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Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2011

Summary Of Significant Accounting Policies [Abstract]

Principles of consolidation

The consolidated financial statements include the accounts of Gibraltar Industries, Inc. and subsidiaries (the Company). All significant intercompany accounts and transactions have been eliminated in consolidation.

Use Of Estimates

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

Revenue recognition

Revenue is recognized when products are shipped or service is provided, the customer takes ownership and assumes the risk of loss, collection of the corresponding receivable is probable, persuasive evidence of an arrangement exists, and the sales price is fixed or determinable. Sales returns, allowances, and customer incentives are treated as reductions to sales and are provided for based on historical experience and current estimates.

Promotional Allowances

Promotional allowances

The Company promotes its branded products through cooperative advertising programs with retailers. Retailers also are offered in-store promotional allowances and rebates based on sales volume. Promotion costs (including allowances and rebates) incurred during the year are expensed during periods related to the associated revenues and recorded as a reduction to net sales.

Cash And Cash Equivalents

Cash and cash equivalents

Cash and cash equivalents include cash on hand, checking accounts, and all highly liquid investments with a maturity of three months or less.

Accounts Receivable

Accounts receivable

Accounts receivable are composed of trade receivables recorded at the invoiced amount, 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 amount of probable uncollectible amounts in the Company's existing accounts receivable. The Company determines the allowance based on a number of factors, including 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 for the years ended December 31 (in thousands):


	2011			2010			2009
Beginning balance	$	3,504		$	3,677		$	3,573
Bad debt expense		1,799			1,213			2,064
Reserves from acquisitions		896			–			–
Accounts written-off and other adjustments		(1,553	)		(1,367	)		(2,034	)
Foreign currency translation		(32	)		(19	)		74
Ending balance	$	4,614		$	3,504		$	3,677

Concentrations of credit risk on accounts receivable are limited to those from significant customers that are believed to be financially sound. The Company typically does not require collateral. Accounts receivable from the Company's most significant customer as a percentage of consolidated accounts receivable as of December 31 was as follows:


	2011		2010
The Home Depot	16.5	%	20.8	%

Net sales to the Company's most significant customer as a percentage of consolidated net sales for the years ended December 31 was as follows:


	2011		2010		2009
The Home Depot	12.5	%	14.0	%	16.3	%

Inventories

Inventories are valued at the lower of cost or market. The Company did not recognize material charges within cost of sales to adjust inventory to the lower of cost or market because inventory at cost exceeded the Company's estimate of net realizable value less normal profit margins during the three year period ended December 31, 2011.

The cost basis of the inventory is determined on a first-in, first-out basis using either actual costs or a standard cost methodology which approximates actual cost. Shipping and handling costs are recognized as a component of cost of sales.

Inventory on hand is regularly reviewed and provisions for excess, obsolete, and slow-moving inventory based on historical and current sales trends are recorded. The following table summarizes activity recorded within the reserves for excess, obsolete, and slow moving inventory for the years ended December 31 (in thousands):


	2011			2010			2009
Beginning balance	$	3,044		$	3,395		$	3,867
Excess, obsolete, and slow-moving inventory expense		378			1,046			615
Reserves from acquisitions		1,270			–			–
Scrapped inventory and other adjustments		(542	)		(1,402	)		(1,130	)
Foreign currency translation		(4	)		5			43
Ending balance	$	4,146		$	3,044		$	3,395

Property, Plant, And Equipment

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 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. Accelerated depreciation methods are used for income tax purposes.

The table below sets forth the amount of interest capitalized and depreciation expense recognized during the years ended December 31 (in thousands):


	2011		2010		2009
Capitalized interest	$	250	$	152	$	660
Depreciation expense	$	19,872	$	18,797	$	18,034

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 difficult 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

Goodwill and other intangible assets

The Company tests goodwill and other indefinite-lived intangible assets 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 amount. 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 impairment test consists of comparing the fair value of a reporting unit, determined using two valuation techniques, with its carrying amount including goodwill, and, if the carrying amount of the reporting unit exceeds its fair value, comparing the implied fair value of goodwill with its carrying amount. An impairment loss would be recognized for the carrying amount of goodwill in excess of its implied fair value. Goodwill impairment charges were recognized for the years ended December 31, 2010 and 2009.

The Company 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 amount. 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. Impairment losses related to indefinite-lived intangible assets were recognized for the years ended December 31, 2010 and 2009.

The Company identified an intangible asset with a finite useful life that was impaired as of October 31, 2010. The intangible asset was re-valued at its fair value determined using discounted cash flows on an excess earnings basis.

