|
|
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s risk factors and its consolidated financial statements and notes thereto included in Item 1A and Item 8, respectively, of this Annual Report on Form 10-K. Certain information set forth in this Item 7 constitutes “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based, in whole or in part, on management’s beliefs, estimates, assumptions, and currently available information. For a more detailed discussion of what constitutes a forward-looking statement and of some of the factors that could cause actual results to differ materially from such forward-looking statements, please refer to the “Safe Harbor Statement” on
page 3
of this Annual Report on Form 10-K.
Company Overview
Gibraltar Industries, Inc. (the "Company") is a leading manufacturer and distributor of building products for residential, industrial, infrastructure, renewable energy and conservation markets. Our business strategy focuses on significantly elevating and accelerating the growth and financial returns of the Company. We strive to deliver best-in-class, sustainable value creation for our shareholders for the long-term. This strategy is intended to drive a transformational change in the Company’s portfolio and its financial results. It has four key elements which are: operational excellence, product innovation, portfolio management, and acquisitions as a strategic accelerator.
The Company serves customers primarily throughout North America. Our customers include major home improvement retailers, wholesalers, industrial distributors, contractors, solar developers and institutional and commercial growers of plants. As of
December 31, 2018
, we operated 40 facilities in
18
states, Canada, China and Japan which includes
30
manufacturing facilities and
five
distribution centers, giving us a base of operations to provide customer support, delivery, service and quality to a number of regional and national customers and providing us with manufacturing and distribution efficiencies in North America, as well as a presence in Asian markets.
The Company operates and reports its results in the following three reporting segments:
|
|
•
|
Industrial and Infrastructure Products; and
|
|
|
•
|
Renewable Energy and Conservation
|
The end markets our businesses serve include residential housing, industrial manufacturing, transportation infrastructure, and renewable energy and conservation. These end markets are subject to economic conditions that are influenced by various factors. These factors include but are not limited to changes in general economic conditions, interest rates, exchange rates, commodity costs, demand for residential construction, demand for repair and remodeling, governmental policies and funding, tax policies and incentives, the level of non-residential construction and infrastructure projects, need for protection of high value assets, demand for renewable energy sources and climate change.
In 2018, we completed the fourth year of our five year transformation strategy, delivering on our promise of making more money, at a higher rate of return, with a more efficient use of capital for the fourth year in a row. By executing on our four-pillar strategy, we:
|
|
•
|
Achieved continued margin improvement from 80/20 simplification initiatives;
|
|
|
•
|
Recovered material cost inflation in a volatile environment caused by the steel and aluminum tariffs announced earlier in the year. By fairly allocating price increases by market and by segment, we recovered costs while ensuring that our customers remain competitive;
|
|
|
•
|
Increased the percentage of higher-margin patented products, achieving organic growth through the commercialization of our perimeter security and solar tracker solutions;
|
|
|
•
|
Further refined our portfolio to limit our downside risk and take advantage of rising tides in the renewable energy and conservation segments; and
|
|
|
•
|
Positioned the Company for the next step in its transformation by reducing our debt and bringing on a new CEO with proven expertise in achieving organic and M&A growth.
|
We believe the key elements of our strategy enabled us, and will continue to allow us, to respond timely to changes in the end markets we serve. We have and expect to continue to examine the need for restructuring of our operations, including consolidation of facilities, reducing overhead costs, curtailing investments in inventory, and managing our business to generate incremental cash. As noted above in our accomplishments for 2018, we believe our current strategy enabled us to better react to volatility in commodity costs and fluctuations in customer demand, along with helping to improve margins. We have used the improved cash flows generated by these initiatives to pay down and maintain low levels of debt, improve our liquidity position, and invest in growth initiatives. Overall, we continue to strive to achieve stronger financial results, make more efficient use of capital, and deliver higher shareholder returns.
Results of Operations
Year Ended
December 31, 2018
Compared to Year Ended
December 31, 2017
The following table sets forth selected results of operations data (in thousands) and its percentages of net sales for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Net sales
|
$
|
1,002,372
|
|
|
100.0
|
%
|
|
$
|
986,918
|
|
|
100.0
|
%
|
Cost of sales
|
760,012
|
|
|
75.8
|
%
|
|
750,374
|
|
|
76.0
|
%
|
Gross profit
|
242,360
|
|
|
24.2
|
%
|
|
236,544
|
|
|
24.0
|
%
|
Selling, general, and administrative expense
|
146,840
|
|
|
14.6
|
%
|
|
143,448
|
|
|
14.6
|
%
|
Intangible asset impairment
|
1,552
|
|
|
0.2
|
%
|
|
247
|
|
|
—
|
%
|
Income from operations
|
93,968
|
|
|
9.4
|
%
|
|
92,849
|
|
|
9.4
|
%
|
Interest expense
|
12,064
|
|
|
1.2
|
%
|
|
14,032
|
|
|
1.4
|
%
|
Other expense
|
1,959
|
|
|
0.2
|
%
|
|
909
|
|
|
0.1
|
%
|
Income before taxes
|
79,945
|
|
|
8.0
|
%
|
|
77,908
|
|
|
7.9
|
%
|
Provision for income taxes
|
16,136
|
|
|
1.6
|
%
|
|
14,943
|
|
|
1.5
|
%
|
Income from continuing operations
|
63,809
|
|
|
6.4
|
%
|
|
62,965
|
|
|
6.4
|
%
|
Loss from discontinued operations
|
—
|
|
|
—
|
%
|
|
(405
|
)
|
|
(0.1
|
)%
|
Net income
|
$
|
63,809
|
|
|
6.4
|
%
|
|
$
|
62,560
|
|
|
6.3
|
%
|
The following table sets forth the Company’s net sales by reportable segment for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
Total
Change
|
Net sales:
|
|
|
|
|
|
Residential Products
|
$
|
463,216
|
|
|
$
|
466,603
|
|
|
$
|
(3,387
|
)
|
Industrial and Infrastructure Products
|
223,006
|
|
|
215,211
|
|
|
7,795
|
|
Less Inter-Segment Sales
|
(1,103
|
)
|
|
(1,247
|
)
|
|
144
|
|
|
221,903
|
|
|
213,964
|
|
|
7,939
|
|
Renewable Energy and Conservation
|
317,253
|
|
|
306,351
|
|
|
10,902
|
|
Consolidated
|
$
|
1,002,372
|
|
|
$
|
986,918
|
|
|
$
|
15,454
|
|
Consolidated net sales
increased
by
$15.5 million
, or
1.6%
, for
2018
compared to
2017
. The
increase
was primarily the result of a 4.6% increase in pricing to customers, along with incremental sales generated from our recent acquisition of SolarBOS in our Renewable Energy and Conservation segment in August of 2018, partially offset by a 3.8% decrease in net sales volume.
Net sales in our Residential Products segment
decreased
0.7%
, or
$3.4 million
, to
$463.2 million
in
2018
compared to
$466.6 million
in
2017
.
T
he
decrease
from the prior year was primarily due to higher storm-related roofing activity
in 2017, and a slight decline in the commercial/multi-family construction market, partially offset by steady customer demand for rain dispersion products.
Net sales in our Industrial and Infrastructure Products segment
increased
3.7%
, or
$7.9 million
, to
$221.9 million
in
2018
compared to
$214.0 million
in
2017
. The increase in revenue in the current year was primarily the combined result of pricing actions along with contributions from new innovative industrial products.
Net sales in our Renewable Energy and Conservation segment increased
3.6%
, or
$10.9 million
, to
$317.3 million
in
2018
compared to
$306.4 million
in
2017
. Continued traction of innovative products along with contributions from the acquisition of SolarBOS in August 2018 drove the increased revenues.
Our consolidated gross margin
increased
to
24.2%
for
2018
compared to
24.0%
for
2017
. The improved margin was the result of 80/20 profit improvement initiatives offsetting the margin impact of material cost inflation recovery actions.
Selling, general, and administrative ("SG&A") expenses
increased
by
$3.4 million
, or
2.4%
, to
$146.8 million
for
2018
from
$143.4 million
for
2017
. The
$3.4 million
increase
was due to a $4.3 million increase in performance-based compensation expenses, partially offset by a $1.4 million decrease in restructuring charges related to our 80/20 initiatives. SG&A expenses as a percentage of net sales was
14.6%
for both
2018
and
2017
.
During 2018, we recognized intangible asset impairment charges of
$1.6 million
. The impairment was primarily the result of a reduction in fair values of indefinite-lived trademarks in our Renewable Energy and Conservation segment along with charges resulting from a realignment of businesses within this segment. In 2017, we recognized intangible asset impairment charges of
$0.2 million
related to indefinite-lived trademarks in our Renewable Energy and Conservation segment due to a realignment of businesses within this segment.
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 years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
Total
Change
|
Income from operations:
|
|
|
|
|
|
|
|
Residential Products
|
$
|
69,838
|
|
15.1
|
%
|
|
$
|
76,893
|
|
16.5
|
%
|
|
$
|
(7,055
|
)
|
Industrial and Infrastructure Products
|
15,336
|
|
6.9
|
%
|
|
8,159
|
|
3.8
|
%
|
|
7,177
|
|
Renewable Energy and Conservation
|
37,423
|
|
11.8
|
%
|
|
30,218
|
|
9.9
|
%
|
|
7,205
|
|
Unallocated Corporate Expenses
|
(28,629
|
)
|
(2.9
|
)%
|
|
(22,421
|
)
|
(2.3
|
)%
|
|
(6,208
|
)
|
Consolidated income from operations
|
$
|
93,968
|
|
9.4
|
%
|
|
$
|
92,849
|
|
9.4
|
%
|
|
$
|
1,119
|
|
Our Residential Products segment generated an operating margin of
15.1%
in
2018
compared to an operating margin of
16.5%
in
2017
. The decrease in operating margin is primarily due to a decrease in volume leverage along with the effects of an unfavorable product mix and a $1.5 million increase in restructuring charges as compared to the prior year.
Our Industrial and Infrastructure Products segment operating margin increased to
6.9%
in
2018
compared to
3.8%
in
2017
. The improved margin year over year was the result of a more favorable alignment of material costs to customer selling prices along with operational efficiencies resulting from the Company’s 80/20 initiatives and higher demand for our new innovative industrial products.
The Renewable Energy and Conservation segment generated an operating margin of
11.8%
in
2018
compared to
9.9%
in
2017
. The improvement in margin was primarily the result of volume and operational improvements resulting from the Company’s 80/20 initiatives and lower charges for these initiatives as compared to the prior year.
Unallocated corporate expenses
increased
$
6.2 million
, or
27.7%
, for
2018
from $
22.4 million
for
2017
to $
28.6 million
for
2018
. The higher expenses in the current year were primarily the result of a $4.3 million increase in performance-based compensation expenses as compared to the prior year.
The Company recorded other expense of
$2.0 million
in
2018
and
$0.9 million
in
2017
, respectively. The increase in other expense from the prior year was due to the $3.1 million reversal of an indemnification asset resulting from the
lapse in the statute of limitations of an uncertain tax position related to an acquisition, partially offset by gains from foreign currency fluctuations.
Interest expense
decreased
$2.0 million to $
12.1 million
for
2018
from
$14.0 million
for
2017
. The decrease in expense was due to the offsetting effect of income earned on our interest-bearing cash balances for the current year compared to the prior year. During
2018
and
2017
, no amounts were outstanding under our revolving credit facility.
We recognized a provision for income taxes of $
16.1 million
, an effective tax rate of 20.2%, for 2018 compared with a provision for income taxes of $
14.9 million
, an effective tax rate of 19.2%, for
2017
. The difference between the Company's recorded charge for 2018 and the expense that would result from applying the U.S. statutory rate of 21% is primarily due to net favorable discrete items and a benefit from the 2018 reversal of an uncertain tax position related to an acquisition as a result of the lapse of the statute of limitations. On December 22, 2017, the United States enacted the the Tax Cuts and Jobs Act ("Tax Reform Act") which significantly changes U.S. tax laws by lowering the federal corporate income tax rate from 35% to 21%, imposing a one-time transition tax on deemed repatriated foreign earnings, moving to a territorial tax system, broadening the tax base and other changes. Due to this new legislation, a net benefit of $12.5 million was recorded in 2017, the result of a $16.2 million benefit primarily from the re-measurement of our net U.S. deferred tax liabilities at the lower corporate tax rate partially offset by an expense of $3.7 million related to foreign earnings.
Results of Operations
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
The following table sets forth selected results of operations data (in thousands) and its percentages of net sales for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
Net sales
|
$
|
986,918
|
|
|
100.0
|
%
|
|
$
|
1,007,981
|
|
|
100.0
|
%
|
Cost of sales
|
750,374
|
|
|
76.0
|
%
|
|
763,219
|
|
|
75.7
|
%
|
Gross profit
|
236,544
|
|
|
24.0
|
%
|
|
244,762
|
|
|
24.3
|
%
|
Selling, general, and administrative expense
|
143,448
|
|
|
14.6
|
%
|
|
161,099
|
|
|
16.0
|
%
|
Intangible asset impairment
|
247
|
|
|
—
|
%
|
|
10,175
|
|
|
1.0
|
%
|
Income from operations
|
92,849
|
|
|
9.4
|
%
|
|
73,488
|
|
|
7.3
|
%
|
Interest expense
|
14,032
|
|
|
1.4
|
%
|
|
14,577
|
|
|
1.4
|
%
|
Other expense
|
909
|
|
|
0.1
|
%
|
|
8,928
|
|
|
0.9
|
%
|
Income before taxes
|
77,908
|
|
|
7.9
|
%
|
|
49,983
|
|
|
5.0
|
%
|
Provision for income taxes
|
14,943
|
|
|
1.5
|
%
|
|
16,264
|
|
|
1.7
|
%
|
Income from continuing operations
|
62,965
|
|
|
6.4
|
%
|
|
33,719
|
|
|
3.3
|
%
|
Loss from discontinued operations
|
(405
|
)
|
|
(0.1
|
)%
|
|
(44
|
)
|
|
—
|
%
|
Net income
|
$
|
62,560
|
|
|
6.3
|
%
|
|
$
|
33,675
|
|
|
3.3
|
%
|
The following table sets forth the Company’s net sales by reportable segment for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change due to
|
|
2017
|
|
2016
|
|
Total
Change
|
|
Divestitures
|
|
Acquisitions
|
|
Operations
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
Residential Products
|
$
|
466,603
|
|
|
$
|
430,938
|
|
|
$
|
35,665
|
|
|
$
|
—
|
|
|
$
|
5,669
|
|
|
$
|
29,996
|
|
Industrial and Infrastructure Products
|
215,211
|
|
|
296,513
|
|
|
(81,302
|
)
|
|
(73,419
|
)
|
|
—
|
|
|
(7,883
|
)
|
Less Inter-Segment Sales
|
(1,247
|
)
|
|
(1,495
|
)
|
|
248
|
|
|
—
|
|
|
—
|
|
|
248
|
|
|
213,964
|
|
|
295,018
|
|
|
(81,054
|
)
|
|
(73,419
|
)
|
|
—
|
|
|
(7,635
|
)
|
Renewable Energy and Conservation
|
306,351
|
|
|
282,025
|
|
|
24,326
|
|
|
(8,197
|
)
|
|
17,109
|
|
|
15,414
|
|
Consolidated
|
$
|
986,918
|
|
|
$
|
1,007,981
|
|
|
$
|
(21,063
|
)
|
|
$
|
(81,616
|
)
|
|
$
|
22,778
|
|
|
$
|
37,775
|
|
Consolidated net sales decreased by $21.1 million, or 2.1%, to $986.9 million for 2017 compared to $1.01 billion for 2016. The decrease in sales was the result of divestitures related to the Company's portfolio management activities during 2016 along with a slight decline in net sales volumes in our Industrial and Infrastructure segment. During 2016, the Company sold its European industrial manufacturing business to a third party and exited both the European residential solar racking business and the Company's U.S. bar grating product line. These divestitures resulted in a decrease in revenues of $81.6 million from the prior year. Largely offsetting these decreases were increased net sales volumes from both our Residential Products and Renewable Energy and Conservation Segments, including contributions from our recent acquisitions of Nexus in October 2016 and Package Concierge in February 2017, respectively. The above results include a net increase in volume of 2.3% as well as a modest 1.5% increase in pricing to customers.
Net sales in our Residential Products segment increased 8.3%, or $35.7 million, to $466.6 million in 2017 compared to $430.9 million in 2016.
T
he increase from prior year was primarily the result of a 4.0% net increase in volume along with $5.7 million of sales generated from the acquisition of Package Concierge and a 3.0% increase in pricing to customers. The higher volume was due to a strong demand for building products in the repair and remodel and new housing construction markets and growing demand for the Company’s centralized mail systems and electronic package solutions.
Net sales in our Industrial and Infrastructure Products segment decreased 27.5%, or $81.1 million, to $214.0 million in 2017 compared to $295.0 million in 2016. The decrease in net sales was the combined result of the Company's exit from its U.S. bar grating product line and the divestiture of our European industrial manufacturing business, along with a 3.0% decrease in volume as compared to the prior year. Excluding the impact of the divestitures, a decrease in demand for our infrastructure products, which include components for bridges and elevated highways, further contributed to the overall segment revenue decline due to continued delay in infrastructure projects. We expect this decline to be temporary as evidenced by an increase in segment backlog during the current year. Partially offsetting the above decrease was increased volume in our industrial products as new products in these businesses continue to gain traction.
Net sales in our Renewable Energy and Conservation segment increased 8.6%, or $24.3 million, to $306.4 million in 2017 compared to $282.0 million in 2016. The increase in 2017 was due to sales generated from the acquisition of Nexus in October 2016 along with increased volume in our domestic markets, partially offset by the exit of the Company's small European residential solar racking business.
Our consolidated gross margin decreased to 24.0% for 2017 compared to 24.3% for 2016. The decline was primarily the result of a less favorable alignment of material costs to customer selling prices. Largely offsetting this less favorable alignment were benefits from portfolio management actions and the Company's 80/20 restructuring initiatives taken during 2016. Furthermore, the related costs associated with those actions decreased by $9.0 million as compared to the prior year. In 2016, the Company sold or exited less profitable businesses or products lines in order to enable the Company to re-allocate leadership, time, capital and resources to the platforms and businesses with the highest potential revenue and margins. In addition, other portfolio management actions and restructuring activities were taken resulting from our 80/20 initiatives and contributed to the margin as well.
Selling, general, and administrative ("SG&A") expenses decreased by $17.7 million, or 11.0%, to $143.4 million for 2017 from $161.1 million for 2016. The $17.7 million decrease was due to a $15.3 million decrease in performance-based compensation expenses, a combination of the lower price of the Company's shares as compared to the prior year and lower achievement under the Company's performance base compensation programs, along with a reduction of expenses as a result of the Company's 2016 divestitures. These decreases were partially offset by incremental expense recorded in 2017 from the acquisitions of Nexus and Package Concierge. SG&A expenses as a percentage of net sales decreased to 14.6% for 2017 compared to 16.0% for 2016.
In 2017, we recognized intangible asset impairment charges of $0.2 million related to indefinite-lived trademarks in our Renewable Energy and Conservation segment due to a realignment of businesses within this segment. During 2016, we recognized intangible asset impairment charges of $10.2 million. These charges primarily resulted from the decision in the fourth quarter of 2016 to discontinue the Company's U.S. bar grating product line and its European residential solar racking business which resulted in lower cash flows and estimated fair values of certain reporting units. The largest portion of the impairment was $8.0 million related to indefinite-lived intangibles in our Industrial and Infrastructure Products segment, with the balance of the charges occurring in the Renewable Energy and Conservation segment.
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 years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Total
Change
|
Income from operations:
|
|
|
|
|
|
|
|
Residential Products
|
$
|
76,893
|
|
16.5
|
%
|
|
$
|
65,241
|
|
15.1
|
%
|
|
$
|
11,652
|
|
Industrial and Infrastructure Products
|
8,159
|
|
3.8
|
%
|
|
1,306
|
|
0.4
|
%
|
|
6,853
|
|
Renewable Energy and Conservation
|
30,218
|
|
9.9
|
%
|
|
43,214
|
|
15.3
|
%
|
|
(12,996
|
)
|
Unallocated Corporate Expenses
|
(22,421
|
)
|
(2.3
|
)%
|
|
(36,273
|
)
|
(3.6
|
)%
|
|
13,852
|
|
Consolidated income from operations
|
$
|
92,849
|
|
9.4
|
%
|
|
$
|
73,488
|
|
7.3
|
%
|
|
$
|
19,361
|
|
Our Residential Products segment generated an operating margin of 16.5% in 2017 compared to an operating margin of 15.1% in 2016. The increase of $11.7 million of operating profit is primarily due to the benefits of operational efficiencies and contributions from 80/20 simplification initiatives, along with lower costs incurred related to these initiatives as compared to the prior year.
Our Industrial and Infrastructure Products segment operating margin increased to 3.8% in 2017 compared to 0.4% in 2016. The increase in the current year was a result of lower charges for portfolio management and restructuring initiatives of $16.2 million as compared to the prior year and operational efficiencies resulting from the Company’s 80/20 initiatives, partially offset by a less favorable alignment of material costs to customer selling prices.
The Renewable Energy and Conservation segment generated an operating margin of 9.9% in 2017 compared to 15.3% in 2016. The decrease was primarily due to an unfavorable alignment of material costs to customer selling prices net of pricing actions, partially offset by operational improvements resulting from the Company’s 80/20 initiatives and lower charges for portfolio management and restructuring initiatives as compared to the prior year.
Unallocated corporate expenses decreased $13.9 million, or 38.2%, for 2017 from $36.3 million for 2016 to $22.4 million for 2017. The lower expenses in the current year were primarily the result of a $13.4 million decrease in performance-based compensation expenses, a combination of the lower price of the Company's shares and lower achievement under the Company's performance based compensation programs as compared to the prior year, along with a reduction in senior leadership transition costs of $2.0 million.
