Document

Table of Contents

 
 
 
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 gibindcolorlogonotaga02.gif
 
FORM 10-Q
 
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-22462
 
 
GIBRALTAR INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
 
 
 
Delaware
 
16-1445150
(State or incorporation )
 
(I.R.S. Employer Identification No.)
 
 
3556 Lake Shore Road, P.O. Box 2028
Buffalo, New York
 
14219-0228
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (716) 826-6500
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨ 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
¨
Emerging growth company
¨

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

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

As of May 3, 2018, the number of common shares outstanding was: 31,760,071.



Table of Contents

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


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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
 
Three Months Ended 
 March 31,
 
2018
 
2017
Net Sales
$
215,337

 
$
206,605

Cost of sales
167,019

 
157,350

Gross profit
48,318

 
49,255

Selling, general, and administrative expense
34,475

 
39,576

Income from operations
13,843

 
9,679

Interest expense
3,269

 
3,576

Other (income) expense
(585
)
 
54

Income before taxes
11,159

 
6,049

Provision for income taxes
2,807

 
2,053

Net income
$
8,352

 
$
3,996

Net earnings per share:
 
 
 
Basic
$
0.26

 
$
0.13

Diluted
$
0.26

 
$
0.12

Weighted average shares outstanding:
 
 
 
Basic
31,786

 
31,688

Diluted
32,444

 
32,254

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
 
Three Months Ended 
 March 31,
 
2018
 
2017
Net income
$
8,352

 
$
3,996

Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustment
110

 
679

Cumulative effect of accounting change (see Note 2)
(350
)
 

Adjustment to retirement benefit liability, net of tax
(5
)
 
(3
)
Adjustment to post employment health care benefit liability, net of tax
32

 
29

Other comprehensive income (loss)
(213
)
 
705

Total comprehensive income
$
8,139

 
$
4,701

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

 
March 31,
2018
 
December 31,
2017
 
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
200,741

 
$
222,280

Accounts receivable, net
145,182

 
145,385

Inventories
90,236

 
86,372

Other current assets
6,712

 
8,727

Total current assets
442,871

 
462,764

Property, plant, and equipment, net
93,671

 
97,098

Goodwill
321,772

 
321,074

Acquired intangibles
104,059

 
105,768

Other assets
4,770

 
4,681

 
$
967,143

 
$
991,385

Liabilities and Shareholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
80,691

 
$
82,387

Accrued expenses
53,254

 
75,467

Billings in excess of cost
11,572

 
12,779

Current maturities of long-term debt
400

 
400

Total current liabilities
145,917

 
171,033

Long-term debt
209,817

 
209,621

Deferred income taxes
31,339

 
31,237

Other non-current liabilities
38,115

 
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; 32,398 shares and 32,332 shares issued and outstanding in 2018 and 2017
324

 
323

Additional paid-in capital
274,279

 
271,957

Retained earnings
283,538

 
274,562

Accumulated other comprehensive loss
(4,579
)
 
(4,366
)
Cost of 639 and 615 common shares held in treasury in 2018 and 2017
(11,607
)
 
(10,757
)
Total shareholders’ equity
541,955

 
531,719

 
$
967,143

 
$
991,385

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)(unaudited) 
 
Three Months Ended 
 March 31,
 
2018
 
2017
Cash Flows from Operating Activities
 
 
 
Net income
$
8,352

 
$
3,996

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
5,189

 
5,480

Stock compensation expense
2,097

 
1,635

Net (gain) loss on sale of assets
(7
)
 
12

Exit activity recoveries, non-cash
(727
)
 
(917
)
Other, net
360

 
240

Changes in operating assets and liabilities, excluding the effects of acquisitions:
 
 
 
Accounts receivable
4,947

 
(4,462
)
Inventories
(8,907
)
 
2,338

Other current assets and other assets
1,498

 
410

Accounts payable
(1,694
)
 
5,672

Accrued expenses and other non-current liabilities
(33,314
)
 
(12,061
)
Net cash (used in) provided by operating activities of continuing operations
(22,206
)
 
2,343

Cash Flows from Investing Activities
 
 
 
Cash paid for acquisitions, net of cash acquired

 
(18,561
)
Net proceeds from sale of property and equipment
2,823

 
9,233

Purchases of property, plant, and equipment
(1,033
)
 
(1,453
)
Net cash provided by (used in) investing activities
1,790

 
(10,781
)
Cash Flows from Financing Activities
 
 
 
Purchase of treasury stock at market prices
(850
)
 
(922
)
Net proceeds from issuance of common stock
226

 
11

Net cash used in financing activities
(624
)
 
(911
)
Effect of exchange rate changes on cash
(499
)
 
73

Net decrease in cash and cash equivalents
(21,539
)
 
(9,276
)
Cash and cash equivalents at beginning of year
222,280

 
170,177

Cash and cash equivalents at end of period
$
200,741

 
$
160,901

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
 
 
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, 2017
32,332

 
$
323

 
$
271,957

 
$
274,562

 
$
(4,366
)
 
615

 
$
(10,757
)
 
$
531,719

Net income

 

 

 
8,352

 

 

 

 
8,352

Foreign currency translation adjustment

 

 

 

 
110

 

 

 
110

Adjustment to retirement benefit liability, net of taxes of $(2)

 

 

 

 
(5
)
 

 

 
(5
)
Adjustment to post employment health care benefit liability, net of taxes of $12

 

 

 

 
32

 

 

 
32

Stock compensation expense

 

 
2,097

 

 

 

 

 
2,097

Cumulative effect of accounting changes (see Note 2)

 

 

 
624

 
(350
)
 

 

 
274

Stock options exercised
13

 

 
226

 

 

 

 

 
226

Net settlement of restricted stock units
53

 
1

 
(1
)
 

 

 
24

 
(850
)
 
(850
)
Balance at March 31, 2018
32,398

 
$
324

 
$
274,279

 
$
283,538

 
$
(4,579
)
 
639

 
$
(11,607
)
 
$
541,955

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1)
CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for the fair presentation of results for the interim period have been included. The Company's operations are seasonal; for this and other reasons, financial results for any interim period are not necessarily indicative of the results expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual Form 10-K for the year ended December 31, 2017.

The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.


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(2)
RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements Adopted
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 information has not been restated and continues to be reported under the accounting standard in effect for that period. Refer to Note 4 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 the beginning of the January 1, 2018, and will record any subsequent period adjustments, if changes to provisional amounts result in additional amounts stranded in accumulated other comprehensive income.

Date of adoption: Q1 2018

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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 Company is currently evaluating the impact of this standard on the Company's consolidated financial statements and related disclosures, including the impact on the Company's current lease portfolio from both a lessor and lessee perspective. The adoption of this standard will primarily result in an increase in the assets and liabilities on the Company's consolidated balance sheet and related disclosures.



Planned date of adoption: Q1 2019


(3)
ACCOUNTS RECEIVABLE, NET

Accounts receivable consists of the following (in thousands):
 
March 31, 2018
 
December 31, 2017
Trade accounts receivable
$
129,549

 
$
140,209

Costs in excess of billings
22,214

 
11,610

Total accounts receivables
151,763

 
151,819

Less allowance for doubtful accounts
(6,581
)
 
(6,434
)
Accounts receivable
$
145,182

 
$
145,385


Refer to Note 4 of the Company's consolidated financial statements included in Item 1 of this quarterly report on Form 10-Q for additional information concerning the Company's costs in excess of billings.


(4)
REVENUE

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; 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 16 of this quarterly report on Form 10Q 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.

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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 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 because the performance obligation is satisfied on the customer's premise, and the customer controls any work in process arising from the Company's performance. For the contracts of products that have no alternative use and the Company has enforceable right to payment, the Company identifies these products as ones 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 uses the expected cost plus a margin approach to estimate the standalone selling price of the single performance obligation.

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 based on the estimated standalone selling price using the expected cost plus a margin approach. 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 is proportionate to the Company's progress in satisfying the performance obligation. Under the cost-to-cost measure of progress, the extent of progress towards 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.


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The Company also recognizes revenues from services contracts over time. For these contracts, in order to estimate the standalone selling price of the performance obligation, the Company uses the adjusted market assessment approach, which is to evaluate the market in which the performance obligation 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 March 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.

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 in a net position on a contract-by-contract basis at the end of each reporting period.

Billings in excess of cost

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 in a net position 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.

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 March 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.