The Company recorded other expense of $0.9 million in 2017. Other expense of $8.9 million in 2016 is primarily comprised of the $8.8 million pre-tax loss on the sale of our European industrial manufacturing business.
Interest expense decreased $0.6 million to $14.0 million for 2017 from $14.6 million for 2016. During 2017 and 2016, no amounts were outstanding under our revolving credit facility.
We recognized a provision for income taxes of $14.9 million, an effective tax rate of 19.2%, for 2017 compared with a provision for income taxes of $16.3 million, an effective tax rate of 32.5%, for 2016. On December 22, 2017, the United States enacted the Tax Reform Act which significantly changes U.S. tax laws by lowering the federal corporate income tax rate from 35% to 21%, imposing a one-time transition tax on deemed repatriated foreign earnings, moving to a territorial tax system, broadening the tax base and other changes. Due to this new legislation, a net benefit of $12.5 million was recorded in 2017, the result of a $16.2 million benefit primarily from the re-measurement of our net U.S. deferred tax liabilities at the lower corporate tax rate partially offset by an expense of $3.7 million related to foreign earnings.
The difference between the Company’s recorded charge for 2016 and the expense that would result from applying the U.S. statutory rate of 35% is due to deductible permanent differences and favorable discrete items partially offset by state taxes. The aforementioned favorable discrete items were primarily comprised of the $6.7 million benefit recorded by the Company in 2016 related to the worthless stock deduction and the associated inter-company debt discharge resulting from the sale of its European industrial manufacturing business to a third party in the same period.
Outlook
For 2019, we begin the year with confidence in the end markets we target across our businesses but are cautious about the general economy, trade actions, and continued volatility in material costs. Our plan is to accelerate innovative product development, continue to drive 80/20 across our businesses and processes, and seek acquisitions in attractive end markets. At the end of the year, we expect to deliver increased profits and make excellent progress in establishing a robust platform for sustainable organic growth.
The Company is providing its guidance for revenues and earnings for the full year 2019. Gibraltar expects 2019 consolidated revenues to be in the range of $1.03 billion and $1.05 billion, up from $1.0 billion for 2018. GAAP EPS for full year 2019 is expected to be between $1.95 and $2.10, compared with $1.96 in 2018.
Liquidity and Capital Resources
General
Our principal capital requirements are to fund our operations' working capital and capital improvements and to fund acquisitions. We will continue to invest in growth opportunities as appropriate while focusing on working capital efficiency and profit improvement opportunities to minimize the cash invested to operate our business. We have successfully generated positive cash flows from operating activities which have funded our capital requirements and recent acquisitions as noted below in “Cash Flows.”
As of
December 31, 2018
, our liquidity of $
587.8 million
consisted of
$297.0 million
of cash and $
290.8 million
of availability under our revolving credit facility as compared to liquidity of $
511.1 million
as of
December 31, 2017
. On January 24, 2019, we entered into the Company's Sixth Amended and Restated Credit Agreement (the "Senior Credit Agreement") which includes a 5-year, $400 million revolving credit facility. The Senior Credit Agreement also provides the Company the opportunity, upon request, to increase the amount of the revolving credit facility to $700 million. Utilizing existing cash on hand, the Company repaid $210 million of 6.25% Senior Subordinated Bonds on February 1, 2019. We believe that our resulting low leverage and increased borrowing capacity along with enhanced flexibility in our new Senior Credit Agreement, provide us with ample liquidity. We believe our liquidity, together with the cash expected to be generated from operations, should be sufficient to fund working capital needs and simplification initiatives that likely will need cash to fund transitions and future growth. We continue to search for strategic acquisitions and larger acquisitions may require additional borrowings and/or the issuance of our common stock.
Our Senior Credit Agreement provides the Company with liquidity and capital resources for use by our U.S. operations. Historically, our foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements. As of
December 31, 2018
, our foreign subsidiaries held $
34.3 million
of cash in U.S. dollars. As a result of the Tax Cuts and Jobs Act ("Tax Reform Act") signed into law on December 22, 2017, $22.5 million of our cash held by foreign subsidiaries at December 22, 2017, is expected to be repatriated to the U.S. Subsequent cash generated by our foreign subsidiaries will be reinvested into their operations.
Over the long-term, we expect that future investments, including strategic business opportunities such as acquisitions, may be financed through a number of sources, including internally available cash, availability under our revolving credit facility, new debt financing, the issuance of equity securities, or any combination of the above. Any 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, and the improvement of shareholder value. Our 2018 acquisition of SolarBOS and our 2017 acquisition of Package Concierge were funded by cash on hand.
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 current levels, or sources of financing are not available or not available at acceptable terms, our future liquidity may be adversely affected.
Cash Flows
The following table sets forth selected cash flow data for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Cash provided by (used in):
|
|
|
|
Operating activities of continuing operations
|
$
|
97,545
|
|
|
$
|
70,070
|
|
Investing activities of continuing operations
|
(14,549
|
)
|
|
(16,797
|
)
|
Financing activities of continuing operations
|
(6,180
|
)
|
|
(2,598
|
)
|
Effect of exchange rate changes
|
(2,090
|
)
|
|
1,428
|
|
Net increase in cash and cash equivalents
|
$
|
74,726
|
|
|
$
|
52,103
|
|
During the year ended
December 31, 2018
, we generated net cash from operating activities totaling
$97.6 million
, composed of net income of $
63.8 million
plus non-cash net charges totaling $
38.5 million
that included depreciation, amortization, deferred income taxes, stock compensation, intangible asset impairment and non-cash exit activity costs, partially offset by a net investment in working capital of $4.7 million. Net cash provided by operating activities for the year ended December 31, 2017 was $70.1 million primarily driven by income from continuing operations of $63.0 million along with non-cash net charges totaling $22.1 million that included depreciation, amortization, deferred income taxes, stock compensation, and non-cash exit activity costs, partially offset by a increase in working capital of $15.0 million.
During 2018, the cash invested in working capital and other net assets of $4.7 million included $16.9 million increase in inventory and $4.8 million decrease in accounts payable, partially offset by a $9.7 million decrease in accounts receivable and a $7.3 million increase in accrued expenses and other non-current liabilities. The increase in inventory was due to material cost increases along with increased unit volume to hedge against potential supply shortages due to tariffs. Accounts payable decreased due to seasonality and timing of year-end vendor payments. The decrease in accounts receivable, which includes costs in excess of billings, is primarily the result of the seasonality of customer contracts and related payments received that impact our business. The increase in accrued expenses and other non-current liabilities was due to both billings in excess of costs correlated to the timing of customer payments on contracts in progress and customer deposits on contracts in backlog at the end of the year, partially offset by payments related to the Company's performance based incentive plans.
Net cash used in investing activities for
2018
of $
14.5 million
consisted of capital expenditures of $12.5 million and net cash paid for the acquisition of SolarBOS of $5.2 million partially offset by net proceeds of $3.2 million from the sale and lease-back of property and equipment. Net cash used in investing activities for
2017
of $
16.8 million
primarily consisted of $18.3 million of net cash paid for the acquisition of Package Concierge, capital expenditures of $11.4 million and a payment of $0.2 million related to the final purchase adjustment for the acquisition of Nexus. These payments were partially offset by net proceeds of $13.1 million from the sale of property and equipment.
Net cash used in financing activities for
2018
of $
6.2 million
consisted of the purchase of treasury stock of $7.2 million primarily due to a large number of performance awards that vested in June 2018 and payment of long-term debt borrowings of $0.4 million partially offset by the proceeds received from the issuance of common stock of $1.4 million due to stock option exercises. Net cash used in financing activities for
2017
of $
2.6 million
consisted of the purchase of treasury stock of $2.9 million and payments of long-term debt borrowings of $0.4 million offset by the proceeds received from the issuance of common stock of $0.7 million.
Senior Credit Agreement and Senior Subordinated Notes
Our new Senior Credit Agreement is committed through January 23, 2024. Borrowings under the 2019 Senior Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and general intangibles of the Company’s significant domestic subsidiaries. The Senior Credit Agreement 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 banks 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 December 31, 2018, the Company is in compliance with all three covenants.
Interest rates on the revolving credit facility are based on the LIBOR plus 1.125%. 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 and the daily average undrawn balance.
As of
December 31, 2018
, we had $
290.8 million
of availability under our then existing revolving credit agreement, net of outstanding letters of credit of $
9.2 million
. No amounts were outstanding under our then existing revolving credit facility as of December 31,
2018
or
2017
.
In addition to our Senior Credit Agreement, the Company issued $210.0 million of 6.25% Notes in January 2013 all of which were repaid February 1, 2019 with existing cash on hand. Provisions of the 6.25% Notes included, without limitation, restrictions on indebtedness, liens, and distributions from restricted subsidiaries, asset sales, affiliated transactions, dividends, and other restricted payments. Dividend payments were subject to annual limits and interest was paid semiannually on February 1 and August 1 of each year.
Off Balance Sheet Arrangements
As of December 31, 2018, the Company did not have any off balance sheet arrangements, other than operating leases, that had or were reasonably likely to have a current or future material effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources. On January 1, 2019, the Company adopted Accounting Standards Update 2016-02
Leases (ASC 842)
which requires the Company to record operating leases and right of use assets on its balance sheet. See Note 1 to the Company's consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further information on this recent accounting pronouncement to be adopted January 1, 2019.
Contractual Obligations
The following table summarizes by category our Company’s expected future cash outflows associated with contractual obligations in effect at
December 31, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
Contractual Obligation
|
Total
|
|
Less than
One Year
|
|
One to Three
Years
|
|
Three to
Five Years
|
|
More Than
Five Years
|
Fixed rate debt
|
$
|
210,000
|
|
|
$
|
210,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest on fixed rate debt
|
1,094
|
|
|
1,094
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Operating lease obligations
|
38,684
|
|
|
14,304
|
|
|
14,066
|
|
|
8,609
|
|
|
1,705
|
|
Pension and other post-retirement payments
|
5,290
|
|
|
597
|
|
|
1,427
|
|
|
972
|
|
|
2,294
|
|
Management stock purchase plan (
1)
|
15,287
|
|
|
5,695
|
|
|
6,893
|
|
|
2,333
|
|
|
366
|
|
Variable rate debt (including interest) (
2)
|
2,090
|
|
|
432
|
|
|
843
|
|
|
815
|
|
|
—
|
|
Performance stock unit awards
|
9,082
|
|
|
9,082
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other
|
329
|
|
|
—
|
|
|
329
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
281,856
|
|
|
$
|
241,204
|
|
|
$
|
23,558
|
|
|
$
|
12,729
|
|
|
$
|
4,365
|
|
(1) Includes amounts due to retired participants of the Management Stock Purchase Plan (MSPP). Excludes the future payments due to active participants of the MSPP, which represents a liability of $14.1 million as of
December 31, 2018
. The timing of future payments to active participants cannot be accurately estimated as we are uncertain of when active participants’ service to the Company will terminate. Active participants include those with pending retirements. Our policy does not recognize the contractual obligation until the participant has officially retired.
(2) Calculated using the interest rate in effect of 1.75% at
December 31, 2018
.
Critical Accounting Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make decisions based upon estimates, assumptions, and factors it considers relevant to the circumstances. Such decisions include the selection of applicable principles and the use of judgment in their application, the results of which could differ from those anticipated.
A summary of the Company’s significant accounting policies are described in Note 1 of the Company’s consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Our most critical accounting estimates that require most difficult, subjective and complex judgments include:
|
|
•
|
revenue recognition on contracts; and
|
|
|
•
|
the assessment of recoverability of goodwill and other indefinite-lived intangible assets.
|
Management reviews these estimates on a regular basis and makes adjustments based on historical experience, current conditions, and future expectations. Management believes these estimates are reasonable, but actual results could differ from these estimates.
Revenue Recognition on Contracts
The vast majority of our sales contracts are for standard products with revenue recognized at the point in time we transfer control to the customer. The point in time we transfer control is based on when we determine the customer has legal title, significant risks and rewards of ownership of the asset, and we have a present right to payment for the product. However, revenue representing
32%
and
28%
of our 2018 and 2017 consolidated net sales, respectively, was recognized over time under the cost-to-cost method as we satisfied our performance obligations. This method of revenue recognition pertains to activities within the Industrial and Infrastructure Products and the Renewable Energy and Conservation segments.
Revenue recognized on contracts over time using the cost-to-cost method for measuring progress is recognized as work progresses toward completion based on the ratio of cumulative costs incurred to date to estimated total contract costs at completion. Revenues are recognized proportionally as costs are incurred under this method. Estimates of the total costs at completion for the performance obligations involves subjective judgment and estimation to determine total costs expected to be incurred by the time the performance obligation has been completed and accepted by the customer. The estimates of total costs to be incurred at completion of each contract are sensitive to significant judgments and assumptions, such as the expected costs to complete installation, which are affected by customer site-specific conditions as well as availability and cost of third-party contractors to complete the installation process. These estimates, judgments and assumptions impact the timing and amount of net sales and cost of sales recognized on in-progress performance obligations with customers. We continuously review our estimates and the progress and performance of the performance obligation for substantially all contracts that we recognize revenue over time under the cost-to-cost method. Any adjustments or changes in these estimates affecting sales, costs and profits are recognized in the period in which the change becomes known using the cumulative catch-up method of accounting, resulting in the cumulative effect of changes reflected in the period. A significant change in an estimate on one or more contracts could have a material effect on our results of operations.
Contract costs include all direct costs related to contract performance. Selling and administrative expenses are charged to operations as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Because of inherent uncertainties in estimating costs, it is reasonably possible that changes in performance could result in revisions to cost and revenue, which are recognized in the period when the revisions are determined.
Goodwill and Other Indefinite-lived Intangible Asset Impairment Testing
Our goodwill and indefinite-lived intangible asset balances of
$323.7 million
and
$43.9 million
, respectively, which in aggregate represent 35% of total assets as of
December 31, 2018
, are subject to impairment testing. We test goodwill and indefinite-lived intangible assets for impairment on an annual basis as of October 31 and at interim dates when indicators of impairment are present. Indicators of impairment could include a significant long-term adverse change in business climate, poor indicators of operating performance, or a sale or disposition of a significant portion of a reporting unit.
We test goodwill for impairment at the reporting unit level. We identify our reporting units by assessing whether the components of our Company constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components. We have twelve reporting units, eleven of which have goodwill.
During interim periods, we evaluate the potential for goodwill impairment using a qualitative assessment by considering factors such as, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political developments, entity specific factors such as strategy, changes in key personnel, and overall financial performance. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we proceed to a quantitative impairment test. During the interim periods of 2018, we concluded that no indicators of impairment existed at interim dates and did not perform any quantitative interim impairment tests related to goodwill and indefinite-lived intangible assets.
The Company conducts its annual impairment test on all twelve reporting units as of October 31, during which we test goodwill and other indefinite-lived intangible assets for impairment. On an annual basis, the quantitative goodwill impairment test consists of comparing the fair value of a reporting unit, as determined using two valuation methodologies described below, with the carrying amount of the reporting unit including goodwill. If the carrying amount of the reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized in the amount by which the carrying value of the reporting unit exceeds the fair value of the reporting unit.
The annual quantitative goodwill impairment test requires subjective and complex judgment due to the significant estimation required in determining the fair value of the reporting units and the fair value of indefinite-lived intangible assets. Reporting unit fair value estimates include significant assumptions such as: revenue growth rates, operating margins, company-specific risk premiums used in the weighted-average cost of capital, and EBITDA multiples, which are affected by expectations about future market or economic conditions. The fair value estimates for indefinite-lived intangible assets include significant assumptions such as revenue growth rates and estimated royalty rates, which are affected by the market for comparable intellectual property licensing arrangements and expectations about future market or economic conditions. The Company performs sensitivity analysis on significant assumptions to evaluate how changes in the estimated fair values of reporting units and indefinite-lived intangible assets respond to changes in assumptions, specifically the revenue growth rates and the weighted-average cost of capital.
As a result of our quantitative testing, none of the reporting units with goodwill as of our testing date had carrying values in excess of their fair values, and one reporting unit with $31.7 million in goodwill within the Industrial and Infrastructure Products segment was "at risk" of impairment. The Company quantitatively defines "at risk" as a percentage of the excess of the reporting unit's fair value over its carrying amount that is less than 10%. An "at risk" reporting unit qualitatively represents a reporting unit with a higher degree of uncertainty of the reporting unit's ability to meet its forecasted cash flows based upon revenue growth rate and operating margin assumptions relied upon in the estimation of its fair value. This "at risk" reporting unit had a percentage of approximately 8% excess of its fair value over its carrying amount and had not met its revenue growth rate and operating margin projections used in the prior year annual goodwill impairment testing. The decline in the reporting unit's revenues during prior year periods was consistent with overall trends in the industrial and infrastructure market over those same periods. The forecasted revenues for this reporting unit were developed to correlate with recent growth expectations in the market supported by published market data and indicators. To the extent that the reporting unit does not achieve the targeted growth or the market activity adversely deviates from expectations, the reporting unit's goodwill may be at risk for impairment or impaired.
There were no impairment charges against goodwill recorded during the years ended December 31, 2018 and 2017. In 2016, the Company discontinued its European residential solar racking business which resulted in an impairment charge against goodwill of $0.9 million.
The fair value of each reporting unit is determined using a weighted average of the fair values calculated under two valuation techniques: an income approach and a market approach.
The income approach included a discounted cash flow model relying on significant assumptions consisting of revenue growth rates and profit margins based on internal forecasts, terminal value, and the weighted average cost of capital ("WACC") used to discount future cash flows. Internal forecasts of revenue growth, operating margins, and working capital needs of each reporting unit over the next five years were developed with consideration of macroeconomic factors, historical performance, and planned activities. We made a terminal value assumption that cash flows would grow 3.0% each year subsequent to 2023 based on our approximation of gross domestic product growth. To determine the WACC, we used a standard valuation method, the capital asset pricing model, based on readily available and current market data of peer companies considered market participants. Acknowledging the varying degrees of risk inherent in each reporting units’ ability to achieve long-term forecasted cash flows in applying the income approach, we applied a reporting unit-specific risk premium to the WACC of each reporting unit, the extent of which was determined
based upon each reporting unit’s past operating performance and their relative ability to achieve the forecasted cash flows. The income approach is weighted at 67% when arriving at our concluded estimate of the fair value of each reporting unit, as this technique uses a long-term approach that considers the expected operating profit of each reporting unit during periods where macroeconomic indicators are nearer historical averages. This weighting approach is consistent with prior years.
The market approach consisted of applying the Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") multiple to the forecasted EBITDA to be generated in the next two years in determining an estimated fair value for the reporting unit. The market approach also relied on the same significant assumptions used in the discounted cash flow model, consisting of revenue growth rates and profit margins based on internal forecasts and the EBITDA multiple selected from an analysis of peer companies. Similar to the WACC analysis, we assessed the risk of each reporting unit achieving its forecasts with consideration given to how each reporting unit has performed historically compared to forecasts. We also evaluated each reporting units' expected growth and historical performance relative to that of the peer companies and made adjustments to the multiples where the growth rates and historical performance deviated from the peer companies. The market approach is weighted at 33% when arriving at our concluded estimate of the fair value of each reporting unit. This weighting approach is consistent with prior years.
Indefinite-Lived Intangibles
We test our indefinite-lived intangible assets for impairment by comparing the fair value of the indefinite-lived intangible asset, determined using a discounted cash flow model, with its carrying amount. Each reporting period, we perform an evaluation of the remaining useful life of our indefinite-lived intangible assets to determine whether events and circumstances continue to support an indefinite useful life. If an indefinite-lived intangible asset is subsequently determined to have a finite useful life, the asset is tested for impairment and then amortized prospectively over its estimated remaining useful life, and accounted for in the same manner as other intangible assets that are subject to amortization.
The assumptions used to determine the fair value of our indefinite-lived intangible assets are consistent with the assumptions employed in the determination of the fair values of our reporting units. An impairment loss would be recognized for the carrying amount in excess of its fair value. The fair values of the impaired trademarks were determined using an income approach consisting of the relief-from-royalty method. During 2018 and 2017, the Company recognized $1.2 million and $0.2 million, respectively, of impairment charges on our indefinite-lived intangible assets. In 2016, the Company incurred $7.8 million of impairment charges related to the Company's discontinued European residential solar racking business and U.S. bar grating product line, and an additional $1.2 million of impairment charges were recognized in 2016 as a result of the Company's annual impairment test.
Recent Accounting Pronouncements
See Note 1 to the Company's consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further information on recent accounting pronouncements.
|
|
|
Item 7A.
|
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, and raw materials pricing and availability. In addition, the Company is exposed to other financial market risks, primarily related to its long-term debt and foreign operations.
Raw Material Pricing Risk
We are subject to market risk exposure related to volatility in the price of steel, aluminum and resins. A significant amount of our cost of sales relates to material costs. Our business is heavily dependent on the price and supply of our raw materials. The commodity market, which includes the steel, aluminum, and resin industries, is highly cyclical in nature, and commodity costs have been volatile in recent years, and may become more volatile in the future. Commodity costs are influenced by numerous factors beyond our control, including general economic conditions, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions.
The Company principally manages its exposures to the market fluctuations in the steel and resins industries through management of its core business activities. Although we have the ability to purchase steel from a number of suppliers, a production cutback by one or more of our current suppliers could create challenges in meeting delivery schedules to our customers. The prices we offer to our customers are also impacted by changes in commodity costs. We manage the alignment of the cost of our raw materials and prices offered to customers and attempt to pass changes to raw material costs through to our customers. To improve our management of commodity costs, we attempt to maintain inventory levels not in excess of our production requirements.