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Contract assets and contract liabilities

The Company's contract assets and contract liabilities consist of costs in excess of billings and billings in excess of cost, 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 three months ended March 31, 2018:
 
Costs in Excess of Billings
 
Billings in Excess of Cost
Beginning balance, January 1, 2018 (1)
$
16,532

 
$
(12,779
)
Reclassification of the beginning balances of:
 
 
 
Costs in excess of billings to receivables
(11,647
)
 

Billings in excess of cost to revenue

 
8,340

Costs in excess of billings recognized, net of reclassification to receivables
17,329

 

Net billings in advance and cash payments not recognized as revenue

 
(7,133
)
Ending balance, March 31, 2018
$
22,214

 
$
(11,572
)
(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" at January 1, 2018. 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 to 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 when products were shipped, the Company now recognizes revenue as the Company satisfies its performance over time in accordance with ASC 606.


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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
$
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 3 of this Form 10-Q for the three months ended March 31, 2018.


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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 period ended March 31, 2018 is as follows (in thousands):
Consolidated Statement of Operations
 
Three Months Ended 
 March 31, 2018
 
As Reported
 
Without Adoption of ASC 606
 
Effect of Change
Higher (Lower)
 
 
 
 
 
 
Net sales
$
215,337

 
$
213,369

 
$
1,968

Cost of sales
167,019

 
165,580

 
1,439

Gross profit
48,318

 
47,789

 
529

Provision for income taxes
2,807

 
2,658

 
149

Net income
$
8,352

 
$
7,972

 
$
380


Consolidated Balance Sheet
 
March 31, 2018
 
As Reported
 
Without Adoption of ASC 606
 
Effect of Change
Higher (Lower)
Assets
 
 
 
 
 
Accounts receivable, net
$
145,182

 
$
138,183

 
$
6,999

Inventories
90,236

 
96,371

 
(6,135
)
Total current assets
442,871

 
442,007

 
864

Total assets
967,143

 
966,279

 
864

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Accrued expenses
53,254

 
53,044

 
210

Total current liabilities
145,917

 
145,707

 
210

 
 
 
 
 
 
Shareholders' equity
 
 
 
 
 
Retained earnings
283,538

 
282,884

 
654

Total shareholders' equity
541,955

 
541,301

 
654

Total liabilities and shareholders' equity
$
967,143

 
$
966,279

 
$
864



(5)
INVENTORIES

Inventories consist of the following (in thousands):
 
March 31, 2018
 
December 31, 2017
Raw material
$
48,225

 
$
42,661

Work-in-process
7,481

 
10,598

Finished goods
34,530

 
33,113

Total inventories
$
90,236

 
$
86,372



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Table of Contents

(6)
ACQUISITIONS

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 is expected to enable 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

 
 

The acquisition of Package Concierge was 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 operations. Acquisition related-costs were $102 thousand for the three months ended March 31, 2017.



16


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(7)
GOODWILL AND RELATED INTANGIBLE ASSETS

Goodwill
The changes in the carrying amount of goodwill for the three months ended March 31, 2018 are as follows (in thousands):
 
Residential
Products
 
Industrial and
Infrastructure
Products
 
Renewable Energy & Conservation
 
Total
Balance at December 31, 2017
$
198,075

 
$
54,280

 
$
68,719

 
$
321,074

Foreign currency translation

 
(163
)
 
861

 
698

Balance at March 31, 2018
$
198,075

 
$
54,117

 
$
69,580

 
$
321,772


Acquired Intangible Assets
Acquired intangible assets consist of the following (in thousands):
 
March 31, 2018
 
December 31, 2017
 
 
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Estimated 
Life
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
Trademarks
$
45,159

 
$

 
$
45,107

 
$

 
Indefinite
Finite-lived intangible assets:
 
 
 
 
 
 
 
 
 
Trademarks
5,848

 
3,166

 
5,876

 
3,062

 
5 to 15 Years
Unpatented technology
28,107

 
12,490

 
28,107

 
12,033

 
5 to 20 Years
Customer relationships
81,174

 
41,215

 
80,707

 
39,652

 
5 to 17 Years
Non-compete agreements
1,649

 
1,007

 
1,649

 
931

 
4 to 10 Years
 
116,778

 
57,878

 
116,339

 
55,678

 
 