We have not entered into long-term contractual commitments for the purchase of raw materials however, from time to time, we may purchase raw materials in advance of commodity cost increases.
We rely on major suppliers for our supply of raw materials. During 2018, we purchased our raw materials from domestic and foreign suppliers in an effort to purchase the lowest cost, high quality material possible while maintaining acceptable service levels.
We cannot accurately calculate the pre-tax impact a one percent change in the commodity costs would have on our 2018 operating results as the change in commodity costs would both impact the cost to purchase materials and the selling prices we offer our customers. The impact to our operating results would significantly depend on the competitive environment and the costs of other alternative building products, which could impact our ability to pass commodity costs to our customers.
Interest Rate Risk
To manage interest rate risk, the Company uses both fixed and variable interest rate debt. As of December 31, 2018, our fixed rate debt consisted of the Company’s Senior Subordinated 6.25% Notes and was the only significant debt that remains outstanding at year end. We believe we limited our exposure to interest rate risk as a result of repaying substantially all variable rate debt and the long-term nature of our fixed rate debt. However, the Company will continue to monitor changes in its debt levels and access to capital ensuring interest rate risk is appropriately managed.
At
December 31, 2018
, our fixed rate debt consisted primarily of $210.0 million of our 6.25% Notes. The Company’s $210.0 million of 6.25% Notes were issued in January 2013 with a maturity date of February 1, 2021, which have been paid in full by Company on February 1, 2019.
As of December 31, 2018, our variable rate debt consisted primarily of the revolving credit facility under the then existing Senior Credit Agreement, which was amended and restated on January 24, 2019, and other debt. No amounts were outstanding on the revolving credit facility as of
December 31, 2018
. Borrowings under the revolving credit facility bore interest at a variable interest rate based upon the LIBOR plus an additional margin. A hypothetical 1% increase or decrease in interest rates would have changed the
2018
interest expense by less than $0.1 million.
Foreign Exchange Risk
The Company has foreign exchange risk due to our international operations, primarily in Canada and Asia and through sales and purchases from foreign customers and vendors. Changes in the values of currencies of foreign countries affect our financial position and cash flows when translated into U.S. dollars. The Company principally manages its exposures to many of these foreign exchange rate risks solely through management of its core business activities. We cannot accurately calculate the pre-tax impact that a one percent change in the exchange rates of foreign currencies would have on our 2018 operating results as the changes in exchange rates would impact the cost of materials, the U.S. dollar revenue equivalents, and potentially the prices offered to our overseas customers.
|
|
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
|
|
|
|
|
Page
Number
|
|
|
Financial Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Data:
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Gibraltar Industries, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Gibraltar Industries, Inc. (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with US generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2019 expressed an unqualified opinion thereon.
Adoption of ASU No. 2014-09
As discussed in Note 1 to the consolidated financial statements, the Company changed its method for recognizing revenue as a result of the adoption of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the amendments in ASUs 2015-14, 2016-08, 2016-10 and 2016-12 effective January 1, 2018.
Basis for Opinion
These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company‘s auditor since 2005.
Buffalo, New York
February 26, 2019
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
Net sales
|
$
|
1,002,372
|
|
|
$
|
986,918
|
|
|
$
|
1,007,981
|
|
Cost of sales
|
760,012
|
|
|
750,374
|
|
|
763,219
|
|
Gross profit
|
242,360
|
|
|
236,544
|
|
|
244,762
|
|
Selling, general, and administrative expense
|
146,840
|
|
|
143,448
|
|
|
161,099
|
|
Intangible asset impairment
|
1,552
|
|
|
247
|
|
|
10,175
|
|
Income from operations
|
93,968
|
|
|
92,849
|
|
|
73,488
|
|
Interest expense, net
|
12,064
|
|
|
14,032
|
|
|
14,577
|
|
Other expense
|
1,959
|
|
|
909
|
|
|
8,928
|
|
Income before taxes
|
79,945
|
|
|
77,908
|
|
|
49,983
|
|
Provision for income taxes
|
16,136
|
|
|
14,943
|
|
|
16,264
|
|
Income from continuing operations
|
63,809
|
|
|
62,965
|
|
|
33,719
|
|
Discontinued operations:
|
|
|
|
|
|
Loss before taxes
|
—
|
|
|
(644
|
)
|
|
(70
|
)
|
Benefit of income taxes
|
—
|
|
|
(239
|
)
|
|
(26
|
)
|
Loss from discontinued operations
|
—
|
|
|
(405
|
)
|
|
(44
|
)
|
Net income
|
$
|
63,809
|
|
|
$
|
62,560
|
|
|
$
|
33,675
|
|
Net earnings per share – Basic:
|
|
|
|
|
|
Income from continuing operations
|
$
|
2.00
|
|
|
$
|
1.98
|
|
|
$
|
1.07
|
|
Loss from discontinued operations
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
Net income
|
$
|
2.00
|
|
|
$
|
1.97
|
|
|
$
|
1.07
|
|
Weighted average shares outstanding – Basic
|
31,979
|
|
|
31,701
|
|
|
31,536
|
|
Net earnings per share – Diluted:
|
|
|
|
|
|
Income from continuing operations
|
$
|
1.96
|
|
|
$
|
1.95
|
|
|
$
|
1.05
|
|
Loss from discontinued operations
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
Net income
|
$
|
1.96
|
|
|
$
|
1.94
|
|
|
$
|
1.05
|
|
Weighted average shares outstanding – Diluted
|
32,534
|
|
|
32,250
|
|
|
32,069
|
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
Net income
|
$
|
63,809
|
|
|
$
|
62,560
|
|
|
$
|
33,675
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
Foreign currency translation adjustment
|
(3,241
|
)
|
|
3,150
|
|
|
6,945
|
|
Cumulative effect of accounting change (see Note 1)
|
(350
|
)
|
|
—
|
|
|
—
|
|
Adjustment to pension and post-retirement benefit liability, net of tax
|
723
|
|
|
205
|
|
|
750
|
|
Other comprehensive (loss) income
|
(2,868
|
)
|
|
3,355
|
|
|
7,695
|
|
Total comprehensive income
|
$
|
60,941
|
|
|
$
|
65,915
|
|
|
$
|
41,370
|
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
Assets
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
297,006
|
|
|
$
|
222,280
|
|
Accounts receivable, net
|
140,283
|
|
|
145,385
|
|
Inventories
|
98,913
|
|
|
86,372
|
|
Other current assets
|
8,351
|
|
|
8,727
|
|
Total current assets
|
544,553
|
|
|
462,764
|
|
Property, plant, and equipment, net
|
95,830
|
|
|
97,098
|
|
Goodwill
|
323,671
|
|
|
321,074
|
|
Acquired intangibles
|
96,375
|
|
|
105,768
|
|
Other assets
|
1,216
|
|
|
4,681
|
|
|
$
|
1,061,645
|
|
|
$
|
991,385
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$
|
79,136
|
|
|
$
|
82,387
|
|
Accrued expenses
|
87,074
|
|
|
75,467
|
|
Billings in excess of cost
|
17,857
|
|
|
12,779
|
|
Current maturities of long-term debt
|
208,805
|
|
|
400
|
|
Total current liabilities
|
392,872
|
|
|
171,033
|
|
Long-term debt
|
1,600
|
|
|
209,621
|
|
Deferred income taxes
|
36,530
|
|
|
31,237
|
|
Other non-current liabilities
|
33,950
|
|
|
47,775
|
|
Shareholders’ equity:
|
|
|
|
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding
|
—
|
|
|
—
|
|
Common stock, $0.01 par value; authorized 50,000 shares; 32,887 and 32,332 shares outstanding in 2018 and 2017
|
329
|
|
|
323
|
|
Additional paid-in capital
|
282,525
|
|
|
271,957
|
|
Retained earnings
|
338,995
|
|
|
274,562
|
|
Accumulated other comprehensive loss
|
(7,234
|
)
|
|
(4,366
|
)
|
Cost of 796 and 615 common shares held in treasury in 2018 and 2017
|
(17,922
|
)
|
|
(10,757
|
)
|
Total shareholders’ equity
|
596,693
|
|
|
531,719
|
|
|
$
|
1,061,645
|
|
|
$
|
991,385
|
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
Cash Flows from Operating Activities
|
|
|
|
|
|
Net income
|
$
|
63,809
|
|
|
$
|
62,560
|
|
|
$
|
33,675
|
|
Loss from discontinued operations
|
—
|
|
|
(405
|
)
|
|
(44
|
)
|
Income from continuing operations
|
63,809
|
|
|
62,965
|
|
|
33,719
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
20,374
|
|
|
21,690
|
|
|
24,114
|
|
Intangible asset impairment
|
1,552
|
|
|
247
|
|
|
10,175
|
|
Loss on sale of business
|
—
|
|
|
—
|
|
|
8,763
|
|
Stock compensation expense
|
9,189
|
|
|
7,122
|
|
|
6,373
|
|
Net gain on sale of assets
|
(143
|
)
|
|
(123
|
)
|
|
(42
|
)
|
Exit activity costs (recoveries), non-cash
|
1,344
|
|
|
(1,877
|
)
|
|
7,530
|
|
Provision for (benefit of) deferred income taxes
|
4,781
|
|
|
(7,105
|
)
|
|
(4,893
|
)
|
Other, net
|
1,386
|
|
|
2,118
|
|
|
1,934
|
|
Changes in operating assets and liabilities (excluding the effects of acquisitions):
|
|
|
|
|
|
Accounts receivable
|
9,737
|
|
|
(21,806
|
)
|
|
37,828
|
|
Inventories
|
(16,951
|
)
|
|
870
|
|
|
11,782
|
|
Other current assets and other assets
|
(22
|
)
|
|
(2,629
|
)
|
|
2,511
|
|
Accounts payable
|
(4,828
|
)
|
|
11,332
|
|
|
(17,060
|
)
|
Accrued expenses and other non-current liabilities
|
7,317
|
|
|
(2,734
|
)
|
|
1,253
|
|
Net cash provided by operating activities
|
97,545
|
|
|
70,070
|
|
|
123,987
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
Purchases of property, plant, and equipment
|
(12,457
|
)
|
|
(11,399
|
)
|
|
(10,779
|
)
|
Acquisitions, net of cash acquired
|
(5,241
|
)
|
|
(18,494
|
)
|
|
(23,412
|
)
|
Net proceeds from sale of property and equipment
|
3,149
|
|
|
13,096
|
|
|
953
|
|
Net proceeds from sale of business
|
—
|
|
|
—
|
|
|
8,250
|
|
Other, net
|
—
|
|
|
—
|
|
|
1,118
|
|
Net cash used in investing activities
|
(14,549
|
)
|
|
(16,797
|
)
|
|
(23,870
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
Long-term debt payments
|
(400
|
)
|
|
(400
|
)
|
|
(400
|
)
|
Payment of debt issuance costs
|
—
|
|
|
—
|
|
|
(54
|
)
|
Purchase of treasury stock at market prices
|
(7,165
|
)
|
|
(2,872
|
)
|
|
(1,539
|
)
|
Net proceeds from issuance of common stock
|
1,385
|
|
|
674
|
|
|
3,341
|
|
Net cash (used in) provided by financing activities
|
(6,180
|
)
|
|
(2,598
|
)
|
|
1,348
|
|
Effect of exchange rate changes on cash
|
(2,090
|
)
|
|
1,428
|
|
|
(146
|
)
|
Net increase in cash and cash equivalents
|
74,726
|
|
|
52,103
|
|
|
101,319
|
|
Cash and cash equivalents at beginning of year
|
222,280
|
|
|
170,177
|
|
|
68,858
|
|
Cash and cash equivalents at end of year
|
$
|
297,006
|
|
|
$
|
222,280
|
|
|
$
|
170,177
|
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional
Paid-In Capital
|
|
Retained Earnings
|
|
Accumulated
Other
Comprehensive Loss
|
|
Treasury Stock
|
|
Total
Shareholders’ Equity
|
|
Shares
|
|
Amount
|
|
|
|
|
Shares
|
|
Amount
|
|
Balance at December 31, 2015
|
31,779
|
|
|
$
|
317
|
|
|
$
|
253,458
|
|
|
$
|
178,073
|
|
|
$
|
(15,416
|
)
|
|
484
|
|
|
$
|
(6,346
|
)
|
|
$
|
410,086
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
33,675
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33,675
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,945
|
|
|
—
|
|
|
—
|
|
|
6,945
|
|
Minimum pension and post retirement benefit plan adjustments, net of taxes of $430
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
750
|
|
|
—
|
|
|
—
|
|
|
750
|
|
Stock compensation expense
|
—
|
|
|
—
|
|
|
6,373
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,373
|
|
Excess tax benefit from stock compensation
|
—
|
|
|
—
|
|
|
1,249
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,249
|
|
Net settlement of restricted stock units
|
131
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
46
|
|
|
(1,539
|
)
|
|
(1,539
|
)
|
Stock options exercised
|
175
|
|
|
2
|
|
|
3,339
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,341
|
|
Balance at December 31, 2016
|
32,085
|
|
|
$
|
320
|
|
|
$
|
264,418
|
|
|
$
|
211,748
|
|
|
$
|
(7,721
|
)
|
|
530
|
|
|
$
|
(7,885
|
)
|
|
$
|
460,880
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
62,560
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62,560
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,150
|
|
|
—
|
|
|
—
|
|
|
3,150
|
|
Minimum pension and post retirement benefit plan adjustments, net of taxes of $110
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
205
|
|
|
—
|
|
|
—
|
|
|
205
|
|
Stock compensation expense
|
—
|
|
|
—
|
|
|
7,122
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,122
|
|
Cumulative effect of accounting change (see Note 1)
|
—
|
|
|
—
|
|
|
(254
|
)
|
|
254
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net settlement of restricted stock units
|
203
|
|
|
3
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
85
|
|
|
(2,872
|
)
|
|
(2,872
|
)
|
Issuance of restricted stock
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock options exercised
|
42
|
|
|
—
|
|
|
674
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
674
|
|
Balance at December 31, 2017
|
32,332
|
|
|
$
|
323
|
|
|
$
|
271,957
|
|
|
$
|
274,562
|
|
|
$
|
(4,366
|
)
|
|
615
|
|
|
$
|
(10,757
|
)
|
|
$
|
531,719
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
63,809
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
63,809
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,241
|
)
|
|
—
|
|
|
—
|
|
|
(3,241
|
)
|
Minimum pension and post retirement benefit plan adjustments, net of taxes of $225
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
723
|
|
|
—
|
|
|
—
|
|
|
723
|
|
Stock compensation expense
|
—
|
|
|
—
|
|
|
9,189
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,189
|
|
Cumulative effect of accounting change (see
Note
1)
|
—
|
|
|
—
|
|
|
—
|
|
|
624
|
|
|
(350
|
)
|
|
—
|
|
|
—
|
|
|
274
|
|
Net settlement of restricted stock units
|
460
|
|
|
5
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
181
|
|
|
(7,165
|
)
|
|
(7,165
|
)
|
Issuance of restricted stock
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock options exercised
|
88
|
|
|
1
|
|
|
1,384
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,385
|
|
Balance at December 31, 2018
|
32,887
|
|
|
$
|
329
|
|
|
$
|
282,525
|
|
|
$
|
338,995
|
|
|
$
|
(7,234
|
)
|
|
796
|
|
|
$
|
(17,922
|
)
|
|
$
|
596,693
|
|
GIBRALTAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of Gibraltar Industries, Inc. and subsidiaries (the "Company"). All intercompany accounts and transactions have been eliminated in consolidation.
Use of estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue recognition
On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” and all related Accounting Standards Updates. As further described in this Note under Recent Accounting Pronouncements Adopted, the core principle of the guidance is that an entity should recognize revenue to depict the transfer of control, promised goods or services, to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company’s policy for recognizing revenue by timing of transfer of control to the customer, at a point in time or over time, is discussed in more detail in Note 3 of the consolidated financial statements. Note 18 of these consolidated financial statements provide information related to the amount of revenue recognized as defined by timing of transfer of control to the customer along with the reportable segment detail.
Cash and cash equivalents
All highly liquid investments with a maturity of three months or less are considered cash equivalents.
Accounts receivable and allowance for doubtful accounts
Accounts receivable are composed of trade and contract receivables recorded at either the invoiced amount or costs in excess of billings, are expected to be collected within one year, and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the probable amount of uncollectible accounts in the Company’s existing accounts receivable. The Company determines the allowance based on a number of factors, including historical experience, credit worthiness of customers, and current market and economic conditions. The Company reviews the allowance for doubtful accounts on a regular basis. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
The following table summarizes activity recorded within the allowance for doubtful accounts balances for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Beginning balance
|
$
|
6,434
|
|
|
$
|
5,272
|
|
|
$
|
4,868
|
|
Bad debt expense
|
1,150
|
|
|
1,253
|
|
|
2,519
|
|
Accounts written off and other adjustments
|
(624
|
)
|
|
(91
|
)
|
|
(2,115
|
)
|
Ending balance
|
$
|
6,960
|
|
|
$
|
6,434
|
|
|
$
|
5,272
|
|
Concentrations of credit risk on accounts receivable are limited to those from significant customers that are believed to be financially sound. As of
December 31, 2018
and
2017
, the Company's most significant customer is a home improvement retailer. The home improvement retailer purchases from the Residential Products and the Renewable Energy and Conservation segments. Accounts receivable as a percentage of consolidated accounts receivable from the home improvement retailer was
13.6%
as of
December 31, 2018
and
2017
.
Net sales as a percentage of consolidated net sales to the home improvement retailer were
12%
,
12%
and
11%
for the years ended
December 31, 2018
,
2017
and
2016
, respectively, with the majority of those sales within the Company's Residential Products segment. Note 2 "Accounts Receivable" contains additional information on the Company's accounts receivable.
Inventories
Inventories are valued at the lower of cost, determined using the first-in, first-out method, or net realizable value. Shipping and handling costs are recognized as a component of cost of sales.
Property, plant, and equipment
Property, plant, and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. Interest is capitalized in connection with construction of qualified assets. Expenditures that exceed an established dollar threshold and that extend the useful lives of assets are capitalized, while repair and maintenance costs are expensed as incurred. The estimated useful lives of land improvements, buildings, and building improvements are
15
to
40
years, while the estimated useful lives for machinery and equipment are
3
to
20
years.
The table below sets forth the depreciation expense recognized during the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Depreciation expense
|
$
|
12,152
|
|
|
$
|
12,929
|
|
|
$
|
14,477
|
|
Acquisition related assets and liabilities
Accounting for the acquisition of a business as a purchase transaction requires an allocation of the purchase price to the assets acquired and the liabilities assumed in the transaction at their respective estimated fair values. The most complex estimations of individual fair values are those involving long-lived assets, such as property, plant, and equipment and intangible assets. The Company uses all available information to make these fair value determinations and, for major business acquisitions, engages independent valuation specialists to assist in the fair value determination of the acquired long-lived assets.
Goodwill and other intangible assets
The Company tests goodwill for impairment at the reporting unit level on an annual basis at October 31, or more frequently if an event occurs, or circumstances change, that indicate that the fair value of a reporting unit could be below its carrying value. The reporting units are at the component level, or one level below the operating segment level. Goodwill is assigned to each reporting unit as of the date the reporting unit is acquired and based upon the expected synergies of the acquisition.
The Company may elect to perform a qualitative assessment that considers economic, industry and company-specific factors for some or all of our selected reporting units. If, after completing the assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company proceeds to a quantitative test. The Company may also elect to perform a quantitative test instead of a qualitative test for any or all of the Company's reporting units.
The quantitative impairment test consists of comparing the fair value of a reporting unit, determined using two valuation techniques, to its carrying value. If the carrying value of the reporting unit exceeds its fair value, goodwill is considered impaired, and a loss measured by the excess of the carrying value of the reporting unit over the fair value of the reporting unit must be recorded.
The Company also tests its indefinite-lived intangible assets for impairment on an annual basis as of October 31, or more frequently if an event occurs, or circumstances change, that indicate that the fair value of an indefinite-lived intangible asset could be below its carrying value. The impairment test consists of comparing the fair value of the indefinite-lived intangible asset, determined using discounted cash flows on a relief-from-royalty basis, with its carrying
amount. An impairment loss would be recognized for the carrying amount in excess of its fair value. Acquired identifiable intangible assets are recorded at cost. Identifiable intangible assets with finite useful lives are amortized over their estimated useful lives.
Impairment of long-lived assets
Long-lived assets, including acquired identifiable intangible assets with finite useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. In specific situations, when the Company has selected individual assets to be sold or scrapped, the Company obtains market value data for those specific assets and measures and records the impairment loss based on such data. Otherwise, the Company uses undiscounted cash flows to determine whether impairment exists and measures any impairment loss by approximating fair value using acceptable valuation techniques, including discounted cash flow models and third-party appraisals. The Company recognized impairment charges related to intangible assets during the years ended December 31, 2018, 2017 and 2016. Several of these impairment charges related to exit activities during the three year period ended December 31, 2018 as described in Note 14 of the consolidated financial statements.
Deferred charges
Deferred charges associated with initial costs incurred to enter into new debt arrangements are included as a component of long-term debt and are amortized as a part of interest expense over the terms of the associated debt agreements.
Advertising
The Company expenses advertising costs as incurred. For the years ended December 31,
2018
,
2017
and
2016
, advertising costs were
$5.2
million,
$4.9
million, and
$5.1
million, respectively.
Research and Development
The Company expenses research and development costs as incurred. For the years ended December 31,
2018
,
2017
and
2016
, research and development costs were
$1.7
million,
$2.9
million, and
$2.2
million, respectively.
Foreign currency transactions and translation
The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at the rate of exchange in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period.
Income taxes
The provision for income taxes is determined using the asset and liability approach. Under this approach, deferred income taxes represent the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities. The Company records a valuation allowance to reduce deferred tax assets when uncertainty exists regarding their realization. On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Tax Reform Act”). Further information on the impact of the Tax Reform Act is included in Note 15 of the consolidated financial statements.
Equity-based compensation
The Company measures the cost of equity-based compensation based on grant date fair value and recognizes the cost over the period in which the employee is required to provide service in exchange for the award reduced by forfeitures. Equity-based compensation consists of grants of stock options, deferred stock units, restricted stock, restricted stock units, and performance stock units. Equity-based compensation expense is included as a component of selling, general, and administrative expenses. The Company’s equity-based compensation plans are discussed in more detail in Note 12 of the consolidated financial statements.
Sale-Leaseback Transactions
During the first quarter of 2018, the Company entered into a transaction to sell one of its real estate properties to an independent third party for
$3.0
million. The Company leased back the entire property under a
four
year operating lease agreement. In accordance with the U.S. generally accepted accounting principles, the Company accounted for the transaction as a sale-leaseback. The net present value of the Company's future minimum lease payments of
$0.7
million were less than the gain on sale of
$1.4
million. As such, the portion of the gain equal to the fair value of the future minimum lease payments was deferred and is being amortized on a straight-line basis over the
four
year term of the lease. The gain exceeding the fair value of the minimum lease payments amounted to
$0.7
million and was recognized during 2018 as a component of selling, general, and administrative expenses. The minimum lease payment for each of the
four
years is
$0.2
million.
These amounts have been included in the future minimum lease payments table in Note 17 of the consolidated financial statements.
Recent accounting pronouncements
Recent Accounting Pronouncements Adopted
|
|
|
|
|
Standard
|
Description
|
|
Financial Statement Effect or Other Significant Matters
|
ASU No. 2014-09
Revenue from Contracts with Customers (Topic 606) And All Related ASUs
|
The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires additional disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and assets recognized from costs incurred to obtain or fulfill a contract. The provisions of the standard, as well as all subsequently issued clarifications to the standard, are effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The standard can be adopted using either a full retrospective or modified retrospective approach.
|
|
The Company has adopted this standard using the modified retrospective method. The Company recognized the cumulative- effect adjustment of initially applying this standard of $274,000 to the opening balance of retained earnings. The comparative 2017 and 2016 information has not been restated and continues to be reported under the accounting standard in effect for that period. Refer to Note 3 for further disclosure of the financial statement effect and other significant matters as a result of the adoption of this standard.
Date of adoption: Q1 2018
|
ASU No. 2016-15
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
|
The standard provides guidance on eight specific cash flow issues to reduce diversity in reporting. The provisions of this standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted.
|
|
The Company has adopted this standard and it did not have any impact on the Company's consolidated financial statements.
Date of adoption: Q1 2018
|
ASU No. 2016-16
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
|
The standard allows an entity to recognize income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The provisions of this standard are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance.
|
|
The Company has adopted this standard and it did not have any impact on the Company's consolidated financial statements.
Date of adoption: Q1 2018
|
ASU No. 2018-02
Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
|
The standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The provisions of this standard are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the standard is permitted, including adoption in any interim period.
|
|
The Company has early adopted this standard. As a result of adopting this standard, the Company recorded an adjustment of $350,000 from accumulated other comprehensive income to retained earnings in the consolidated statement of shareholders' equity as of January 1, 2018.
Date of adoption: Q1 2018
|
Recent Accounting Pronouncements Not Yet Adopted
|
|
|
|
|
Standard
|
Description
|
|
Financial Statement Effect or Other Significant Matters
|
ASU No. 2016-02
Leases (Topic 842)
|
The standard requires lessees to recognize most leases as assets and liabilities on the balance sheet, but record expenses on the statement of operations in a manner similar to current accounting. For lessors, the guidance modifies the classification criteria and accounting for sales-type and direct financing leases. The standard also requires additional disclosures about leasing arrangements and requires a modified retrospective transition approach for existing leases, whereby the standard will be applied to the earliest year presented. The provisions of the standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted.
|
|
The standard is effective for the Company as of January 1, 2019. The Company will adopt the new leasing standard using the modified retrospective transition approach and will elect the transition method to initially apply the new leases standard to leases that exist at January 1, 2019 (i.e., adoption date). Under this transition method, the date of initial application, and the consolidated financial statements which the Company will first apply the new standard will be January 1, 2019, rather than the later of January 1, 2017 or the Company's underlying leases commencements dates. Further under this approach, the Company will continue reporting and presenting comparative periods in accordance with ASC 840, including disclosures. In addition, the Company will elect the package of practical expedients permitted under the transition guidance within the standard, which among other things, allows the Company to carry-forward the historical lease classification assessed under ASC 840. The Company will make an accounting policy election to keep leases with an initial term of 12 months or less off of the consolidated balance sheet. The Company will recognize operating lease costs in the consolidated statements of operations on a straight-line basis over the lease term. The Company estimates the adoption of the standard will result in recognition of operating lease assets and operating lease liabilities of approximately $29 million, respectively, as of January 1, 2019. The Company expects the standard will have no impact to the Company's lease expense presentation in the consolidated statement of operations nor the Company's liquidity. The standard will have no impact on the Company's debt covenant compliance under the Company's current agreements. Also, the Company has identified and will be implementing appropriate changes to the Company's business processes, systems and internal controls to support recognition and disclosure under this standard.
Planned date of adoption: Q1 2019
|
We consider the applicability and impact of all ASUs. ASUs not listed above were assessed and determined to be either not applicable, or had or are expected to have minimal impact on our financial statements and related disclosures.
(2) ACCOUNTS RECEIVABLE, NET
Accounts receivable at December 31 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Trade accounts receivable
|
$
|
124,609
|
|
|
$
|
140,209
|
|
Costs in excess of billings
|
22,634
|
|
|
11,610
|
|
Total accounts receivables
|
147,243
|
|
|
151,819
|
|
Less allowance for doubtful accounts
|
(6,960
|
)
|
|
(6,434
|
)
|
Accounts receivable
|
$
|
140,283
|
|
|
$
|
145,385
|
|
Refer to Note 3 of the Company's consolidated financial statements included in this annual report on Form 10-K for additional information concerning the Company's costs in excess of billings.
Sales includes revenue from contracts with customers from roof and foundation ventilation products; centralized mail systems and electronic package solutions; rain dispersion products and roofing accessories; expanded and perforated metal; perimeter security solutions; expansion joints and structural bearings; designing, engineering, manufacturing and installation of solar racking systems and greenhouse structures.
Revenue recognition
Revenue is recognized when, or as, the Company transfers control of promised products or service to a customer in an amount that reflects the consideration the Company expects to be entitled in exchange for transferring those products or service. Refer to Note 18 of this annual report on Form 10K for additional information related to revenue recognized by timing of transfer of control by reportable segment.
Payment terms and conditions vary by contract, although terms generally include a requirement of payment within a range from
30
to
60 days
, or in certain cases, up front deposits. In circumstances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that the Company's contracts generally do not include a significant financing component. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from sales.
Performance obligations satisfied at a point in time and significant judgments
The majority of the Company's revenue from contracts with customers is recognized when the Company transfers control of the promised product at a point in time, which is determined when the customer has legal title and the significant risks and rewards of ownership of the asset, and the Company has a present right to payment for the product. These contracts with customers include promised products, which are generally capable of being distinct and accounted for as separate performance obligations. Accordingly, the Company allocates the transaction price, which is generally the quoted price per terms of the contract and the consideration the Company expects to receive, to each performance obligation in an amount based on an observable price of the products as the Company frequently sells these products separately in similar circumstances and to similar customers. These products are generally sold with rights of return and these contracts may provide other credits or incentives, which are accounted for as variable consideration. Variable consideration is estimated at the most likely amount to predict the consideration to which the Company will be entitled, and only to the extent it is probable that a subsequent change in estimate will not result in a significant revenue reversal when estimating the amount of revenue to recognize. Sales returns, allowances, and customer incentives, including rebates, are treated as reductions to the sales transaction price and based largely on an assessment of all information (i.e., historical, current and forecasted) that is reasonably available to the Company, and estimated at contract inception and updated at the end of each reporting period as additional information becomes available.
Performance obligations satisfied over time and significant judgments
For contracts with customers which the Company satisfies a promise to the customer to construct a certain asset that the customer controls as it is being created or enhanced, or a promise to provide a product that has no alternative use to the Company and the Company has enforceable rights to payment, the Company satisfies the performance obligation and recognizes revenue over time. For the contracts to construct a certain asset, the Company determines that the customer controls the asset while it is being constructed. For the contracts for products that have no alternative use and for which the Company has an enforceable right to payment, the Company identifies these products as products that are not a standard inventory item or the Company cannot readily direct the product to another customer or use without incurring a significant economic loss, or significant costs to rework the product.
When the promised products and services are to construct a certain asset that the customer controls, the entire contract is accounted for as one performance obligation. The Company determines the transaction price for each contract based on the consideration the Company expects to receive for the promised products and services under the entire contract, which is generally the stated contract price based on an expected cost plus a margin.
When the promised products do not have an alternative use to the Company, and the Company has enforceable rights to payment, the transaction price is determined for each contract based on the consideration the Company expects to receive for the promised products under the contract and is generally the stated contract price based on an expected cost plus a margin for each performance obligation. These promised products are generally capable of being distinct and accounted for as separate performance obligations.
For the above contracts with customers with respect to which the Company satisfies a performance obligation over time, the Company recognizes revenue based on the extent of progress towards completion of the performance obligation. The cost-to-cost measure of progress best depicts the transfer of control to the customer which occurs as the Company incurs costs on the contract as the incurred costs are proportionate to the Company's progress in satisfying the performance obligation. Under the cost-to-cost measure of progress, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recognized proportionally as costs are incurred. Costs to fulfill a contract include all direct costs related to contract performance. Selling and administrative expenses are charged to operations as incurred. Provision for loss on an uncompleted performance obligation is recognized in the period in which such loss is determined.
The Company regularly reviews the progress and performance of the performance obligation recognized over time under the cost-to-cost method. Any adjustments to net sales, cost of sales, and the related impact to operating income are recognized as necessary in the period they become known. Changes in estimates of net sales, cost of sales, and the related impact to operating income are recognized on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current or prior periods based on a performance obligation's cost-to-cost measure of progress.
The Company also recognizes revenues from services contracts over time. For these contracts, the transaction price is determined for each contract based on the consideration the Company expects to receive for the promised service under the contract, which generally is the stated contract price. In order to estimate the standalone selling price of the performance obligation, the Company evaluates the market in which the promised service is sold and estimates the price that customers in the market would be willing to pay. Further, the Company recognizes revenue over time during the term of the agreement as the customer is simultaneously receiving and consuming the benefits provided throughout the Company's performance. Therefore due to control transferring over time, the Company recognizes revenue on a straight-line basis throughout the contract period.
Remaining performance obligations
As of December 31, 2018, the Company's remaining performance obligations are part of contracts that have an original expected duration of
one year
or less. Therefore, any remaining performance obligations are not required to be disclosed.
Contract assets
Contract assets consist of costs in excess of billings. Costs in excess of billings includes unbilled amounts resulting from revenues under contracts with customers that are satisfied over time and when the cost-to-cost measurement method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Costs
in excess of billings are classified as current assets and are reported net of contract billings on a contract-by-contract basis at the end of each reporting period.
Contract liabilities
Contract liabilities consist of billings in excess of cost and unearned revenue. Billings in excess of cost includes billings in excess of revenue recognized and deferred revenue, which includes advanced payments, up-front payments, and progress billing payments. Billings in excess of cost are reported net of contract cost on a contract-by-contract basis at the end of each reporting period and are classified as current liabilities. To determine the revenue recognized in the period from the beginning balance of billings in excess of cost, the contract liability as of the beginning of the period is recognized as revenue on a contract by contract basis when the Company incurs costs to satisfy the performance obligation related to the individual contract. Once the beginning contract liability balance for an individual contract has been fully recognized as revenue, any additional payments received in the period are recognized as revenue once the related costs have been incurred.
Unearned revenue relates to payments received in advance of performance under the contract and is recognized when the Company performs under the contract. Unearned revenue is presented within accrued expenses in the Company's consolidated balance sheets.
Costs to obtain a contract with a customer
The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than
one year
. As of December 31, 2018, the Company does not have any open contracts with an original expected duration of greater than one year, and therefore, we expense such costs as incurred. These incremental costs include, but are not limited to, sales commissions incurred to obtain a contract with a customer.
Contract assets and contract liabilities
The Company's contract assets and contract liabilities consist of costs in excess of billings, billings in excess of cost and unearned revenue, respectively. The following table presents the beginning and ending balances and significant changes in the costs in excess of billings and billings in excess of cost balance during the year ended December 31, 2018:
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
January 1, 2018 (1)
|
Costs in excess of billings
|
$
|
22,634
|
|
|
$
|
16,532
|
|
Billings in excess of cost
|
(17,857
|
)
|
|
(12,779
|
)
|
Unearned revenue
|
(12,028
|
)
|
|
(3,336
|
)
|
Revenue recognized in the period from:
|
|
|
|
Amounts included in billings in excess of cost at the beginning of the period
|
10,097
|
|
|
|
Amounts included in unearned revenue at the beginning of the period
|
2,988
|
|
|
|
|
|
|
|
|
(1) Due to the adoption of ASC 606 effective January 1, 2018, the Company recorded a transition adjustment to the opening balance of "Costs in excess of billings" and "Unearned revenue" at January 1, 2018, respectively. There were no transition adjustments to the opening balance of "Billings in Excess of Cost" at January 1, 2018. Refer to "Transition disclosures" below for further explanation of cumulative effect of the changes made to the Company's consolidated January 1, 2018 balance sheet for the adoption of ASC 606.
|
Transition disclosures
On January 1, 2018, the Company adopted the accounting standard ASC 606, Revenue from Contracts with Customers, only for contracts that were not completed at the date of initial application using the modified retrospective method. The Company recognized the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of retained earnings. The comparative period information has not been restated and continues to be reported under the accounting standards in effect for that period. The Company does not expect the adoption of this standard to have a material impact to the Company's net income on an ongoing basis.
A majority of the Company's revenues continue to be recognized when products are shipped or service is provided and the customer takes ownership and assumes the risk of loss. For certain custom fabricated products for which there is no alternative use and the Company has enforceable rights to payment for performance to date where revenue was previously recognized upon transfer of title and risk of loss, the Company now recognizes revenue as the Company satisfies its performance over time in accordance with ASC 606.
The cumulative effect of the changes made to the Company's consolidated January 1, 2018 balance sheet for the adoption of ASC 606 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
Adjustments
|
|
Balance at January 1, 2018
|
Assets
|
|
|
|
|
|
Accounts receivable, net
|
$
|
145,385
|
|
|
$
|
4,922
|
|
|
$
|
150,307
|
|
Costs in excess of billings (1)
|
$
|
11,610
|
|
|
$
|
4,922
|
|
|
$
|
16,532
|
|
Inventories
|
$
|
86,372
|
|
|
$
|
(4,735
|
)
|
|
$
|
81,637
|
|
Total current assets
|
$
|
462,764
|
|
|
$
|
187
|
|
|
$
|
462,951
|
|
Total assets
|
$
|
991,385
|
|
|
$
|
187
|
|
|
$
|
991,572
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Accrued expenses (2)
|
$
|
75,467
|
|
|
$
|
(87
|
)
|
|
$
|
75,380
|
|
Total current liabilities
|
$
|
171,033
|
|
|
$
|
(87
|
)
|
|
$
|
170,946
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
Retained earnings
|
$
|
274,562
|
|
|
$
|
274
|
|
|
$
|
274,836
|
|
Total shareholders' equity
|
$
|
531,719
|
|
|
$
|
274
|
|
|
$
|
531,993
|
|
Total liabilities and shareholders' equity
|
$
|
991,385
|
|
|
$
|
187
|
|
|
$
|
991,572
|
|
|
|
|
|
|
|
|
(1) The balance presented at December 31, 2017 for "Costs in excess of billings" represents the balance reported in Note 2 of the Company's annual report on Form 10-K for the year ended December 31, 2017. This balance was included within the total balance of "Accounts receivable, net" presented on the Company's Consolidated Balance Sheet on Form 10-K as of December 31, 2017. Due to the adoption of ASC 606 effective January 1, 2018, the Company recorded a transition adjustment to the opening balance of "Costs in excess of billings" at January 1, 2018 that is included in the "Accounts receivable, net" line item presented on the Company's Consolidated Balance Sheet and disclosed in Note 2 of this Form 10-K for the year ended December 31, 2018.
|
(2) Included in "Accrued expenses" at December 31, 2017 was "Unearned revenue" in the amount of $3.681 million presented in "Other" balance reported in Note 7 of the Company's annual report on Form 10-K for the year ended December 31, 2017. Due to the adoption of ASC 606 effective January 1, 2018, the Company recorded a transition adjustment in the amount of $0.3 million to reduce the opening balance of "Unearned revenue" at January 1, 2018 that is included in "Accrued expense" line item presented on the Company's Consolidated Balance Sheet and disclosed in "Other" in Note 8 of this Form 10-K for the year ended December 31, 2018.
|
In accordance with ASC 606, the disclosure of the impact of adoption on the Company's consolidated statement of operations and balance sheet for the periods ended December 31, 2018 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Operations
|
|
Twelve Months Ended December 31, 2018
|
|
As Reported
|
|
Without Adoption of ASC 606
|
|
Effect of Change
Higher (Lower)
|
|
|
|
|
|
|
Net sales
|
$
|
1,002,372
|
|
|
$
|
1,000,882
|
|
|
$
|
1,490
|
|
Cost of sales
|
760,012
|
|
|
759,165
|
|
|
847
|
|
Gross profit
|
242,360
|
|
|
241,717
|
|
|
643
|
|
Provision for income taxes
|
16,136
|
|
|
15,956
|
|
|
180
|
|
Net income
|
$
|
63,809
|
|
|
$
|
63,346
|
|
|
$
|
463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet
|
|
December 31, 2018
|
|
As Reported
|
|
Without Adoption of ASC 606
|
|
Effect of Change
Higher (Lower)
|
Assets
|
|
|
|
|
|
Accounts receivable, net
|
$
|
140,283
|
|
|
$
|
133,526
|
|
|
$
|
6,757
|
|
Inventories
|
98,913
|
|
|
104,592
|
|
|
(5,679
|
)
|
Total current assets
|
544,553
|
|
|
543,475
|
|
|
1,078
|
|
Total assets
|
1,061,645
|
|
|
1,060,567
|
|
|
1,078
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Accrued expenses
|
87,074
|
|
|
86,733
|
|
|
341
|
|
Total current liabilities
|
392,872
|
|
|
392,531
|
|
|
341
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
Retained earnings
|
338,995
|
|
|
338,258
|
|
|
737
|
|
Total shareholders' equity
|
596,693
|
|
|
595,956
|
|
|
737
|
|
Total liabilities and shareholders' equity
|
$
|
1,061,645
|
|
|
$
|
1,060,567
|
|
|
$
|
1,078
|
|
(4) INVENTORIES
Inventories at December 31 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Raw material
|
$
|
57,845
|
|
|
$
|
42,661
|
|
Work-in-process
|
6,930
|
|
|
10,598
|
|
Finished goods
|
34,138
|
|
|
33,113
|
|
Total inventories
|
$
|
98,913
|
|
|
$
|
86,372
|
|
The following table summarizes activity recorded within the reserve for excess, obsolete and slow moving inventory for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Beginning balance
|
$
|
3,695
|
|
|
$
|
3,801
|
|
|
$
|
7,428
|
|
Excess, obsolete and slow moving inventory expense
|
729
|
|
|
1,276
|
|
|
(239
|
)
|
Scrapped inventory and other adjustments
|
(252
|
)
|
|
(1,382
|
)
|
|
(3,388
|
)
|
Ending balance
|
$
|
4,172
|
|
|
$
|
3,695
|
|
|
$
|
3,801
|
|
(5) PROPERTY, PLANT, AND EQUIPMENT
Components of property, plant, and equipment at December 31 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Land and land improvements
|
$
|
6,061
|
|
|
$
|
6,301
|
|
Building and improvements
|
46,678
|
|
|
46,562
|
|
Machinery and equipment
|
204,326
|
|
|
195,301
|
|
Construction in progress
|
7,690
|
|
|
8,522
|
|
Property, plant, and equipment, gross
|
264,755
|
|
|
256,686
|
|
Less: accumulated depreciation
|
(168,925
|
)
|
|
(159,588
|
)
|
Property, plant, and equipment, net
|
$
|
95,830
|
|
|
$
|
97,098
|
|
(6) ACQUISITIONS
2018 Acquisition
On August 21, 2018, the Company acquired all of the outstanding stock of SolarBOS. SolarBOS is a provider of electrical balance of systems products, which consists of electrical components such as wiring, switches, and combiner boxes that support photovoltaic systems, for the U.S. solar renewable energy market. The Company expects the acquisition of SolarBOS to enable the Company to provide complementary product offerings to its existing customers and strengthen its position in the solar renewable energy market. The results of SolarBOS have been included in the Company's consolidated financial results since the date of acquisition (within the Company's Renewable Energy and Conservation segment). The preliminary aggregate purchase consideration for the acquisition of SolarBOS was
$6.5 million
, which includes a working capital adjustment and certain other adjustments provided for in the stock purchase agreement. The acquisition was financed through cash on hand.
The preliminary purchase price for the acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill and approximated
$3.1 million
, all of which is deductible for tax purposes. Goodwill represents future economic benefits arising from other assets acquired that could not be individually identified including workforce additions, growth opportunities, and increased presence in the solar renewable energy markets.