Total acquired intangible assets
$
161,937

 
$
57,878

 
$
161,446

 
$
55,678

 
 

The following table summarizes the acquired intangible asset amortization expense for the three months ended March 31 (in thousands):
 
2018
 
2017
Amortization expense
$
2,139

 
$
2,162


Amortization expense related to acquired intangible assets for the remainder of fiscal 2018 and the next five years thereafter is estimated as follows (in thousands):
 
2018
 
2019
 
2020
 
2021
 
2022
 
2023
Amortization expense
$
6,087

 
$
7,654

 
$
7,142

 
$
6,539

 
$
6,127

 
$
5,588



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(8)
LONG-TERM DEBT

Long-term debt consists of the following (in thousands):
 
March 31, 2018
 
December 31, 2017
Senior Subordinated 6.25% Notes
$
210,000

 
$
210,000

Other debt
2,400

 
2,400

Less unamortized debt issuance costs
(2,183
)
 
(2,379
)
Total debt
210,217

 
210,021

Less current maturities
400

 
400

Total long-term debt
$
209,817

 
$
209,621

The Company's Fifth Amended and Restated Credit Agreement dated December 9, 2015 (the "Senior Credit Agreement") was amended to convert our secured asset based credit facility into a secured cash flow revolver, and terminates on December 9, 2020.
The Senior Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount of $300 million. The Company has the option to request additional financing from the banks to either increase the revolving credit facility to $500 million or to provide a term loan of up to $200 million. The Senior Credit Agreement contains three financial covenants. As of March 31, 2018, the Company is 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 $9.7 million have been issued under the Senior Credit Agreement on behalf of the Company as of March 31, 2018. These letters of credit reduce the amount otherwise available under the revolving credit facility. As of March 31, 2018, the Company had $290.3 million of availability under the revolving credit facility. No borrowings were outstanding under the revolving credit facility at March 31, 2018 and December 31, 2017.
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.


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Table of Contents

(9)
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The cumulative balance of each component of accumulated other comprehensive loss, net of tax, is as follows (in thousands):
 
Foreign Currency Translation Adjustment
 
Minimum 
Pension
Liability
Adjustment
 
Unamortized Post Retirement Health
Care Costs
 
Total Pre-Tax Amount
 
Tax (Benefit) Expense
 
Accumulated  Other
Comprehensive
(Loss) Income
Balance at December 31, 2017
$
(2,698
)
 
$
171

 
$
(2,809
)
 
$
(5,336
)
 
$
(970
)
 
$
(4,366
)
Cumulative effect of accounting change (see Note 2)

 
15

 
(365
)
 
(350
)
 

 
(350
)
Minimum pension and post retirement health care plan adjustments

 
(7
)
 
44

 
37

 
10

 
27

Foreign currency translation adjustment
110

 

 

 
110

 

 
110

Balance at March 31, 2018
$
(2,588
)
 
$
179

 
$
(3,130
)

$
(5,539
)

$
(960
)
 
$
(4,579
)

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.

(10)
EQUITY-BASED COMPENSATION
The shareholders of the Company have authorized: (1) the Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "Plan") that allows the Company to grant equity-based incentive compensation awards, in the form of options, restricted shares, restricted units, performance shares, and performance stock units, to eligible participants; and (2) the Gibraltar Industries, Inc. 2016 Stock Plan for Non-Employee Directors ("Non-Employee Directors Plan") that 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. The Company's 2005 Equity Incentive Plan (the "Prior Plan") was amended in 2015 to terminate issuance of further awards from the Prior Plan.

Equity Based Awards - Settled in Stock
The following table provides the number of stock unit awards granted during the three months ended March 31, which will convert to shares upon vesting, along with the weighted average grant date fair values:
 
2018
 
2017
Awards
Number of
Awards (1)
 
Weighted
Average
Grant Date
Fair Value
 
Number of
Awards (2)
 
Weighted
Average
Grant Date
Fair Value
Performance stock units
132,288

 
$
33.35

 
98,482

 
$
43.05

Restricted stock units
67,055

 
$
33.35

 
59,112

 
$
43.05

Options

 
$

 
20,000

 
$
43.05

(1) Performance stock units granted will convert to shares based on the Company's actual return on invested capital ("ROIC") relative to the ROIC targeted for the performance period ended December 31, 2018.
(2) Performance stock units granted include 78,482 units awarded in February 2017 which will convert to 23,546 shares to be issued in February 2020, representing 30% of the targeted 2017 award, based on the Company’s actual ROIC compared to ROIC target for the performance period ended December 31, 2017. The remaining performance stock units granted include 20,000 units awarded in February 2017. The number of these shares to be issued to the recipients will be determined based upon the ranking of the Company’s total

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shareholder return ("TSR") over a three (3) year performance period ended February 1, 2020 compared to the TSR of companies in the S&P Small Cap Industrial Sector over the same three year period.
Equity Based Awards - Settled in Cash
The Company's equity-based liabilities include performance based stock units settled in cash and a management stock purchase plan. As of March 31, 2018, the Company's total share-based liabilities recorded on the consolidated balance sheet was $31.8 million, of which $19.7 million was included in non-current liabilities.
Performance Stock Units - Settled in Cash
The Company awarded performance stock units ("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 are determined based on the Company’s actual ROIC relative to the ROIC targeted for the performance period.
During the 2016 performance period, the participants earned an aggregate of 256,000 PSUs, representing 200% the targeted 2016 award of 128,000. This award will convert to cash payable in the first quarter of 2019.

During the 2015 performance period, the participants earned an aggregate of 438,000 PSUs, representing 200% of the targeted 2015 award of 219,000. This award converted to cash and was paid in the first quarter of 2018.

The following table summarizes the compensation expense recognized for the PSUs, which will convert to cash, for the three months ended March 31, (in thousands):
 
2018
 
2017
PSUs compensation expense
$
706

 
$
1,737


Management Stock Purchase Plan
The Management Stock Purchase Plan ("MSPP") provides participants 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. Directors do not receive any company-matching on amounts deferred. 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 and the payments made with respect to restricted stock units issued under the MSPP during the three months ended March 31,
 
2018
 
2017
Restricted stock units credited
63,937

 
98,770

Share-based liabilities paid (in thousands)
$
4,717

 
$
2,353


(11)
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.

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Table of Contents

The Company had no financial assets or liabilities measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017. The Company’s only financial instrument for which the carrying value differs from its fair value is long-term debt. At March 31, 2018 and December 31, 2017, the fair value of outstanding debt net of unamortized debt issuance costs was $214.0 million and $213.8 million, respectively, compared to its carrying value of $210.2 million and $210.0 million, respectively.  The fair value of the Company’s 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. 
  
(12)
DISCONTINUED OPERATIONS

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 March 31, 2018, the Company has a contingent liability recorded for such provisions related to discontinued operations. Management does not believe that the outcome of these claims, or other claims, would significantly affect the Company's financial condition or results of operation.

(13)
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, and in the sale and exiting of less profitable businesses or products lines.
Exit activity costs were incurred during the three months ended March 31, 2018 which related to contract terminations, severance, and other moving and closing costs. In addition, the Company sold and leased back a facility which resulted in a gain, which was partially offset by inventory impairment charges incurred for discontinued products.
During the three months ended March 31, 2017, the Company incurred asset impairment charges and exit activity costs resulting from the above initiatives. Also, as a result of these initiatives, the Company closed three facilities during the first quarter of 2017.
The following tables set forth the asset impairment charges and exit activity costs incurred by segment during the three months ended March 31, related to the restructuring activities described above (in thousands):
 
2018
 
2017
 
Inventory write-downs &/or asset impairment recoveries, net
 
Exit activity costs, net
 
Total
 
Inventory write-downs &/or asset impairment recoveries
 
Exit activity costs
 
Total
Residential Products
$
(43
)
 
$
(123
)
 
$
(166
)
 
$
(21
)
 
$
185

 
$
164

Industrial & Infrastructure Products
(703
)
 
218

 
(485
)
 
(896
)
 
2,656

 
1,760

Renewable Energy & Conservation
19

 
117

 
136

 

 
1,050

 
1,050

Corporate

 
44

 
44

 

 
28

 
28

Total exit activity costs & asset impairments
$
(727
)
 
$
256

 
$
(471
)
 
$
(917
)
 
$
3,919

 
$
3,002


The following table provides a summary of where the asset impairments and exit activity costs were recorded in the consolidated statement of operations for the three months ended March 31, (in thousands):
 