The allocation of the preliminary purchase consideration to the fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
|
|
|
|
|
Cash
|
$
|
915
|
|
Working capital
|
680
|
|
Property, plant and equipment
|
483
|
|
Acquired intangible assets
|
1,450
|
|
Other assets
|
13
|
|
Other liabilities
|
(51
|
)
|
Goodwill
|
3,051
|
|
Fair value of purchase consideration
|
$
|
6,541
|
|
The intangible assets acquired in this acquisition consisted of the following (in thousands):
|
|
|
|
|
|
|
|
Fair Value
|
|
Estimated
Useful Life
|
Trademarks
|
$
|
300
|
|
|
3 years
|
Technology
|
450
|
|
|
9 years
|
Customer relationships
|
700
|
|
|
9 years
|
Total
|
$
|
1,450
|
|
|
|
2017 Acquisition
On February 22, 2017, the Company acquired all of the outstanding stock of Package Concierge. Package Concierge is a leading provider of multifamily electronic package delivery locker systems in the United States.
The acquisition of Package Concierge has enabled the Company to expand its position in the fast-growing package delivery solutions market. The results of Package Concierge have been included in the Company's consolidated financial results since the date of acquisition (within the Company's Residential Products segment). The final aggregate purchase consideration for the acquisition of Package Concierge was
$18.9
million.
The purchase price for the acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill and approximated
$16.8
million, which is not 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 building products markets.
The allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
|
|
|
|
|
Cash
|
$
|
590
|
|
Working capital
|
(1,998
|
)
|
Property, plant, and equipment
|
55
|
|
Acquired intangible assets
|
3,600
|
|
Other assets
|
8
|
|
Deferred income taxes
|
(128
|
)
|
Goodwill
|
16,790
|
|
Fair value of purchase consideration
|
$
|
18,917
|
|
The intangible assets acquired in this acquisition consisted of the following (in thousands):
|
|
|
|
|
|
|
|
Fair Value
|
|
Estimated
Useful Life
|
Trademarks
|
$
|
600
|
|
|
Indefinite
|
Technology
|
1,300
|
|
|
10 years
|
Customer relationships
|
1,700
|
|
|
7 years
|
Total
|
$
|
3,600
|
|
|
|
2016 Acquisition
On October 11, 2016, the Company acquired all of the outstanding stock of Nexus Corporation ("Nexus"). Nexus is a leading provider of commercial-scale greenhouses to customers in the United States.
The acquisition of Nexus has enabled the Company to strengthen its position in the commercial greenhouse market in the United States. The results of Nexus have been included in the Company's consolidated financial results since the date of acquisition (within the Company's Renewable Energy and Conservation segment). The final aggregate purchase consideration for the acquisition of Nexus was
$23.8
million, which includes a working capital adjustment and certain other adjustments provided for in the stock purchase agreement.
The purchase price for the acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill and approximated
$11.5
million, of which all is deductible for tax purposes.
The allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
|
|
|
|
|
Cash
|
$
|
2,495
|
|
Working capital
|
(1,109
|
)
|
Property, plant, and equipment
|
4,702
|
|
Acquired intangible assets
|
6,200
|
|
Other assets
|
23
|
|
Goodwill
|
11,451
|
|
Fair value of purchase consideration
|
$
|
23,762
|
|
The intangible assets acquired in this acquisition consisted of the following (in thousands):
|
|
|
|
|
|
|
|
Fair Value
|
|
Estimated
Useful Life
|
Trademarks
|
$
|
3,200
|
|
|
Indefinite
|
Technology
|
1,300
|
|
|
15 years
|
Customer relationships
|
800
|
|
|
11 years
|
Backlog
|
900
|
|
|
0.25 years
|
Total
|
$
|
6,200
|
|
|
|
The acquisitions of SolarBOS, Package Concierge and Nexus were funded from available cash on hand. The Company incurred certain acquisition-related costs composed of legal and consulting fees, and these costs were recognized as a component of selling, general, and administrative expenses in the consolidated statements of income. The Company also recognized costs related to the sale of inventory at fair value as a result of allocating the purchase price of recent acquisitions.
All acquisition related costs consisted of the following for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Selling, general and administrative costs
|
$
|
497
|
|
|
$
|
146
|
|
|
$
|
228
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
81
|
|
Total acquisition related costs
|
$
|
497
|
|
|
$
|
146
|
|
|
$
|
309
|
|
(7) GOODWILL AND RELATED INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill for the years ended December 31 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
Products
|
|
Industrial and
Infrastructure
Products
|
|
Renewable Energy and Conservation
|
|
Total
|
Balance at December 31, 2016
|
$
|
181,285
|
|
|
$
|
53,884
|
|
|
$
|
68,863
|
|
|
$
|
304,032
|
|
Acquired goodwill
|
16,790
|
|
|
—
|
|
|
—
|
|
|
16,790
|
|
Adjustments to prior year acquisitions
|
—
|
|
|
—
|
|
|
(832
|
)
|
|
(832
|
)
|
Foreign currency translation
|
—
|
|
|
396
|
|
|
688
|
|
|
1,084
|
|
Balance at December 31, 2017
|
$
|
198,075
|
|
|
$
|
54,280
|
|
|
$
|
68,719
|
|
|
$
|
321,074
|
|
Acquired goodwill
|
—
|
|
|
—
|
|
|
3,051
|
|
|
3,051
|
|
Adjustments to prior year acquisitions
|
—
|
|
|
(38
|
)
|
|
—
|
|
|
(38
|
)
|
Foreign currency translation
|
—
|
|
|
(473
|
)
|
|
57
|
|
|
(416
|
)
|
Balance at December 31, 2018
|
$
|
198,075
|
|
|
$
|
53,769
|
|
|
$
|
71,827
|
|
|
$
|
323,671
|
|
Goodwill is recognized net of accumulated impairment losses of
$235.4
million as of
December 31, 2018
and
2017
, respectively.
No
goodwill impairment charges were recognized by the Company during 2018.
Annual Impairment Testing
The Company performed its annual goodwill impairment test as of October 31,
2018
,
2017
, and
2016
. The Company did not recognize any impairment charges during 2018, 2017, and 2016 as a result of the annual goodwill impairment test. However, subsequent to the annual goodwill impairment test as of October 31, 2016, the Company discontinued its European residential solar racking business which resulted in an impairment charge against goodwill of
$0.9
million
which was recorded for the year ended December 31, 2016.
During the October 31,
2018
impairment test, the Company conducted a quantitative analysis for all
twelve
of the Company’s reporting units. The quantitative impairment test consists of comparing the fair value of a reporting unit with its carrying value including goodwill. The fair value of each reporting unit evaluated under the quantitative test was determined using two valuation techniques: an income approach and a market approach. Each valuation approach relies on significant assumptions including a weighted average cost of capital ("WACC") based upon the capital structure of market participants in the Company’s peer groups, projected revenue growth, forecasted cash flows, and earnings multiples based on the market value of the Company and market participants within its peer groups.
As a result of our annual testing for 2018 and 2017, none of the reporting units with goodwill as of our testing date had carrying values in excess of their fair values.
Interim Impairment Testing
We test goodwill and indefinite-lived intangible assets for impairment on an annual basis as of October 31 and at interim dates when indicators of impairment are present. In 2018, 2017 and 2016, no indicators of impairment were identified as of interim dates; therefore, no interim tests were performed.
Acquired Intangible Assets
Acquired intangible assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Estimated
Useful Life
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
Trademarks
|
$
|
43,870
|
|
|
$
|
—
|
|
|
$
|
45,107
|
|
|
$
|
—
|
|
|
Indefinite
|
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
Trademarks
|
6,094
|
|
|
3,518
|
|
|
5,876
|
|
|
3,062
|
|
|
3 to 15 Years
|
Unpatented technology
|
28,644
|
|
|
13,881
|
|
|
28,107
|
|
|
12,033
|
|
|
5 to 20 Years
|
Customer relationships
|
70,419
|
|
|
35,678
|
|
|
80,707
|
|
|
39,652
|
|
|
5 to 17 Years
|
Non-compete agreements
|
1,649
|
|
|
1,224
|
|
|
1,649
|
|
|
931
|
|
|
4 to 10 Years
|
|
106,806
|
|
|
54,301
|
|
|
116,339
|
|
|
55,678
|
|
|
|
Total acquired intangible assets
|
$
|
150,676
|
|
|
$
|
54,301
|
|
|
$
|
161,446
|
|
|
$
|
55,678
|
|
|
|
The Company recognized impairment charges related to indefinite-lived trademark intangible assets for the years ended
December 31, 2018
, 2017 and 2016. The Company also recognized impairment charges related to finite-lived intangible assets for the years ended December 31, 2018 and 2016.
The following table summarizes the impairment charges for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Indefinite-lived intangibles (1)
|
|
Definite-lived intangibles
(2)
|
|
Indefinite-lived intangibles (3)
|
|
Definite-lived intangibles
|
|
Indefinite-lived intangibles (4)
|
|
Definite-lived intangibles (5)
|
Residential Products
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Industrial and Infrastructure Products
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,980
|
|
|
—
|
|
Renewable Energy and Conservation
|
1,037
|
|
|
315
|
|
|
247
|
|
|
—
|
|
|
1,068
|
|
|
198
|
|
Impairment charges
|
$
|
1,237
|
|
|
$
|
315
|
|
|
$
|
247
|
|
|
$
|
—
|
|
|
$
|
9,048
|
|
|
$
|
198
|
|
(1) Residential Products impairment charges due to annual testing. Renewable Energy and Conservation impairment charges due to the annual testing in its international solar racking business and restructuring in its domestic greenhouse business.
(2) Renewable Energy and Conservation impairment charges due to the restructuring in its domestic greenhouse business.
(3) Renewable Energy and Conservation impairment charges due to the discontinuation of its domestic greenhouse business in China.
(4) Industrial and Infrastructure Products impairment charges due to discontinuation of U.S. bar grating product line and annual testing. Renewable Energy and Conservation impairment due to discontinuation of European residential solar racking business and annual testing.
(5) Renewable Energy and Conservation impairment due to discontinuation of European residential solar racking business.
The Company recognized amortization expense related to the definite-lived intangible assets. The following table summarizes amortization expense for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Amortization expense
|
$
|
8,222
|
|
|
$
|
8,761
|
|
|
$
|
9,637
|
|
Amortization expense related to acquired intangible assets for the next five years ended December 31 is estimated as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
Amortization expense
|
$
|
7,213
|
|
|
$
|
6,921
|
|
|
$
|
6,726
|
|
|
$
|
6,248
|
|
|
$
|
5,709
|
|
(8) ACCRUED EXPENSES
Accrued expenses at December 31 consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Compensation
|
$
|
32,927
|
|
|
$
|
34,752
|
|
Interest and taxes
|
9,231
|
|
|
8,002
|
|
Customer rebates
|
10,300
|
|
|
10,517
|
|
Insurance
|
7,789
|
|
|
7,261
|
|
Unearned revenue
|
12,028
|
|
|
3,681
|
|
Other
|
14,799
|
|
|
11,254
|
|
Total accrued expenses
|
$
|
87,074
|
|
|
$
|
75,467
|
|
Accrued expenses for insurance are primarily for general liability, workers’ compensation and employee healthcare policies for which the Company is self-insured up to certain per-occurrence and aggregate limits. The amounts accrued represent the Company's best estimates of the probable amount of claims to be paid. Differences between the amounts accrued and the amount that may be reasonably possible of payment are not material. Accrued expenses for unearned revenue primarily relates to customer deposits received for services not yet performed by the Company further discussed in Note 3 of the Company's consolidated financial statements.
(9) DEBT
Long-term debt at December 31 consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Senior Subordinated 6.25% Notes
|
$
|
210,000
|
|
|
$
|
210,000
|
|
Other debt
|
2,000
|
|
|
2,400
|
|
Less unamortized debt issuance costs
|
(1,595
|
)
|
|
(2,379
|
)
|
Total debt
|
210,405
|
|
|
210,021
|
|
Less current maturities
|
208,805
|
|
|
400
|
|
Total long-term debt
|
$
|
1,600
|
|
|
$
|
209,621
|
|
Senior Credit Agreement
The Company's Fifth Amended and Restated Credit Agreement dated December 9, 2015 (the "Senior Credit Agreement") had a termination date of December 9, 2020.
The Senior Credit Agreement provided for a revolving credit facility and letters of credit in an aggregate amount of
$300 million
. The Company had the option to request additional financing from the banks to either increase the revolving credit facility to
$500 million
or in the form of a term loan of up to
$200 million
. The Senior Credit Agreement contained three financial covenants. As of
December 31, 2018
, the Company was in compliance with all three covenants.
Borrowings under the Senior Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and certain real property of the Company’s significant domestic subsidiaries. Interest rates on the revolving credit facility are based on the LIBOR plus an additional margin that ranges from
1.25%
to
2.25%
for LIBOR loans based on the Total Leverage Ratio.
In addition, the revolving credit facility is subject to an undrawn commitment fee ranging between
0.20%
and
0.30%
based on the Total Leverage Ratio and the daily average undrawn balance.
Standby letters of credit of
$9.2
million have been issued under the Senior Credit Agreement to third parties on behalf of the Company as of December 31, 2018. These letters of credit reduce the amount otherwise available under the revolving credit facility. The Company had
$290.8 million
and
$288.8
million of availability under the revolving credit facility at December 31, 2018 and 2017, respectively.
On January 24, 2019, the Company entered into a Sixth Amended and Restated Credit Agreement ("2019 Senior Credit Agreement"), which amends and restates the Company’s Fifth Amended and Restated Credit Agreement dated December 9, 2015. Borrowings under the 2019 Senior Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and general intangibles of the Company’s significant domestic subsidiaries. The 2019 Senior Credit Agreement 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 banks 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 2019 Senior Credit Agreement contains three financial covenants. Interest rates on the 2019 revolving credit facility are based on the 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 and the daily average undrawn balance. The 2019 Senior Credit Agreement terminates on January 23, 2024.
Senior Subordinated Notes
On January 31, 2013, the Company issued
$210 million
of
6.25%
Senior Subordinated Notes ("
6.25%
Notes") due
February 1, 2021
. The provisions of the
6.25%
Notes include, without limitation, restrictions on indebtedness, liens, and distributions from restricted subsidiaries, asset sales, affiliate transactions, dividends, and other restricted payments. Dividend payments are subject to annual limits and interest is paid semiannually on February 1 and August 1 of each year.
On December 20, 2018, the Company announced on Form 8-K its notice of redemption of its
$210 million
outstanding Senior Subordinated
6.25%
Notes, effective February 1, 2019. The
6.25%
Notes were redeemed in accordance with the provisions of the indenture governing the Notes on February 1, 2019. The Company expects to record a charge of approximately
$1.0 million
for the write-off of deferred financing fees relating to the
6.25%
Notes during the quarter ending March 31, 2019.
The aggregate maturities of long-term debt for the next five years and thereafter are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
Long-term debt payments
|
|
$
|
210,400
|
|
|
$
|
400
|
|
|
$
|
400
|
|
|
$
|
400
|
|
|
$
|
400
|
|
|
$
|
—
|
|
Total cash paid for interest in the years ended December 31 was (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Interest expense, net
|
$
|
12,064
|
|
|
$
|
14,032
|
|
|
$
|
14,577
|
|
Interest income
|
2,156
|
|
|
574
|
|
|
136
|
|
Other non-cash adjustments
|
$
|
(529
|
)
|
|
$
|
(647
|
)
|
|
$
|
(671
|
)
|
Cash paid for interest
|
$
|
13,691
|
|
|
$
|
13,959
|
|
|
$
|
14,042
|
|
(10) PENSION AND OTHER POSTRETIREMENT BENEFITS
Supplemental Pension and Multiemployer Pension Plans
The Company has an unfunded supplemental pension plan which provides defined pension benefits to certain former salaried employees upon retirement. The plan has been frozen, no additional participants will be added to the plan in the future and there are no active employees in the plan.
The Company also has a 401(k) plan which all employees of U.S. subsidiaries are eligible to participate.
The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover union-represented employees.
Total expense for all retirement plans for the years ended December 31 was (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Defined benefit pension plan
|
|
$
|
4
|
|
|
$
|
28
|
|
|
$
|
52
|
|
401(k) plan
|
|
2,262
|
|
|
2,248
|
|
|
1,952
|
|
Multiemployer defined benefit plans
|
|
234
|
|
|
292
|
|
|
296
|
|
Postretirement healthcare plan
|
|
$
|
427
|
|
|
$
|
476
|
|
|
$
|
587
|
|
Total retirement plan expense
|
|
$
|
2,927
|
|
|
$
|
3,044
|
|
|
$
|
2,887
|
|
All of the multiemployer plans are underfunded, and each fund has a rehabilitation plan in place. Each plan with a rehabilitation plan requires minimum contributions from the Company. Given the status of these plans, it is reasonably possible that future contributions to the plans will increase although the Company cannot reasonably estimate a possible range of increased contributions as of December 31, 2018.
Other Postretirement Benefits
The Company has an unfunded postretirement healthcare plan which provides health insurance to certain employees and their spouses upon retirement. This plan has been frozen and no additional participants will be added to the plan in the future.
The following table presents the changes in the accumulated postretirement benefit obligation related to the Company’s unfunded postretirement healthcare benefits at December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Projected benefit obligation at January 1
|
$
|
7,020
|
|
|
$
|
7,202
|
|
Service cost
|
18
|
|
|
17
|
|
Interest cost
|
233
|
|
|
269
|
|
Actuarial gain
|
(819
|
)
|
|
(150
|
)
|
Benefits paid, net of contributions
|
(317
|
)
|
|
(318
|
)
|
Projected benefit obligation at December 31
|
6,135
|
|
|
7,020
|
|
Fair value of plan assets
|
—
|
|
|
—
|
|
Under funded status
|
(6,135
|
)
|
|
(7,020
|
)
|
Unamortized prior service cost
|
382
|
|
|
427
|
|
Unrecognized actuarial loss
|
1,431
|
|
|
2,382
|
|
Net amount recognized
|
$
|
(4,322
|
)
|
|
$
|
(4,211
|
)
|
Amounts recognized in the consolidated financial statements consisted of (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Accrued postretirement benefit liability
|
|
|
|
Current portion
|
$
|
331
|
|
|
$
|
314
|
|
Long term portion
|
5,805
|
|
|
6,706
|
|
Pre-tax accumulated other comprehensive loss – unamortized post-retirement healthcare costs
|
(1,814
|
)
|
|
(2,809
|
)
|
Net amount recognized
|
$
|
4,322
|
|
|
$
|
4,211
|
|
The measurement date used to determine postretirement benefit obligation measures was December 31.
Components of net periodic postretirement benefit cost charged to expense for the years ended December 31 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Service cost
|
$
|
18
|
|
|
$
|
17
|
|
|
$
|
22
|
|
Interest cost
|
233
|
|
|
269
|
|
|
272
|
|
Amortization of unrecognized prior service cost
|
44
|
|
|
44
|
|
|
44
|
|
Loss amortization (
2
)
|
132
|
|
|
146
|
|
|
134
|
|
Net periodic benefit cost
|
$
|
427
|
|
|
$
|
476
|
|
|
$
|
472
|
|
Assumptions used to calculate the benefit obligation:
|
|
|
|
|
|
Discount rate
|
4.1
|
%
|
|
3.4
|
%
|
|
3.8
|
%
|
Annual rate of increase in the per capita cost of:
|
|
|
|
|
|
Medical costs before age 65 (
1)
|
7.0
|
%
|
|
7.3
|
%
|
|
7.5
|
%
|
Medical costs after age 65 (
1)
|
5.0
|
%
|
|
6.3
|
%
|
|
6.5
|
%
|
Prescription drug costs (
1)
|
9.5
|
%
|
|
10.5
|
%
|
|
10.5
|
%
|
(1) It was assumed that these rates would gradually decline to
3.8%
by 2075.
(2) Actuarial (gains)/losses are amortized utilizing the corridor approach. Differences between actual experience and the actuarial assumptions are reflected in (gain)/loss. If the total net (gain) or loss exceeds 10 percent of the greater of the accumulated postretirement benefit obligation or plan asset, this excess must be amortized over the average remaining service period of the active plan participants. If most of the plan participants are inactive, the amortization period is the expected future lifetime of inactive plan participants.
A 1% change in the annual medical inflation rate issued would have the following impact on the amounts reported at December 31 as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Effect on accumulated postretirement benefit obligation
|
|
|
|
1% increase
|
$
|
831
|
|
|
$
|
950
|
|
1% decrease
|
$
|
(702
|
)
|
|
$
|
(803
|
)
|
Effect on annual service and interest costs
|
|
|
|
1% increase
|
$
|
36
|
|
|
$
|
41
|
|
1% decrease
|
$
|
(30
|
)
|
|
$
|
(34
|
)
|
Expected benefit payments from the plan for the years ended December 31 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Years 2024 - 2028
|
Expected benefit payments
|
|
$
|
331
|
|
|
$
|
349
|
|
|
$
|
364
|
|
|
$
|
379
|
|
|
$
|
393
|
|
|
$
|
2,102
|
|
(11) ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
The cumulative balance of each component of accumulated other comprehensive (loss) income is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
Translation
Adjustment
|
|
Minimum pension and post retirement benefit plan adjustments
|
|
Total Pre-Tax Amount
|
|
Tax (Benefit) Expense
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
Balance at December 31, 2016
|
$
|
(5,848
|
)
|
|
$
|
(2,953
|
)
|
|
$
|
(8,801
|
)
|
|
$
|
(1,080
|
)
|
|
$
|
(7,721
|
)
|
Minimum pension and post retirement benefit plan adjustments
|
—
|
|
|
315
|
|
|
315
|
|
|
110
|
|
|
205
|
|
Foreign currency translation adjustment
|
3,150
|
|
|
—
|
|
|
3,150
|
|
|
—
|
|
|
3,150
|
|
Balance at December 31, 2017
|
$
|
(2,698
|
)
|
|
$
|
(2,638
|
)
|
|
$
|
(5,336
|
)
|
|
$
|
(970
|
)
|
|
$
|
(4,366
|
)
|
Minimum pension and post retirement benefit plan adjustments
|
—
|
|
|
948
|
|
|
948
|
|
|
225
|
|
|
723
|
|
Cumulative effect of accounting change (see Note 1)
|
—
|
|
|
(350
|
)
|
|
(350
|
)
|
|
—
|
|
|
(350
|
)
|
Foreign currency translation adjustment
|
(3,241
|
)
|
|
—
|
|
|
(3,241
|
)
|
|
—
|
|
|
(3,241
|
)
|
Balance at December 31, 2018
|
$
|
(5,939
|
)
|
|
$
|
(2,040
|
)
|
|
$
|
(7,979
|
)
|
|
$
|
(745
|
)
|
|
$
|
(7,234
|
)
|
The realized adjustments relating to the Company’s minimum pension liability and post retirement health care costs were reclassified from accumulated other comprehensive loss and included in other expense in the consolidated statements of operations.