2018
 
2017
Cost of sales
$
37

 
$
994

Selling, general, and administrative (recoveries) expense
(508
)
 
2,008

Net asset impairment and exit activity (recoveries) charges
$
(471
)
 
$
3,002



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Table of Contents

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 at January 1
$
961

 
$
3,744

Exit activity costs recognized
256

 
3,919

Cash payments
(739
)
 
(4,617
)
Balance at March 31
$
478

 
$
3,046


(14)
INCOME TAXES

The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three months ended March 31, and the applicable effective tax rates:
 
2018
 
2017
Provision for income taxes
$
2,807

 
$
2,053

Effective tax rate
25.2
%
 
33.9
%
The change in the effective tax rate year over year is primarily due to the reduction in U.S. federal statutory tax rate from 35% to 21%. The effective tax rate for the three months ended March 31, 2018 was greater than the U.S. federal statutory rate of 21% due to state taxes and nondeductible permanent differences partially offset by favorable discrete items. The effective tax rate for the three months ended March 31, 2017 was less than the U.S. federal statutory rate of 35% due to net deductible permanent differences and favorable discrete items partially offset by state taxes and $0.9 million of pretax losses generated by the European residential solar racking business for which no tax benefit has been recorded as such benefit is not expected to be realizable.

On December 22, 2017, the Tax Cuts and Jobs Act ("Tax Reform Act") was signed into law. On this day, 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. The Company has recognized the provisional tax impacts related to the one-time transition tax, withholding tax and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. As there is some uncertainty around the grandfathering provisions related to performance-based executive compensation, we have not included a provisional amount for deferred tax assets related to performance-based executive compensation as we believe that all of our plans are grandfathered. Our preliminary estimate of the one-time transition tax and the re-measurement of our deferred tax assets and liabilities is subject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the 2017 Tax Reform Act, changes to certain estimates and amounts related to the earnings and profits of certain subsidiaries and the filing of our tax returns, U.S. Treasury regulations, administrative interpretations or court decisions interpreting the 2017 Tax Reform Act may require further adjustments and changes in our estimates.

During the three month period ended March 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 three month period ended March 31, 2018, (in thousands):
Remeasurement of certain deferred tax balances (1)
 
114

One-time transition tax (2)
 
(233
)
Non-deductible performance based compensation (3)
 
51

Net benefit recorded to provisional income tax expense
 
(68
)

(1) The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. We recorded a provisional income tax benefit of $16.2 million at December 31, 2017 related to the remeasurement of certain deferred tax balances.
 

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Table of Contents

(2) The Tax Reform Act provided for a one-time transition tax on post-1986 undistributed foreign subsidiary earnings and profits (“E&P”). The Company recognized a provisional $3.7 million of income tax expense at December 31, 2017 related to the one-time transition tax and related repatriation.

(3) The Tax Reform Act repealed the performance-based compensation exceptions to Section 162(m) $1.0 million deduction limitation. The Company did not provide for a provisional adjustment at December 31, 2017.

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 year ended December 31, 2017, or during the quarter ended March 31, 2018. We have made sufficient progress in our calculations to reasonably estimate the effect on our effective tax rate. The adjustment increased our effective tax rate by 0.6%. We will continue to refine our calculations, which may result in changes to this amount.

The final determination of the one-time transition tax and the re-measurement of our deferred assets and liabilities will be completed as additional information becomes available, but no later than one year from the enactment of the 2017 Tax Reform Act.

In January 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated other Comprehensive Income, which gives entities the option to reclassify retained earning tax effects resulting from Tax Reform related to items in AOCI that the FASB refers to as having been stranded in AOCI. The Company must adopt this guidance for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted for periods for which financial statements have not yet been issued or made available for issuance, including the period Tax Reform was enacted. We elected to early adopt ASU 2018-02. As a result of adopting this standard, we reclassified $350,000 from AOCI to retained earnings.



23


Table of Contents

(15)
EARNINGS PER SHARE

Basic earnings and diluted weighted-average shares outstanding are as follows for the three months ended March 31, (in thousands):
 
2018
 
2017
Numerator:
 
 
 
Income from continuing operations
$
8,352

 
$
3,996

Net income available to common shareholders
$
8,352

 
$
3,996

Denominator for basic earnings per share:
 
 
 
Weighted average shares outstanding
31,786

 
31,688

Denominator for diluted earnings per share:
 
 
 
Weighted average shares outstanding
31,786

 
31,688

Common stock options and restricted stock
658

 
566

Weighted average shares and conversions
32,444

 
32,254

The weighted average number of diluted shares does not include potential anti-dilutive common shares issuable pursuant to equity based incentive compensation awards, aggregating to 359,000 and 526,000 for the three months ended March 31, 2018 and 2017, respectively.

(16)
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, centralized mail systems and electronic package solutions, rain dispersion products and roofing accessories;
(ii)
Industrial and Infrastructure Products, which primarily includes expanded and perforated metal, expansion joints, structural bearings and perimeter security; and
(iii)
Renewable Energy and Conservation, which primarily includes designing, engineering, manufacturing and installation of solar racking systems and greenhouse structures.
When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics.

24


Table of Contents

The following table illustrates certain measurements used by management to assess performance of the segments described above for the three months ended March 31, (in thousands):
 
Three Months Ended 
 March 31,
 
2018
 
2017
Net sales:
 
 
 
Residential Products
$
103,948

 
$
104,551

Industrial and Infrastructure Products
54,624

 
50,718

Less: Intersegment sales
(221
)
 
(456
)
Net Industrial and Infrastructure Products
54,403

 
50,262

Renewable Energy and Conservation
56,986

 
51,792

Total consolidated net sales
$
215,337

 
$
206,605

 
 
 
 
Income from operations:
 
 
 
Residential Products
$
13,238

 
$
15,641

Industrial and Infrastructure Products
2,602

 
(37
)
Renewable Energy and Conservation
4,062

 
3,340

Unallocated Corporate Expenses
(6,059
)
 
(9,265
)
Total income from operations
$
13,843

 
$
9,679


The following tables illustrate revenue disaggregated by timing of transfer of control to the customer for the three months ended March 31 (in thousands):
 
Three Months Ended March 31, 2018
 
Residential Products
 
Industrial and Infrastructure Products
 
Renewable Energy and Conservation
 
Total
Net sales:
 
 
 
 
 
 
 
Point in Time
$
102,884

 
$
46,543

 
$
5,620

 
$
155,047

Over Time
1,064

 
7,860

 
51,366

 
60,290

Total
$
103,948

 
$
54,403

 
$
56,986

 
$
215,337

 
Three Months Ended March 31, 2017
 
Residential Products
 
Industrial and Infrastructure Products
 
Renewable Energy and Conservation
 
Total
Net sales:
 
 
 
 
 
 
 
Point in Time
$
104,551

 
$
50,262

 
$
5,793

 
$
160,606

Over Time

 

 
45,999

 
45,999

Total
$
104,551

 
$
50,262

 
$
51,792

 
$
206,605



25


Table of Contents


(17)
SUPPLEMENTAL FINANCIAL INFORMATION

The following information sets forth the consolidating summary financial statements of the issuer (Gibraltar Industries, Inc.) and guarantors, which guarantee the 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.

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Table of Contents


GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2018
(in thousands)
 
 
Gibraltar
Industries, Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Net sales
$

 
$
204,467

 
$
12,330

 
$
(1,460
)
 
$
215,337

Cost of sales

 
158,584

 
9,758

 
(1,323
)
 
167,019

Gross profit

 
45,883

 
2,572

 
(137
)
 
48,318

Selling, general, and administrative expense
44

 
32,724

 
1,707

 

 
34,475

(Loss) income from operations
(44
)
 
13,159

 
865

 
(137
)
 
13,843

Interest expense (income)
3,402

 
(84
)
 
(49
)
 

 
3,269

Other expense (income)

 
28

 
(613
)
 

 
(585
)
(Loss) income before taxes
(3,446
)
 
13,215

 
1,527

 
(137
)
 
11,159

(Benefit of) provision for income taxes
(965
)
 
3,335

 
437

 

 
2,807

Equity in earnings from subsidiaries
10,970

 
1,090

 

 
(12,060
)
 

Net income
$
8,489

 
$
10,970

 
$
1,090

 
$
(12,197
)
 
$
8,352




































27


Table of Contents


GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2017
(in thousands)
 