(12) EQUITY-BASED COMPENSATION
The Company awards equity-based compensation to employees and directors, which is recognized in the statements of operations based on the grant-date fair value of the award. The Company uses the straight-line method for recording compensation expense over a vesting period generally up to
four
years with either graded or cliff vesting. Stock compensation expense recognized during the period is based on the value of the portion of equity-based awards that is ultimately expected to vest during the period reduced by the unvested expense on awards forfeited during the period.
On May 4, 2018, the shareholders of the Company approved the adoption of the Gibraltar Industries, Inc. 2018 Equity Incentive Plan (the "2018 Plan"). The 2018 Plan provides for the issuance of up to
1,000,000
shares of common stock and supplements the remaining shares available for issuance under the existing Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "2015 Plan"). The Company's 2005 Equity Incentive Plan (the "Prior Plan") was amended in 2015 to terminate issuance of further awards from the Prior Plan.
Both the 2018 Plan and the 2015 Plan allow the Company to grant equity-based incentive compensation awards, in the form of non-qualified options, restricted shares, restricted stock units, performance shares, performance stock units, and stock rights to eligible participants.
In 2016, the shareholders of the Company approved the adoption of the Gibraltar Industries, Inc. 2016 Stock Plan for Non-Employee Directors ("Non-Employee Directors Plan") which allows the Company to grant awards of shares of the Company's common stock to non-employee Directors of the Company and permits the Directors to defer receipt of such shares pursuant to the terms of the Non-Employee Directors Plan.
At
December 31, 2018
,
946,000
and
73,000
shares were available for issuance under the 2018 Plan and 2015 Plan, respectively, as incentive stock options or other stock awards, and
60,000
shares were available for issuance under the Non-Employee Directors Plan as awards of shares of the Company's common stock.
The Company recognized the following compensation expense in connection with awards that vested under the 2018 Plan, the 2015 Plan, the Prior Plan, and the Non-Employee Directors Plan along with the related tax benefits recognized during the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Expense recognized under the Prior Plan
|
$
|
569
|
|
|
$
|
1,059
|
|
|
$
|
1,937
|
|
Expense recognized under the 2015 Plan
|
7,988
|
|
|
5,643
|
|
|
3,993
|
|
Expense recognized under the 2018 Plan
|
188
|
|
|
—
|
|
|
—
|
|
Expense recognized under the Non-Employee Directors Plan
|
444
|
|
|
420
|
|
|
443
|
|
Total stock compensation expense
|
$
|
9,189
|
|
|
$
|
7,122
|
|
|
$
|
6,373
|
|
Tax benefits recognized related to stock compensation expense
|
$
|
2,509
|
|
|
$
|
2,133
|
|
|
$
|
2,485
|
|
Equity Based Awards - Settled in Stock
The following table provides the number of stock options, stock units, and unrestricted shares granted during the years ended December 31, along with the weighted-average grant-date fair value of each award:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Awards
|
Number of
Awards
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Number of
Awards
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Number of
Awards
|
|
Weighted
Average
Grant Date
Fair Value
|
Options
|
—
|
|
|
$
|
—
|
|
|
25,000
|
|
|
$
|
12.85
|
|
|
—
|
|
|
$
|
—
|
|
Deferred stock units
|
10,255
|
|
|
$
|
35.96
|
|
|
10,170
|
|
|
$
|
34.42
|
|
|
11,945
|
|
|
$
|
29.30
|
|
Common shares
|
2,113
|
|
|
$
|
35.50
|
|
|
2,034
|
|
|
$
|
34.42
|
|
|
3,185
|
|
|
$
|
29.30
|
|
Restricted stock units
|
116,174
|
|
|
$
|
36.61
|
|
|
133,548
|
|
|
$
|
36.56
|
|
|
141,982
|
|
|
$
|
25.44
|
|
Performance stock units
|
135,929
|
|
|
$
|
33.63
|
|
|
108,748
|
|
|
$
|
42.72
|
|
|
—
|
|
|
$
|
—
|
|
Stock Options
The fair value of stock options granted during the year ended December 31, 2017 was estimated on the date of grant using the Black-Scholes option pricing model. No options were granted in 2018 and 2016. Expected stock volatility was based on volatility of the Company’s stock price using a historical period commensurate with the expected life of the options. The following table provides the weighted average assumptions used to value stock options issued during the year ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year of Grant
|
|
Fair Value
|
|
Expected Life
(in years)
|
|
Expected Stock Volatility
|
|
Risk-free Interest Rate
|
|
Expected Dividend Yield
|
2017
|
|
$
|
12.85
|
|
|
4.00
|
|
35.7
|
%
|
|
1.7
|
%
|
|
—
|
%
|
The following table summarizes the ranges of outstanding and exercisable options at
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Prices
|
Options
Outstanding
|
|
Weighted Average
Remaining
Contractual Life
(in years)
|
|
Weighted
Average
Exercise
Price
|
|
Options
Exercisable
|
|
Weighted
Average
Exercise
Price
|
$8.90 – $9.32
|
18,938
|
|
|
1.70
|
|
$
|
8.90
|
|
|
18,938
|
|
|
$
|
8.90
|
|
$9.33 – $11.73
|
70,721
|
|
|
2.70
|
|
$
|
9.74
|
|
|
70,721
|
|
|
$
|
9.74
|
|
$11.74 – $19.58
|
20,100
|
|
|
0.70
|
|
$
|
13.72
|
|
|
20,100
|
|
|
$
|
13.72
|
|
$19.59 - $32.49
|
25,000
|
|
|
7.00
|
|
$
|
25.44
|
|
|
25,000
|
|
|
$
|
25.44
|
|
$32.50 - $43.05
|
25,000
|
|
|
8.14
|
|
$
|
42.35
|
|
|
—
|
|
|
$
|
—
|
|
|
159,759
|
|
|
|
|
|
|
134,759
|
|
|
|
The following table summarizes information about stock option transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
|
Weighted Average
Remaining Contractual
Life (in years)
|
|
Aggregate
Intrinsic Value
|
Balance at January 1, 2016
|
458,349
|
|
|
$
|
16.57
|
|
|
|
|
|
Exercised
|
(175,125
|
)
|
|
19.08
|
|
|
|
|
|
Forfeited
|
(6,000
|
)
|
|
18.22
|
|
|
|
|
|
Balance at December 31, 2016
|
277,224
|
|
|
$
|
14.95
|
|
|
|
|
|
Granted
|
25,000
|
|
|
42.35
|
|
|
|
|
|
Exercised
|
(42,058
|
)
|
|
16.02
|
|
|
|
|
|
Forfeited
|
(12,500
|
)
|
|
25.44
|
|
|
|
|
|
Balance at December 31, 2017
|
247,666
|
|
|
$
|
17.01
|
|
|
|
|
|
Exercised
|
(87,907
|
)
|
|
15.75
|
|
|
|
|
|
Balance at December 31, 2018
|
159,759
|
|
|
$
|
17.70
|
|
|
6.13
|
|
$
|
3,026,930
|
|
The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the
$35.59
per share market price of the Company’s common stock as of
December 31, 2018
, which would have been received by the option holders had all option holders with an exercise price below the per share market price on
December 31, 2018
, exercised their options as of that date.
Stock units and Restricted Shares
The following table summarizes information about non-vested restricted stock units, performance stock units (that will convert to shares upon vesting) and common and restricted shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock Units
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Common and Restricted
Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Performance Stock Units (1)
|
|
Weighted Average Grant Date Fair Value
|
|
Deferred Stock Units (2)
|
|
Weighted Average Grant Date Fair Value
|
Balance at December 31, 2017
|
441,816
|
|
|
$
|
23.96
|
|
|
4,258
|
|
|
$
|
17.30
|
|
|
480,462
|
|
|
$
|
24.68
|
|
|
22,115
|
|
|
$
|
31.65
|
|
Granted
|
116,174
|
|
|
36.61
|
|
|
2,113
|
|
|
35.50
|
|
|
135,929
|
|
|
33.63
|
|
|
10,255
|
|
|
35.96
|
|
Vested
|
(137,020
|
)
|
|
22.72
|
|
|
(6,371
|
)
|
|
23.34
|
|
|
(323,118
|
)
|
|
18.57
|
|
|
(5,127
|
)
|
|
32.18
|
|
Forfeited
|
(25,617
|
)
|
|
31.70
|
|
|
—
|
|
|
—
|
|
|
(57,788
|
)
|
|
41.59
|
|
|
—
|
|
|
—
|
|
Balance at December 31, 2018
|
395,353
|
|
|
$
|
27.61
|
|
|
—
|
|
|
$
|
—
|
|
|
235,485
|
|
|
$
|
33.78
|
|
|
27,243
|
|
|
$
|
33.18
|
|
(1) The Company’s performance stock units (“PSUs”) represent shares granted for which the final number of shares earned depends on financial performance or market conditions. The number of shares to be issued may vary between
0%
and
200%
of the number of performance stock units granted depending on the relative achievement to targeted thresholds. The Company's PSUs with a financial performance condition are based
on either the Company’s return on invested capital (“ROIC”) over a
one
-year period performance period or gross profit thresholds over a
two
-year performance period. The Company's PSUs with a market condition are based on the ranking of the Company’s total shareholder return (“TSR”) performance, on a percentile basis, over a
three
year performance period compared to the S&P Small Cap Industrial sector, over the same
three
year performance period.
(2) Vested and issued upon retirement.
The fair value of the common shares, restricted stock units, and deferred stock units, as well as, the performance stock units with a financial performance condition granted during the three years ended
December 31, 2018
was based on the Company stock price at grant date of the award. The fair value of the performance stock units with a market condition granted during the three years ended
December 31, 2018
were determined using a Monte Carlo simulation as of the grant date of the award, however no such awards were granted in 2018.
The following table sets forth the aggregate intrinsic value of options exercised and aggregate fair value of restricted stock units and restricted shares that vested during the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Aggregate intrinsic value of options exercised
|
$
|
2,128
|
|
|
$
|
628
|
|
|
$
|
2,439
|
|
Aggregate fair value of vested restricted stock units
|
$
|
5,307
|
|
|
$
|
6,756
|
|
|
$
|
4,368
|
|
Aggregate fair value of vested common and restricted shares
|
$
|
149
|
|
|
$
|
70
|
|
|
$
|
247
|
|
Aggregate fair value of vested deferred stock units
|
$
|
369
|
|
|
$
|
350
|
|
|
$
|
443
|
|
As of
December 31, 2018
, there was
$8.3
million of total unrecognized compensation cost related to non-vested options, restricted shares, and restricted stock units. That cost is expected to be recognized over a weighted average period of
1.9 years
.
Equity Based Awards - Settled in Cash
As of
December 31, 2018
, the Company's total share-based liabilities recorded on the consolidated balance sheet was
$38.4 million
, of which
$23.6 million
was included in non-current liabilities. Total share-based liabilities as of
December 31, 2017
were
$48.0 million
, of which
$29.3 million
was included in non-current liabilities. The Company's equity based awards that are settled in cash include performance stock units settled in cash and a management stock purchase plan.
Performance Stock Units - Settled in Cash
The Company also has PSUs that will convert to cash after
three
years based upon a
one
year performance period. The cost of these awards is recognized over the requisite vesting period. The PSUs earned over the performance period were determined based on the Company's actual ROIC relative to the ROIC targeted for the performance period.
The following table provides the number of PSUs which will convert to cash for the years ending December 31:
|
|
|
|
|
|
|
|
|
2016
|
Awards
|
Number of
Units (2)
|
|
Grant Date Fair Value
(in $000s)
|
Performance stock units (1)
|
128,000
|
|
|
$
|
3,100
|
|
(1) There were no performance stock units that convert to cash granted to participants in 2018 and 2017.
(2) The participants earned
200%
of target aggregating
256,000
PSUs earned. This award will be converted to cash and will be paid to participants in the first quarter of 2019 at the trailing
90
-day closing price of the Company's common stock as of December 31, 2018.
The following table summarizes the compensation expense recognized from the change in fair value and vesting of cash settled performance stock units awarded for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Performance stock unit compensation expense
|
$
|
2,846
|
|
|
$
|
3,591
|
|
|
$
|
10,377
|
|
Management Stock Purchase Plan
The Management Stock Purchase Plan ("MSPP") provides certain employees and Directors the ability to defer a portion of their compensation or Directors’ fees, which deferral is converted to restricted stock units, and credited to an account. Employees eligible to defer a portion of their compensation also receive a company-matching award in restricted stock units equal to a percentage of their compensation. The account represents a share-based liability that is converted to and settled in cash payable to participants upon retirement or a termination of their service to the Company.
The following table provides the number of restricted stock units credited to active participant accounts, balance of vested and unvested restricted stock units within active participant accounts, payments made with respect to restricted stock units issued under the MSPP, and MSPP expense during years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Restricted stock units credited
|
66,843
|
|
|
84,299
|
|
|
198,155
|
|
Restricted stock units balance, vested and unvested
|
387,870
|
|
|
389,189
|
|
|
646,669
|
|
Share-based liabilities paid, in thousands
|
$
|
5,232
|
|
|
$
|
6,058
|
|
|
$
|
3,137
|
|
MSPP expense, in thousands
|
$
|
4,809
|
|
|
$
|
2,432
|
|
|
$
|
8,565
|
|
(13) FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement as follows:
|
|
•
|
Level 1 - Quoted prices in active markets for identical assets or liabilities.
|
|
|
•
|
Level 2 - Observable inputs other than quoted prices in active markets for similar assets and liabilities.
|
|
|
•
|
Level 3 - Inputs that are unobservable inputs for the asset or liability.
|
The Company had no financial assets or liabilities measured at fair value on a recurring basis at
December 31, 2018
and 2017. The Company's only financial instrument for which carrying value differs from its fair value is the Company's Senior Subordinated
6.25%
Notes. At December 31, 2018 and 2017, the fair value of the outstanding debt net of unamortized debt issuance costs was
$210.8
million and
$213.8
million, respectively, compared to its carrying value of $
210.4 million
and $
210.0 million
, respectively. The fair value of the Company's Senior Subordinated
6.25%
Notes is classified as Level 2 within the fair value hierarchy and was estimated based on quoted market prices adjusted for unamortized debt issuance costs.
The Company’s other financial instruments primarily consist of cash and cash equivalents, accounts receivable, notes receivable, and accounts payable. The carrying values for our financial instruments approximate fair value. The Company did not have any other material assets or liabilities carried at fair value and measured on a recurring basis as of
December 31, 2018
and
2017
.
Other non-recurring fair value measurements
The Company recognized the impairment of certain intangible assets and property, plant, and equipment during the years ended
December 31, 2018
,
2017
and
2016
. The Company uses unobservable inputs, classified as Level 3 inputs, in determining the fair value of these assets. See Note 7 and Note 14 of the consolidated financial statements for more disclosure regarding the impairment of certain intangible assets and property, plant, and equipment, respectively.
The Company also applied fair value principles for the goodwill impairment tests performed during
2018
,
2017
, and
2016
. The Company used two valuation models to estimate the fair values of its reporting units, both of which primarily use Level 3 inputs. See Note 7 of the consolidated financial statements for the results of the Company’s goodwill impairment tests.
Additionally, the Company's recent acquisition activity, as described in Note 6 of the consolidated financial statements, used Level 3 inputs to estimate fair values allocated to the assets acquired and liabilities assumed.
(14) 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, and in the sale and exiting of less profitable businesses or products lines.
Exit activity costs were incurred during 2018 which related to contract terminations, severance, and other moving and closing costs. During this time, the Company also incurred asset impairment charges related to the write-down of inventory, impairment of machinery and equipment and intangible assets associated with either discontinued product lines or reduced sales of lower margin products. In conjunction with these initiatives, the Company also sold and leased back a facility which resulted in a gain, as well as closed and consolidated
four
other facilities in 2018.
The Company closed and consolidated
three
facilities during 2017 and
seven
facilities during 2016 as a result of these initiatives, which resulted in asset impairment charges and exit activity costs in both years.
The following table sets forth the asset impairment charges and exit activity costs incurred by segment during the years ended December 31 related to the restructuring activities described above (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Inventory write-downs &/or asset impairment charges (recoveries), net
|
|
Exit activity costs (recoveries), net
|
|
Total
|
|
Inventory write-downs &/or asset impairment charges (recoveries), net
|
|
Exit activity costs
|
|
Total
|
|
Inventory write-downs &/or asset impairment charges
|
|
Exit activity costs
|
|
Total
|
Residential Products
|
$
|
1,586
|
|
|
$
|
1,321
|
|
|
$
|
2,907
|
|
|
$
|
345
|
|
|
$
|
1,058
|
|
|
$
|
1,403
|
|
|
$
|
1,459
|
|
|
$
|
1,074
|
|
|
$
|
2,533
|
|
Industrial & Infrastructure Products
|
(347
|
)
|
|
1,749
|
|
|
1,402
|
|
|
(2,484
|
)
|
|
2,820
|
|
|
336
|
|
|
4,221
|
|
|
4,546
|
|
|
8,767
|
|
Renewable Energy & Conservation
|
105
|
|
|
(33
|
)
|
|
72
|
|
|
509
|
|
|
2,986
|
|
|
3,495
|
|
|
1,850
|
|
|
539
|
|
|
2,389
|
|
Corporate
|
—
|
|
|
438
|
|
|
438
|
|
|
—
|
|
|
261
|
|
|
261
|
|
|
—
|
|
|
58
|
|
|
58
|
|
Total exit activity costs & asset impairments
|
$
|
1,344
|
|
|
$
|
3,475
|
|
|
$
|
4,819
|
|
|
$
|
(1,630
|
)
|
|
$
|
7,125
|
|
|
$
|
5,495
|
|
|
$
|
7,530
|
|
|
$
|
6,217
|
|
|
$
|
13,747
|
|
The following table provides a summary of where the above exit activity costs and asset impairments are recorded in the consolidated statements of operations for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Cost of sales
|
$
|
1,906
|
|
|
$
|
911
|
|
|
$
|
9,922
|
|
Selling, general, and administrative expense
|
2,913
|
|
|
4,584
|
|
|
3,825
|
|
Total exit activity costs and asset impairments
|
$
|
4,819
|
|
|
$
|
5,495
|
|
|
$
|
13,747
|
|
The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Balance as of January 1
|
$
|
961
|
|
|
$
|
3,744
|
|
Exit activity costs recognized
|
3,475
|
|
|
7,125
|
|
Cash payments
|
(2,513
|
)
|
|
(9,908
|
)
|
Balance as of December 31
|
$
|
1,923
|
|
|
$
|
961
|
|
During the three years ended December 31, 2018, none of the Company's exit activities met the criteria to be reported as discontinued operations, as these actions do not represent a strategic shift that has or will have a major effect on the Company’s operations. Therefore, prior period results of continuing operations have not been restated to exclude the impact of any divested business’s financial results.
(15) INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“Tax Reform Act”). The legislation significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, assessing a one-time transition tax on a deemed repatriation of non-previously taxed earnings of foreign subsidiaries, and implementing a territorial tax system.
While the Tax Reform Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions.
The GILTI provisions require the Company to include in its U.S. income tax return any foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company recorded
$0.1 million
of income tax expense as a result of GILTI for the year ended December 31, 2018. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the years ended December 31, 2018 and 2017.
The BEAT provisions in the Tax Reform Act eliminate the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greater than regular tax. The BEAT tax had no impact on the Company's consolidated financial statements for the years ended December 31, 2018 and 2017.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. At December 31, 2017, the Company recorded a provisional
$3.9 million
of income tax expense as a result of the transition tax, and
$16.2 million
income tax benefit related to the remeasurement of deferred income taxes. At December 31, 2017 the Company recorded no provisional expense related to performance-based executive compensation based on the guidance available at that time.
We have completed our analysis of the one-time transition tax, performance-based executive compensation and the remeasurement of our deferred assets and liabilities as of December 31, 2018.
During the year ended December 31, 2018, the Company recognized an adjustment to the provisional amounts recorded at December 31, 2017. The following table sets forth the components of the adjustment which were recorded in income tax expense from continuing operations during year ended December 31, 2018, (in thousands):
|
|
|
|
|
Remeasurement of certain deferred tax balances (1)
|
|
174
|
|
One-time transition tax (1)
|
|
(94
|
)
|
Non-deductible performance based compensation (2)
|
|
145
|
|
Net adjustment recorded to provisional income tax expense (3)
|
|
225
|
|
(1) Amounts primarily related to return to provision adjustments.
(2) Amounts primarily related to further guidance of Notice 2018-68 (guidance on performance-based compensation issued in the third quarter ended September 30, 2018).
(3) The impact of the adjustment to the provisional amounts recorded at December 31, 2017 is
0.3%
.
The components of income (loss) before taxes from continuing operations consisted of the following for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Domestic
|
$
|
76,953
|
|
|
$
|
78,468
|
|
|
$
|
37,316
|
|
Foreign
|
2,992
|
|
|
(560
|
)
|
|
12,667
|
|
Income before taxes from continuing operations
|
$
|
79,945
|
|
|
$
|
77,908
|
|
|
$
|
49,983
|
|
The provision for (benefit of) income taxes from continuing operations for the years ended December 31 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Current:
|
|
|
|
|
|
U.S. Federal
|
$
|
9,402
|
|
|
$
|
16,882
|
|
|
$
|
14,703
|
|
State
|
3,144
|
|
|
2,479
|
|
|
2,987
|
|
Foreign
|
(1,191
|
)
|
|
2,687
|
|
|
3,467
|
|
Total current
|
11,355
|
|
|
22,048
|
|
|
21,157
|
|
Deferred:
|
|
|
|
|
|
U.S. Federal
|
4,158
|
|
|
(7,466
|
)
|
|
(5,404
|
)
|
State
|
1,047
|
|
|
1,246
|
|
|
1,595
|
|
Foreign
|
(424
|
)
|
|
(885
|
)
|
|
(1,084
|
)
|
Total deferred
|
4,781
|
|
|
(7,105
|
)
|
|
(4,893
|
)
|
Provision for income taxes
|
$
|
16,136
|
|
|
$
|
14,943
|
|
|
$
|
16,264
|
|
The benefit of income taxes from discontinued operations for the years ended December 31 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Current:
|
|
|
|
|
|
U.S. Federal
|
$
|
—
|
|
|
$
|
219
|
|
|
$
|
24
|
|
State
|
—
|
|
|
20
|
|
|
2
|
|
Foreign
|
—
|
|
|
—
|
|
|
—
|
|
Benefit of income taxes
|
$
|
—
|
|
|
$
|
239
|
|
|
$
|
26
|
|
The provision for income taxes from continuing operations differs from the federal statutory rate of
21%
for the year ended December 31, 2018 and 35% for the years ended December 31, 2017 and 2016 due to the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Statutory rate
|
16,788
|
|
|
21.0
|
%
|
|
27,268
|
|
|
35.0
|
%
|
|
17,494
|
|
|
35.0
|
%
|
State taxes, less federal effect
|
3,242
|
|
|
4.1
|
%
|
|
2,442
|
|
|
3.1
|
%
|
|
3,033
|
|
|
6.1
|
%
|
Federal tax credits
|
(3,680
|
)
|
|
(4.6
|
)%
|
|
(373
|
)
|
|
(0.5
|
)%
|
|
(439
|
)
|
|
(0.9
|
)%
|
Uncertain tax positions
|
(3,051
|
)
|
|
(3.8
|
)%
|
|
(148
|
)
|
|
(0.2
|
)%
|
|
(154
|
)
|
|
(0.3
|
)%
|
Excess tax benefit on stock based compensation
|
(2,288
|
)
|
|
(2.9
|
)%
|
|
(1,415
|
)
|
|
(1.8
|
)%
|
|
—
|
|
|
—
|
%
|
Net operating loss (NOL) write down
|
1,640
|
|
|
2.1
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
Executive compensation
|
1,369
|
|
|
1.7
|
%
|
|
160
|
|
|
0.2
|
%
|
|
75
|
|
|
0.2
|
%
|
Change in valuation allowance
|
844
|
|
|
1.1
|
%
|
|
660
|
|
|
0.8
|
%
|
|
685
|
|
|
1.4
|
%
|
Change in Indemnification Asset
|
643
|
|
|
0.8
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
Tax effect of Tax Reform Act
|
—
|
|
|
—
|
%
|
|
(12,535
|
)
|
|
(16.1
|
)%
|
|
—
|
|
|
—
|
%
|
Domestic manufacturer's deduction
|
—
|
|
|
—
|
%
|
|
(1,578
|
)
|
|
(2.0
|
)%
|
|
(1,363
|
)
|
|
(2.7
|
)%
|
Intercompany debt discharge
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
(2,389
|
)
|
|
(4.8
|
)%
|
Worthless stock deduction
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
(868
|
)
|
|
(1.7
|
)%
|
Other
|
629
|
|
|
0.7
|
%
|
|
462
|
|
|
0.7
|
%
|
|
190
|
|
|
0.2
|
%
|
|
$
|
16,136
|
|
|
20.2
|
%
|
|
$
|
14,943
|
|
|
19.2
|
%
|
|
$
|
16,264
|
|
|
32.5
|
%
|
Deferred tax liabilities (assets) at December 31 consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Depreciation
|
$
|
9,886
|
|
|
$
|
9,563
|
|
Goodwill
|
35,813
|
|
|
32,662
|
|
Intangible assets
|
9,907
|
|
|
10,928
|
|
Foreign withholding tax
|
1,182
|
|
|
1,014
|
|
Other
|
696
|
|
|
652
|
|
Gross deferred tax liabilities
|
57,484
|
|
|
54,819
|
|
Equity compensation
|
(10,420
|
)
|
|
(12,577
|
)
|
Other
|
(13,529
|
)
|
|
(13,247
|
)
|
Gross deferred tax assets
|
(23,949
|
)
|
|
(25,824
|
)
|
Valuation allowances
|
2,995
|
|
|
2,242
|
|
Deferred tax assets, net of valuation allowances
|
(20,954
|
)
|
|
(23,582
|
)
|
Net deferred tax liabilities
|
$
|
36,530
|
|
|
$
|
31,237
|
|
At
December 31, 2018
, the Company had total net operating loss carry forwards of
$11.9 million
, which included
$0.6 million
for federal,
$9.6 million
for state, and
$1.7 million
for foreign income tax purposes. The federal and state net operating loss carry forwards expire between
2019
and
2038
. The foreign net operating loss carry forwards expire between 2022 and 2026. The Company recognized a total of
$1.2 million
of deferred tax assets, net of the federal tax benefit, related to these net operating losses prior to any valuation allowances, which included
$0.1 million
of federal,
$0.6 million
of state, and
$0.5 million
of foreign deferred tax assets.
Deferred taxes include net deferred tax assets relating to certain state and foreign tax jurisdictions. A reduction of the carrying amount of deferred tax assets by a valuation allowance is required if it is more likely than not that such assets will not be realized. The valuation allowances on the net operating loss in Germany and Brazil were reversed since we exited both markets. The following sets forth a reconciliation of the beginning and ending amount of the Company’s valuation allowance (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Balance as of January 1
|
$
|
2,242
|
|
|
$
|
1,362
|
|
|
$
|
766
|
|
Cost charged to the tax provision
|
2,597
|
|
|
1,505
|
|
|
983
|
|
Reductions
|
(1,750
|
)
|
|
(820
|
)
|
|
(338
|
)
|
Currency translation
|
(94
|
)
|
|
195
|
|
|
(49
|
)
|
Balance as of December 31
|
$
|
2,995
|
|
|
$
|
2,242
|
|
|
$
|
1,362
|
|
The Company made net payments for income taxes for the following amounts for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Payments made for income taxes, net
|
$
|
15,167
|
|
|
$
|
26,186
|
|
|
$
|
17,700
|
|
At December 31, 2018, the Company had approximately
$30.0
million of undistributed earnings of foreign subsidiaries. The Company expects to execute a one-time repatriation of
$22.5
million in cash to the U.S., net of withholding tax. The funds will be used for general corporate purposes. The Company continues to maintain its assertion that all remaining foreign earnings will be indefinitely reinvested. Any excess earnings could be used to grow the Company's foreign operations through launches of new capital projects or additional acquisitions. Determination of the amount of unrecognized deferred U.S. income tax liability related to our remaining unremitted foreign earnings is not practicable due to the complexities associated with its hypothetical calculation.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Balance as of January 1
|
$
|
3,536
|
|
|
$
|
3,466
|
|
|
$
|
3,876
|
|
Additions for tax positions of the current year
|
15
|
|
|
99
|
|
|
33
|
|
Additions for tax positions of prior years
|
—
|
|
|
—
|
|
|
—
|
|
Reductions for tax positions of prior years for:
|
|
|
|
|
|
Settlements and changes in judgment
|
—
|
|
|
(422
|
)
|
|
(256
|
)
|
Lapses of applicable statute of limitations
|
(3,060
|
)
|
|
—
|
|
|
—
|
|
Divestitures and foreign currency translation
|
(162
|
)
|
|
393
|
|
|
(187
|
)
|
Balance as of December 31
|
$
|
329
|
|
|
$
|
3,536
|
|
|
$
|
3,466
|
|
In 2018 and 2017, the unrecognized tax benefits of
$0.3
million and
$3.5
million, respectively, would affect the effective tax rate, if recognized as of
December 31, 2018
and
2017
.
$3.1
million of unrecognized tax benefits related to the acquisition was reversed in 2018 as a result of the lapse of the statute of limitations. The corresponding indemnification asset was also reversed in pretax income. The Company classifies accrued interest and penalties related to unrecognized tax benefits in income tax expense.
The Company and its U.S. subsidiaries file a U.S. federal consolidated income tax return. Foreign and U.S. state jurisdictions have statute of limitations generally ranging from
four
to
ten
years. The Company's U.S. federal consolidated income tax return is under examination for 2015 and remains subject to examination for 2016 and 2017.
Interest (net of federal tax benefit) and penalties recognized during the years ended December 31 were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Interest and penalties recognized as income
|
$
|
13
|
|
|
$
|
130
|
|
|
$
|
122
|
|
(16) EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding, as well as dilutive common shares which include shares issuable under the equity compensation plans described in Note 12 of the consolidated financial statements. The weighted average number of diluted shares does not include potential anti-dilutive common shares aggregating
303,000
,
468,000
and
653,000
at December 31, 2018, 2017 and 2016, respectively. The treasury stock method is used to calculate dilutive shares, which reduces the gross number of dilutive shares by the number of shares purchasable from the proceeds of the options assumed to be exercised and the unrecognized expense related to the options, restricted shares, restricted stock units, and performance stock units assumed to have vested.
Basic earnings and diluted weighted-average shares outstanding are as follows for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Numerator:
|
|
|
|
|
|
Income from continuing operations
|
$
|
63,809
|
|
|
$
|
62,965
|
|
|
$
|
33,719
|
|
Loss from discontinued operations
|
—
|
|
|
(405
|
)
|
|
(44
|
)
|
Net income available to common shareholders
|
$
|
63,809
|
|
|
$
|
62,560
|
|
|
$
|
33,675
|
|
Denominator for basic earnings per share:
|
|
|
|
|
|
Weighted average shares outstanding
|
31,979
|
|
|
31,701
|
|
|
31,536
|
|
Denominator for diluted earnings per share:
|
|
|
|
|
|
Common stock options and stock units
|
555
|
|
|
549
|
|
|
533
|
|
Weighted average shares and conversions
|
32,534
|
|
|
32,250
|
|
|
32,069
|
|
(17) COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities and equipment under operating leases. As leases expire, it can be expected that, in the normal course of business, certain leases will be renewed or replaced. Certain lease agreements include escalating rent payments over the lease terms. The Company expenses rent on a straight-line basis over the lease term which commences on the date the Company has the right to control the property. Rent expense under operating leases for the years ended December 31 aggregated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Rent expense
|
$
|
12,571
|
|
|
$
|
11,964
|
|
|
$
|
13,652
|
|
Future minimum lease payments under these noncancelable operating leases as of December 31,
2018
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
Future minimum lease payments
|
14,304
|
|
|
8,156
|
|
|
5,910
|
|
|
4,566
|
|
|
4,043
|
|
|
1,705
|
|
The Company is a party to certain claims and legal actions generally incidental to its business. For certain divestiture transactions completed in prior years, the Company has agreed to indemnify the buyer for various liabilities that may arise after the disposal date, subject to limits of time and amount. The Company is a party to certain claims made under these indemnification provisions. As of December 31, 2018, the Company has a contingent liability recorded for such provisions related to discontinued operations. Management does not believe that the outcome of this claim, or other claims which are not clearly determinable at the present time, would significantly affect the Company's financial condition or results of operation.
(18) SEGMENT INFORMATION
The Company is organized into
three
reportable segments on the basis of the production process and products and services provided by each segment, identified as follows:
|
|
(i)
|
Residential Products, which primarily includes roof and foundation ventilation products, rain dispersion products and roofing accessories, centralized mail systems and electronic package solutions;
|
|
|
(ii)
|
Industrial and Infrastructure Products, which primarily includes expanded and perforated metal, perimeter security systems, expansion joints, and structural bearings; and
|
|
|
(iii)
|
Renewable Energy and Conservation, which primarily includes designing, engineering, manufacturing and installation of solar racking and electrical balance of systems and greenhouse structures.
|
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 the performance of the segments described above as of and for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Net sales:
|
|
|
|
|
|
Residential Products
|
$
|
463,216
|
|
|
$
|
466,603
|
|
|
$
|
430,938
|
|
Industrial and Infrastructure Products
|
223,006
|
|
|
215,211
|
|
|
296,513
|
|
Less: Intersegment sales
|
(1,103
|
)
|
|
(1,247
|
)
|
|
(1,495
|
)
|
|
221,903
|
|
|
213,964
|
|
|
295,018
|
|
Renewable Energy and Conservation
|
317,253
|
|
|
306,351
|
|
|
282,025
|
|
Total consolidated net sales
|
$
|
1,002,372
|
|
|
$
|
986,918
|
|
|
$
|
1,007,981
|
|
|
|
|
|
|
|
Income from operations:
|
|
|
|
|
|
Residential Products
|
$
|
69,838
|
|
|
$
|
76,893
|
|
|
$
|
65,241
|
|
Industrial and Infrastructure Products
|
15,336
|
|
|
8,159
|
|
|
1,306
|
|
Renewable Energy and Conservation
|
37,423
|
|
|
30,218
|
|
|
43,214
|
|
Segments income from operations
|
122,597
|
|
|
115,270
|
|
|
109,761
|
|
Unallocated corporate expenses
|
(28,629
|
)
|
|
(22,421
|
)
|
|
(36,273
|
)
|
Total income from operations
|
$
|
93,968
|
|
|
$
|
92,849
|
|
|
$
|
73,488
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
|
|
|
Residential Products
|
$
|
8,217
|
|
|
$
|
9,183
|
|
|
$
|
9,297
|
|
Industrial and Infrastructure Products
|
6,035
|
|
|
6,529
|
|
|
8,237
|
|
Renewable Energy and Conservation
|
5,790
|
|
|
5,657
|
|
|
6,203
|
|
Unallocated corporate expenses
|
332
|
|
|
321
|
|
|
377
|
|
|
$
|
20,374
|
|
|
$
|
21,690
|
|
|
$
|
24,114
|
|
Total assets
|
|
|
|
|
|
Residential Products
|
$
|
361,499
|
|
|
$
|
358,838
|
|
|
$
|
331,975
|
|
Industrial and Infrastructure Products
|
210,482
|
|
|
203,455
|
|
|
225,691
|
|
Renewable Energy and Conservation
|
218,048
|
|
|
219,806
|
|
|
207,241
|
|
Unallocated corporate assets
|
271,616
|
|
|
209,286
|
|
|
153,338
|
|
|
$
|
1,061,645
|
|
|
$
|
991,385
|
|
|
$
|
918,245
|
|
Capital expenditures
|
|
|
|
|
|
Residential Products
|
$
|
7,921
|
|
|
$
|
5,236
|
|
|
$
|
5,182
|
|
Industrial and Infrastructure Products
|
3,016
|
|
|
2,094
|
|
|
2,060
|
|
Renewable Energy and Conservation
|
1,345
|
|
|
3,648
|
|
|
3,160
|
|
Unallocated corporate expenditures
|
175
|
|
|
421
|
|
|
377
|
|
|
$
|
12,457
|
|
|
$
|
11,399
|
|
|
$
|
10,779
|
|
The following tables illustrate revenue disaggregated by timing of transfer of control to the customer for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
Residential Products
|
|
Industrial and Infrastructure Products
|
|
Renewable Energy and Conservation
|
|
Total
|
Net sales:
|
|
|
|
|
|
|
|
Point in Time
|
$
|
460,513
|
|
|
$
|
188,081
|
|
|
$
|
33,427
|
|
|
$
|
682,021
|
|
Over Time
|
2,703
|
|
|
33,822
|
|
|
283,826
|
|
|
320,351
|
|
Total
|
$
|
463,216
|
|
|
$
|
221,903
|
|
|
$
|
317,253
|
|
|
$
|
1,002,372
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
Residential Products
|
|
Industrial and Infrastructure Products
|
|
Renewable Energy and Conservation
|
|
Total
|
Net sales:
|
|
|
|
|
|
|
|
Point in Time
|
$
|
466,603
|
|
|
$
|
213,964
|
|
|
$
|
30,137
|
|
|
$
|
710,704
|
|
Over Time
|
—
|
|
|
—
|
|
|
276,214
|
|
|
276,214
|
|
Total
|
$
|
466,603
|
|
|
$
|
213,964
|
|
|
$
|
306,351
|
|
|
$
|
986,918
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
Residential Products
|
|
Industrial and Infrastructure Products
|
|
Renewable Energy and Conservation
|
|
Total
|
Net sales:
|
|
|
|
|
|
|
|
Point in Time
|
$
|
430,938
|
|
|
$
|
295,018
|
|
|
$
|
21,566
|
|
|
$
|
747,522
|
|
Over Time
|
—
|
|
|
—
|
|
|
260,459
|
|
|
260,459
|
|
Total
|
$
|
430,938
|
|
|
$
|
295,018
|
|
|
$
|
282,025
|
|
|
$
|
1,007,981
|
|
Net sales by region or origin and long-lived assets by region of domicile for the years ended and as of December 31 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Net sales
|
|
|
|
|
|
North America
|
$
|
990,772
|
|
|
$
|
977,942
|
|
|
$
|
963,797
|
|
Europe
|
—
|
|
|
1,131
|
|
|
19,447
|
|
Asia
|
11,600
|
|
|
7,845
|
|
|
24,737
|
|
Total
|
$
|
1,002,372
|
|
|
$
|
986,918
|
|
|
$
|
1,007,981
|
|
|
|
|
|
|
|
Long-lived assets
|
|
|
|
|
|
North America
|
$
|
96,342
|
|
|
$
|
97,956
|
|
|
$
|
108,334
|
|
Europe
|
—
|
|
|
3,222
|
|
|
2,900
|
|
Asia
|
704
|
|
|
601
|
|
|
992
|
|
Total
|
$
|
97,046
|
|
|
$
|
101,779
|
|
|
$
|
112,226
|
|
(19) SUPPLEMENTAL FINANCIAL INFORMATION
The following information sets forth the consolidating summary financial statements of the issuer (Gibraltar Industries, Inc.) and guarantors, which guarantee the Senior Subordinated
6.25%
Notes due February 1, 2021, and the non-guarantors. The guarantors are 100% owned domestic subsidiaries of the issuer and the guarantees are full, unconditional, joint and several.