 
Gibraltar
Industries, Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Net sales
$

 
$
197,748

 
$
11,242

 
$
(2,385
)
 
$
206,605

Cost of sales

 
150,507

 
8,982

 
(2,139
)
 
157,350

Gross profit

 
47,241

 
2,260

 
(246
)
 
49,255

Selling, general, and administrative expense
43

 
36,506

 
3,027

 

 
39,576

(Loss) income from operations
(43
)
 
10,735

 
(767
)
 
(246
)
 
9,679

Interest expense (income)
3,402

 
192

 
(18
)
 

 
3,576

Other expense (income)

 
130

 
(76
)
 

 
54

(Loss) income before taxes
(3,445
)
 
10,413

 
(673
)
 
(246
)
 
6,049

(Benefit of) provision for income taxes
(1,344
)
 
3,378

 
19

 

 
2,053

Equity in earnings from subsidiaries
6,343

 
(692
)
 

 
(5,651
)
 

Net income (loss)
$
4,242

 
$
6,343

 
$
(692
)
 
$
(5,897
)
 
$
3,996





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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2018
(in thousands)
 
 
Gibraltar
Industries, Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Net income
$
8,489

 
$
10,970

 
$
1,090

 
$
(12,197
)
 
$
8,352

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment

 

 
110

 

 
110

Cumulative effect of change in accounting (see Note 2)

 
(350
)
 

 

 
(350
)
Adjustment to retirement benefit liability, net of tax

 
(5
)
 

 

 
(5
)
Adjustment to post employment health care benefit liability, net of tax

 
32

 

 

 
32

Other comprehensive (loss) income

 
(323
)
 
110

 

 
(213
)
Total comprehensive income
$
8,489

 
$
10,647

 
$
1,200

 
$
(12,197
)
 
$
8,139



GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2017
(in thousands)
 
 
Gibraltar
Industries, Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Net income (loss)
$
4,242

 
$
6,343

 
$
(692
)
 
$
(5,897
)
 
$
3,996

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment

 

 
679

 

 
679

Adjustment to retirement benefit liability, net of tax

 
(3
)
 

 

 
(3
)
Adjustment to post employment health care benefit liability, net of tax

 
29

 

 

 
29

Other comprehensive income

 
26

 
679

 

 
705

Total comprehensive income (loss)
$
4,242

 
$
6,369

 
$
(13
)
 
$
(5,897
)
 
$
4,701

















29


Table of Contents


GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
MARCH 31, 2018
(in thousands) 

 
Gibraltar
Industries, Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
172,930

 
$
27,811

 
$

 
$
200,741

Accounts receivable, net

 
139,143

 
6,039

 

 
145,182

Intercompany balances
914

 
3,362

 
(4,276
)
 

 

Inventories

 
86,265

 
3,971

 

 
90,236

Other current assets
1,048

 
2,114

 
3,550

 

 
6,712

Total current assets
1,962

 
403,814

 
37,095

 

 
442,871

Property, plant, and equipment, net

 
90,625

 
3,046

 

 
93,671

Goodwill

 
298,258

 
23,514

 

 
321,772

Acquired intangibles

 
95,275

 
8,784

 

 
104,059

Other assets

 
4,770

 

 

 
4,770

Investment in subsidiaries
750,823

 
62,594

 

 
(813,417
)
 

 
$
752,785

 
$
955,336

 
$
72,439

 
$
(813,417
)
 
$
967,143

Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$
76,994

 
$
3,697

 
$

 
$
80,691

Accrued expenses
2,188

 
49,631

 
1,435

 

 
53,254

Billings in excess of cost

 
9,280

 
2,292

 
 
 
11,572

Current maturities of long-term debt

 
400

 

 

 
400

Total current liabilities
2,188

 
136,305

 
7,424

 

 
145,917

Long-term debt
208,642

 
1,175

 

 

 
209,817

Deferred income taxes

 
28,918

 
2,421

 

 
31,339

Other non-current liabilities

 
38,115

 

 

 
38,115

Shareholders’ equity
541,955

 
750,823

 
62,594

 
(813,417
)
 
541,955

 
$
752,785

 
$
955,336

 
$
72,439

 
$
(813,417
)
 
$
967,143


















30


Table of Contents

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
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