Investments in subsidiaries are accounted for by the parent using the equity method of accounting. The guarantor subsidiaries and non-guarantor subsidiaries are presented on a combined basis. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED
DECEMBER 31, 2018
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Net sales
|
$
|
—
|
|
|
$
|
960,142
|
|
|
$
|
64,090
|
|
|
$
|
(21,860
|
)
|
|
$
|
1,002,372
|
|
Cost of sales
|
—
|
|
|
728,187
|
|
|
52,857
|
|
|
(21,032
|
)
|
|
760,012
|
|
Gross profit
|
—
|
|
|
231,955
|
|
|
11,233
|
|
|
(828
|
)
|
|
242,360
|
|
Selling, general, and administrative expense
|
151
|
|
|
139,726
|
|
|
6,963
|
|
|
—
|
|
|
146,840
|
|
Intangible asset impairment
|
—
|
|
|
615
|
|
|
937
|
|
|
—
|
|
|
1,552
|
|
(Loss) income from operations
|
(151
|
)
|
|
91,614
|
|
|
3,333
|
|
|
(828
|
)
|
|
93,968
|
|
Interest expense (income)
|
13,609
|
|
|
(1,279
|
)
|
|
(266
|
)
|
|
—
|
|
|
12,064
|
|
Other expense (income)
|
—
|
|
|
3,396
|
|
|
(1,437
|
)
|
|
—
|
|
|
1,959
|
|
(Loss) income before taxes
|
(13,760
|
)
|
|
89,497
|
|
|
5,036
|
|
|
(828
|
)
|
|
79,945
|
|
(Benefit of) provision for income taxes
|
(3,853
|
)
|
|
18,544
|
|
|
1,445
|
|
|
—
|
|
|
16,136
|
|
Equity in earnings from subsidiaries
|
74,544
|
|
|
3,591
|
|
|
—
|
|
|
(78,135
|
)
|
|
—
|
|
Net income
|
$
|
64,637
|
|
|
$
|
74,544
|
|
|
$
|
3,591
|
|
|
$
|
(78,963
|
)
|
|
$
|
63,809
|
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED
DECEMBER 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Net sales
|
$
|
—
|
|
|
$
|
947,604
|
|
|
$
|
52,738
|
|
|
$
|
(13,424
|
)
|
|
$
|
986,918
|
|
Cost of sales
|
—
|
|
|
719,587
|
|
|
43,187
|
|
|
(12,400
|
)
|
|
750,374
|
|
Gross profit
|
—
|
|
|
228,017
|
|
|
9,551
|
|
|
(1,024
|
)
|
|
236,544
|
|
Selling, general, and administrative expense
|
147
|
|
|
133,409
|
|
|
9,892
|
|
|
—
|
|
|
143,448
|
|
Intangible asset impairment
|
—
|
|
|
200
|
|
|
47
|
|
|
—
|
|
|
247
|
|
(Loss) income from operations
|
(147
|
)
|
|
94,408
|
|
|
(388
|
)
|
|
(1,024
|
)
|
|
92,849
|
|
Interest expense (income)
|
13,609
|
|
|
512
|
|
|
(89
|
)
|
|
—
|
|
|
14,032
|
|
Other expense
|
—
|
|
|
500
|
|
|
409
|
|
|
—
|
|
|
909
|
|
(Loss) income before taxes
|
(13,756
|
)
|
|
93,396
|
|
|
(708
|
)
|
|
(1,024
|
)
|
|
77,908
|
|
(Benefit of) provision for income taxes
|
(5,079
|
)
|
|
19,787
|
|
|
235
|
|
|
—
|
|
|
14,943
|
|
(Loss) income from continuing operations
|
(8,677
|
)
|
|
73,609
|
|
|
(943
|
)
|
|
(1,024
|
)
|
|
62,965
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
Loss before taxes
|
—
|
|
|
(644
|
)
|
|
—
|
|
|
—
|
|
|
(644
|
)
|
Benefit of income taxes
|
—
|
|
|
(239
|
)
|
|
—
|
|
|
—
|
|
|
(239
|
)
|
Loss from discontinued operations
|
—
|
|
|
(405
|
)
|
|
—
|
|
|
—
|
|
|
(405
|
)
|
Equity in earnings from subsidiaries
|
72,261
|
|
|
(943
|
)
|
|
—
|
|
|
(71,318
|
)
|
|
—
|
|
Net income (loss)
|
$
|
63,584
|
|
|
$
|
72,261
|
|
|
$
|
(943
|
)
|
|
$
|
(72,342
|
)
|
|
$
|
62,560
|
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED
DECEMBER 31, 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Net sales
|
$
|
—
|
|
|
$
|
950,945
|
|
|
$
|
78,184
|
|
|
$
|
(21,148
|
)
|
|
$
|
1,007,981
|
|
Cost of sales
|
—
|
|
|
722,315
|
|
|
62,729
|
|
|
(21,825
|
)
|
|
763,219
|
|
Gross profit
|
—
|
|
|
228,630
|
|
|
15,455
|
|
|
677
|
|
|
244,762
|
|
Selling, general, and administrative expense
|
14,302
|
|
|
137,343
|
|
|
9,454
|
|
|
—
|
|
|
161,099
|
|
Intangible asset impairment
|
—
|
|
|
7,980
|
|
|
2,195
|
|
|
—
|
|
|
10,175
|
|
(Loss) income from operations
|
(14,302
|
)
|
|
83,307
|
|
|
3,806
|
|
|
677
|
|
|
73,488
|
|
Interest expense (income)
|
13,609
|
|
|
1,042
|
|
|
(74
|
)
|
|
—
|
|
|
14,577
|
|
Other expense (income)
|
8,716
|
|
|
512
|
|
|
(300
|
)
|
|
—
|
|
|
8,928
|
|
(Loss) income before taxes
|
(36,627
|
)
|
|
81,753
|
|
|
4,180
|
|
|
677
|
|
|
49,983
|
|
(Benefit of) provision for income taxes
|
(11,768
|
)
|
|
27,551
|
|
|
481
|
|
|
—
|
|
|
16,264
|
|
(Loss) income from continuing operations
|
(24,859
|
)
|
|
54,202
|
|
|
3,699
|
|
|
677
|
|
|
33,719
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
Loss before taxes
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
Benefit of income taxes
|
—
|
|
|
(26
|
)
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
Loss from discontinued operations
|
—
|
|
|
(44
|
)
|
|
—
|
|
|
—
|
|
|
(44
|
)
|
Equity in earnings from subsidiaries
|
57,857
|
|
|
3,699
|
|
|
—
|
|
|
(61,556
|
)
|
|
—
|
|
Net income
|
$
|
32,998
|
|
|
$
|
57,857
|
|
|
$
|
3,699
|
|
|
$
|
(60,879
|
)
|
|
$
|
33,675
|
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
64,637
|
|
|
$
|
74,544
|
|
|
$
|
3,591
|
|
|
$
|
(78,963
|
)
|
|
$
|
63,809
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
(3,241
|
)
|
|
—
|
|
|
(3,241
|
)
|
Cumulative effect of accounting change (see Note 2)
|
—
|
|
|
(350
|
)
|
|
—
|
|
|
—
|
|
|
(350
|
)
|
Adjustment to pension and post-retirement benefit liability, net of tax
|
—
|
|
|
723
|
|
|
—
|
|
|
—
|
|
|
723
|
|
Other comprehensive income (loss)
|
—
|
|
|
373
|
|
|
(3,241
|
)
|
|
—
|
|
|
(2,868
|
)
|
Total comprehensive income
|
$
|
64,637
|
|
|
$
|
74,917
|
|
|
$
|
350
|
|
|
$
|
(78,963
|
)
|
|
$
|
60,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
63,584
|
|
|
$
|
72,261
|
|
|
$
|
(943
|
)
|
|
$
|
(72,342
|
)
|
|
$
|
62,560
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
3,150
|
|
|
—
|
|
|
3,150
|
|
Adjustment to pension and post-retirement benefit liability, net of tax
|
—
|
|
|
205
|
|
|
—
|
|
|
—
|
|
|
205
|
|
Other comprehensive income
|
—
|
|
|
205
|
|
|
3,150
|
|
|
—
|
|
|
3,355
|
|
Total comprehensive income
|
$
|
63,584
|
|
|
$
|
72,466
|
|
|
$
|
2,207
|
|
|
$
|
(72,342
|
)
|
|
$
|
65,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
32,998
|
|
|
$
|
57,857
|
|
|
$
|
3,699
|
|
|
$
|
(60,879
|
)
|
|
$
|
33,675
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
6,945
|
|
|
—
|
|
|
6,945
|
|
Adjustment to pension and post-retirement benefit liability, net of tax
|
—
|
|
|
750
|
|
|
—
|
|
|
—
|
|
|
750
|
|
Other comprehensive income
|
—
|
|
|
750
|
|
|
6,945
|
|
|
—
|
|
|
7,695
|
|
Total comprehensive income
|
$
|
32,998
|
|
|
$
|
58,607
|
|
|
$
|
10,644
|
|
|
$
|
(60,879
|
)
|
|
$
|
41,370
|
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2018
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
262,716
|
|
|
$
|
34,290
|
|
|
$
|
—
|
|
|
$
|
297,006
|
|
Accounts receivable, net
|
—
|
|
|
132,841
|
|
|
7,442
|
|
|
—
|
|
|
140,283
|
|
Intercompany balances
|
1,183
|
|
|
2,439
|
|
|
(3,622
|
)
|
|
—
|
|
|
—
|
|
Inventories
|
—
|
|
|
94,700
|
|
|
4,213
|
|
|
—
|
|
|
98,913
|
|
Other current assets
|
3,853
|
|
|
1,146
|
|
|
3,352
|
|
|
—
|
|
|
8,351
|
|
Total current assets
|
5,036
|
|
|
493,842
|
|
|
45,675
|
|
|
—
|
|
|
544,553
|
|
Property, plant, and equipment, net
|
—
|
|
|
93,034
|
|
|
2,796
|
|
|
—
|
|
|
95,830
|
|
Goodwill
|
—
|
|
|
301,309
|
|
|
22,362
|
|
|
—
|
|
|
323,671
|
|
Acquired intangibles
|
—
|
|
|
89,556
|
|
|
6,819
|
|
|
—
|
|
|
96,375
|
|
Other assets
|
—
|
|
|
1,047
|
|
|
169
|
|
|
—
|
|
|
1,216
|
|
Investment in subsidiaries
|
806,155
|
|
|
62,722
|
|
|
—
|
|
|
(868,877
|
)
|
|
—
|
|
|
$
|
811,191
|
|
|
$
|
1,041,510
|
|
|
$
|
77,821
|
|
|
$
|
(868,877
|
)
|
|
$
|
1,061,645
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
73,934
|
|
|
$
|
5,202
|
|
|
$
|
—
|
|
|
$
|
79,136
|
|
Accrued expenses
|
5,493
|
|
|
77,282
|
|
|
4,299
|
|
|
—
|
|
|
87,074
|
|
Billings in excess of cost
|
—
|
|
|
13,864
|
|
|
3,993
|
|
|
—
|
|
|
17,857
|
|
Current maturities of long-term debt
|
209,005
|
|
|
(200
|
)
|
|
—
|
|
|
—
|
|
|
208,805
|
|
Total current liabilities
|
214,498
|
|
|
164,880
|
|
|
13,494
|
|
|
—
|
|
|
392,872
|
|
Long-term debt
|
—
|
|
|
1,600
|
|
|
—
|
|
|
—
|
|
|
1,600
|
|
Deferred income taxes
|
—
|
|
|
34,925
|
|
|
1,605
|
|
|
—
|
|
|
36,530
|
|
Other non-current liabilities
|
—
|
|
|
33,950
|
|
|
—
|
|
|
—
|
|
|
33,950
|
|
Shareholders’ equity
|
596,693
|
|
|
806,155
|
|
|
62,722
|
|
|
(868,877
|
)
|
|
596,693
|
|
|
$
|
811,191
|
|
|
$
|
1,041,510
|
|
|
$
|
77,821
|
|
|
$
|
(868,877
|
)
|
|
$
|
1,061,645
|
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
192,604
|
|
|
$
|
29,676
|
|
|
$
|
—
|
|
|
$
|
222,280
|
|
Accounts receivable, net
|
—
|
|
|
138,903
|
|
|
6,482
|
|
|
—
|
|
|
145,385
|
|
Intercompany balances
|
324
|
|
|
4,166
|
|
|
(4,490
|
)
|
|
—
|
|
|
—
|
|
Inventories
|
—
|
|
|
82,457
|
|
|
3,915
|
|
|
—
|
|
|
86,372
|
|
Other current assets
|
5,415
|
|
|
(368
|
)
|
|
3,680
|
|
|
—
|
|
|
8,727
|
|
Total current assets
|
5,739
|
|
|
417,762
|
|
|
39,263
|
|
|
—
|
|
|
462,764
|
|
Property, plant, and equipment, net
|
—
|
|
|
93,906
|
|
|
3,192
|
|
|
—
|
|
|
97,098
|
|
Goodwill
|
—
|
|
|
298,258
|
|
|
22,816
|
|
|
—
|
|
|
321,074
|
|
Acquired intangibles
|
—
|
|
|
97,171
|
|
|
8,597
|
|
|
—
|
|
|
105,768
|
|
Other assets
|
—
|
|
|
4,681
|
|
|
—
|
|
|
—
|
|
|
4,681
|
|
Investment in subsidiaries
|
739,970
|
|
|
61,746
|
|
|
—
|
|
|
(801,716
|
)
|
|
—
|
|
|
$
|
745,709
|
|
|
$
|
973,524
|
|
|
$
|
73,868
|
|
|
$
|
(801,716
|
)
|
|
$
|
991,385
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
77,786
|
|
|
$
|
4,601
|
|
|
$
|
—
|
|
|
$
|
82,387
|
|
Accrued expenses
|
5,469
|
|
|
67,746
|
|
|
2,252
|
|
|
—
|
|
|
75,467
|
|
Billings in excess of cost
|
—
|
|
|
9,840
|
|
|
2,939
|
|
|
—
|
|
|
12,779
|
|
Current maturities of long-term debt
|
—
|
|
|
400
|
|
|
—
|
|
|
—
|
|
|
400
|
|
Total current liabilities
|
5,469
|
|
|
155,772
|
|
|
9,792
|
|
|
—
|
|
|
171,033
|
|
Long-term debt
|
208,521
|
|
|
1,100
|
|
|
—
|
|
|
—
|
|
|
209,621
|
|
Deferred income taxes
|
—
|
|
|
28,907
|
|
|
2,330
|
|
|
—
|
|
|
31,237
|
|
Other non-current liabilities
|
—
|
|
|
47,775
|
|
|
—
|
|
|
—
|
|
|
47,775
|
|
Shareholders’ equity
|
531,719
|
|
|
739,970
|
|
|
61,746
|
|
|
(801,716
|
)
|
|
531,719
|
|
|
$
|
745,709
|
|
|
$
|
973,524
|
|
|
$
|
73,868
|
|
|
$
|
(801,716
|
)
|
|
$
|
991,385
|
|
GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
DECEMBER 31, 2018
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
$
|
(13,252
|
)
|
|
$
|
103,543
|
|
|
$
|
7,254
|
|
|
$
|
—
|
|
|
$
|
97,545
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant, and equipment
|
—
|
|
|
(12,054
|
)
|
|
(403
|
)
|
|
—
|
|
|
(12,457
|
)
|
Acquisitions, net of cash acquired
|
—
|
|
|
(5,241
|
)
|
|
—
|
|
|
—
|
|
|
(5,241
|
)
|
Net proceeds from sale of property and equipment
|
—
|
|
|
3,063
|
|
|
86
|
|
|
—
|
|
|
3,149
|
|
Net cash used in investing activities
|
—
|
|
|
(14,232
|
)
|
|
(317
|
)
|
|
—
|
|
|
(14,549
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
Long-term debt payments
|
—
|
|
|
(400
|
)
|
|
—
|
|
|
—
|
|
|
(400
|
)
|
Purchase of treasury stock at market prices
|
(7,165
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,165
|
)
|
Intercompany financing
|
19,032
|
|
|
(18,799
|
)
|
|
(233
|
)
|
|
—
|
|
|
—
|
|
Net proceeds from issuance of common stock
|
1,385
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,385
|
|
Net cash provided by (used in) financing activities
|
13,252
|
|
|
(19,199
|
)
|
|
(233
|
)
|
|
—
|
|
|
(6,180
|
)
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
(2,090
|
)
|
|
—
|
|
|
(2,090
|
)
|
Net increase in cash and cash equivalents
|
—
|
|
|
70,112
|
|
|
4,614
|
|
|
—
|
|
|
74,726
|
|
Cash and cash equivalents at beginning of year
|
—
|
|
|
192,604
|
|
|
29,676
|
|
|
—
|
|
|
222,280
|
|
Cash and cash equivalents at end of year
|
$
|
—
|
|
|
$
|
262,716
|
|
|
$
|
34,290
|
|
|
$
|
—
|
|
|
$
|
297,006
|
|
GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
DECEMBER 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
$
|
(15,172
|
)
|
|
$
|
83,114
|
|
|
$
|
2,128
|
|
|
$
|
—
|
|
|
$
|
70,070
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant, and equipment
|
—
|
|
|
(11,026
|
)
|
|
(373
|
)
|
|
—
|
|
|
(11,399
|
)
|
Acquisitions, net of cash acquired
|
—
|
|
|
(18,494
|
)
|
|
—
|
|
|
—
|
|
|
(18,494
|
)
|
Net proceeds from sale of property and equipment
|
—
|
|
|
12,905
|
|
|
191
|
|
|
—
|
|
|
13,096
|
|
Net cash used in investing activities
|
—
|
|
|
(16,615
|
)
|
|
(182
|
)
|
|
—
|
|
|
(16,797
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
Long-term debt payments
|
—
|
|
|
(400
|
)
|
|
—
|
|
|
—
|
|
|
(400
|
)
|
Purchase of treasury stock at market prices
|
(2,872
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,872
|
)
|
Intercompany financing
|
17,370
|
|
|
(17,321
|
)
|
|
(49
|
)
|
|
—
|
|
|
—
|
|
Net proceeds from issuance of common stock
|
674
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
674
|
|
Net cash provided by (used in) financing activities
|
15,172
|
|
|
(17,721
|
)
|
|
(49
|
)
|
|
—
|
|
|
(2,598
|
)
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
1,428
|
|
|
—
|
|
|
1,428
|
|
Net increase in cash and cash equivalents
|
—
|
|
|
48,778
|
|
|
3,325
|
|
|
—
|
|
|
52,103
|
|
Cash and cash equivalents at beginning of year
|
—
|
|
|
143,826
|
|
|
26,351
|
|
|
—
|
|
|
170,177
|
|
Cash and cash equivalents at end of year
|
$
|
—
|
|
|
$
|
192,604
|
|
|
$
|
29,676
|
|
|
$
|
—
|
|
|
$
|
222,280
|
|
GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
DECEMBER 31, 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar
Industries,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Total
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
$
|
(34,243
|
)
|
|
$
|
140,890
|
|
|
$
|
17,340
|
|
|
$
|
—
|
|
|
$
|
123,987
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant, and equipment
|
—
|
|
|
(10,321
|
)
|
|
(458
|
)
|
|
—
|
|
|
(10,779
|
)
|
Acquisitions, net of cash acquired
|
—
|
|
|
(23,412
|
)
|
|
—
|
|
|
—
|
|
|
(23,412
|
)
|
Net proceeds from sale of property and equipment
|
—
|
|
|
230
|
|
|
723
|
|
|
—
|
|
|
953
|
|
Net proceeds from sale of business
|
—
|
|
|
—
|
|
|
8,250
|
|
|
—
|
|
|
8,250
|
|
Other, net
|
—
|
|
|
1,118
|
|
|
|
|
|
|
1,118
|
|
Net cash (used in) provided by investing activities
|
—
|
|
|
(32,385
|
)
|
|
8,515
|
|
|
—
|
|
|
(23,870
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
Long-term debt payments
|
—
|
|
|
(400
|
)
|
|
—
|
|
|
—
|
|
|
(400
|
)
|
Payment of debt issuance costs
|
—
|
|
|
(54
|
)
|
|
—
|
|
|
—
|
|
|
(54
|
)
|
Purchase of treasury stock at market prices
|
(1,539
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,539
|
)
|
Intercompany financing
|
32,441
|
|
|
(3,822
|
)
|
|
(28,619
|
)
|
|
—
|
|
|
—
|
|
Net proceeds from issuance of common stock
|
3,341
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,341
|
|
Net cash provided by (used in) financing activities
|
34,243
|
|
|
(4,276
|
)
|
|
(28,619
|
)
|
|
—
|
|
|
1,348
|
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
(146
|
)
|
|
—
|
|
|
(146
|
)
|
Net increase (decrease) in cash and cash equivalents
|
—
|
|
|
104,229
|
|
|
(2,910
|
)
|
|
—
|
|
|
101,319
|
|
Cash and cash equivalents at beginning of year
|
—
|
|
|
39,597
|
|
|
29,261
|
|
|
—
|
|
|
68,858
|
|
Cash and cash equivalents at end of year
|
$
|
—
|
|
|
$
|
143,826
|
|
|
$
|
26,351
|
|
|
$
|
—
|
|
|
$
|
170,177
|
|
(20) QUARTERLY UNAUDITED FINANCIAL DATA
GIBRALTAR INDUSTRIES, INC.
QUARTERLY UNAUDITED FINANCIAL DATA
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Quarters Ended
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
Total
|
Net sales
|
$
|
215,337
|
|
|
$
|
266,036
|
|
|
$
|
280,086
|
|
|
$
|
240,913
|
|
|
$
|
1,002,372
|
|
Gross profit
|
$
|
48,318
|
|
|
$
|
70,503
|
|
|
$
|
70,279
|
|
|
$
|
53,260
|
|
|
$
|
242,360
|
|
Income from operations
|
$
|
13,843
|
|
|
$
|
32,274
|
|
|
$
|
29,404
|
|
|
$
|
18,447
|
|
|
$
|
93,968
|
|
Interest expense
|
$
|
3,269
|
|
|
$
|
3,130
|
|
|
$
|
2,906
|
|
|
$
|
2,759
|
|
|
$
|
12,064
|
|
Net income from continuing operations
|
$
|
8,352
|
|
|
$
|
22,837
|
|
|
$
|
19,503
|
|
|
$
|
13,117
|
|
|
$
|
63,809
|
|
Total net income
|
$
|
8,352
|
|
|
$
|
22,837
|
|
|
$
|
19,503
|
|
|
$
|
13,117
|
|
|
$
|
63,809
|
|
Income per share from continuing operations:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.26
|
|
|
$
|
0.72
|
|
|
$
|
0.61
|
|
|
$
|
0.41
|
|
|
$
|
2.00
|
|
Diluted
|
$
|
0.26
|
|
|
$
|
0.70
|
|
|
$
|
0.60
|
|
|
$
|
0.40
|
|
|
$
|
1.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Quarters Ended
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
Total
|
Net sales
|
$
|
206,605
|
|
|
$
|
247,627
|
|
|
$
|
274,574
|
|
|
$
|
258,112
|
|
|
$
|
986,918
|
|
Gross profit
|
$
|
49,255
|
|
|
$
|
61,825
|
|
|
$
|
68,735
|
|
|
$
|
56,729
|
|
|
$
|
236,544
|
|
Income from operations
|
$
|
9,679
|
|
|
$
|
24,930
|
|
|
$
|
35,693
|
|
|
$
|
22,547
|
|
|
$
|
92,849
|
|
Interest expense
|
$
|
3,576
|
|
|
$
|
3,550
|
|
|
$
|
3,486
|
|
|
$
|
3,420
|
|
|
$
|
14,032
|
|
Net income from continuing operations
|
$
|
3,996
|
|
|
$
|
13,174
|
|
|
$
|
20,619
|
|
|
$
|
25,176
|
|
|
$
|
62,965
|
|
Net loss from discontinued operations
|
$
|
—
|
|
|
$
|
(405
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(405
|
)
|
Total net income
|
$
|
3,996
|
|
|
$
|
12,769
|
|
|
$
|
20,619
|
|
|
$
|
25,176
|
|
|
$
|
62,560
|
|
Income per share from continuing operations:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.13
|
|
|
$
|
0.41
|
|
|
$
|
0.65
|
|
|
$
|
0.79
|
|
|
$
|
1.98
|
|
Diluted
|
$
|
0.12
|
|
|
$
|
0.41
|
|
|
$
|
0.64
|
|
|
$
|
0.78
|
|
|
$
|
1.95
|
|
Loss per share from discontinued operations:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
Diluted
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|