The Company recognized the following intangible asset impairment charges during the years ended December 31 (in thousands):


	2011		2010		2009
Goodwill impairment	$	–	$	66,589	$	59,008
Indefinite-lived intangible asset impairment		–		5,100		1,090
Finite-lived intangible asset impairment		–		5,275		–
Total intangible asset impairment	$	–	$	76,964	$	60,098

Acquired identifiable intangible assets are recorded at estimated cost. Identifiable intangible assets with finite useful lives are amortized over their estimated useful lives.

Deferred Charges

Deferred charges

Deferred charges associated with initial costs incurred to enter into new debt arrangements are included in other assets and are amortized as a part of interest expense over the terms of the associated debt agreements. In 2011 and 2009, portions of these deferred financing charges were written off as a result of entering into amended and restated credit agreements and the early payment of debt outstanding under a term loan as discussed in Note 8 of the consolidated financial statements.

Notes Receivable

Notes receivable

The Company held notes receivable from various divestitures and real estate transactions. The current portion of the notes receivable was included in other current assets and the long-term portion of the notes receivable was included in other assets. Each note receivable is evaluated for collectability each reporting period on an individual basis. Collectability is primarily evaluated on the financial condition of the debtor and whether and to what extent the debtor has complied with the terms of the underlining note agreements. No allowances for credit losses were established for the notes receivable during the years ended December 31, 2011, 2010, or 2009. Interest income was recognized on an accrual basis based upon fixed rates as defined in each note receivable agreement and classified as a reduction to interest expense on the consolidated statement of operations.

The following table sets forth the outstanding notes receivable as of December 31 (in thousands):


	2011		2010
Current portion	$	215	$	304
Long-term portion		838		9,355
Notes receivable	$	1,053	$	9,659

A note receivable from a divestiture completed in 2008 was repaid in full during 2011. As a result, the amount of notes receivable outstanding decreased significantly from December 31, 2010 to December 31, 2011.

Impairment Of Long-Lived Assets

Impairment of long-lived assets

Long-lived assets, including acquired identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. 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. As noted above, the Company recognized an impairment charge related to intangible assets during the years ended December 31, 2010 and 2009. In addition, the Company recognized a number of impairment charges related to restructuring plans during the three year period ended December 31, 2011 as described in Note 15 of the consolidated financial statements.

Equity Method Investment

Equity method investments

The Company's equity method investments were accounted for using the equity method of accounting, under which the Company's share of the earnings of each investee was recognized in income as earned and distributions were credited against the investment when received. The portion of the investment in excess of the Company's applicable share of an investee's net assets resulted in an equity-method intangible asset. The equity-method intangible asset was amortized over its estimated useful life of seven years. The Company divested of its membership interests in both equity method investments in 2011 and 2010, respectively.

Derivative Instruments And Hedging Activities

Derivative instruments and hedging activities

The Company is exposed to certain risks relating to its ongoing business operations. From time to time, the Company may use derivative instruments to manage interest rate risk. Interest rate swaps have been entered into in prior periods to manage interest rate risk associated with the Company's variable-rate borrowings. The Company had an interest rate swap outstanding with a notional amount of $57,500,000, which expired on December 22, 2010. The Company designated this interest rate swap as a cash flow hedge at inception.

In connection with the execution of the Company's Third Amended and Restated Credit Agreement dated July 24, 2009 and based on the Company's prospective assessment of the effectiveness of the interest rate swap, the Company de-designated the swap as a hedge and beginning in the third quarter of 2009 all changes in the fair value of the swap were prospectively recorded in earnings as increases or decreases to interest expense. The Company amortized amounts remaining in accumulated other comprehensive loss related to the swap to interest expense during the second half of 2009 and the first quarter of 2010.

On February 1, 2010, the Company sold the majority of the assets of the Processed Metal Products business as disclosed in Note 14 of the consolidated financial statements. The Company used proceeds from the sale together with cash generated from operations to repay all remaining variable-rate debt outstanding. Accordingly, all losses previously deferred in accumulated other comprehensive loss related to the interest rate swap were reclassified to interest expense during the first quarter of 2010. Changes in the fair value of the swap continued to be recorded in earnings until the swap expired.

The following table summarizes the gains and losses recorded in interest expense and other comprehensive income as a result of the interest rate swap for the years ended December 31 (in thousands):


	2011		2010		2009
Adjustments to interest expense:
Loss reclassified from accumulated other comprehensive income	$	–	$	1,899	$	2,010
Loss from changes in the fair value of the ineffective portion of the interest rate swap		–		170		896
Total loss included in interest expense	$	–	$	2,069	$	2,906
		–
Adjustments to other comprehensive income:		–	–
Realized loss reclassified to interest expense, net of taxes	$	–	$	302	$	1,264
Unrealized loss reclassified to interest expense, net of taxes		–		904		–
Unrealized loss from changes in the fair value of the effective portion of the interest rate swap, net of taxes		–		–		(44	)
Gain included in other comprehensive income	$	–	$	1,206	$	1,220

Foreign Currency Transactions And Translation

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. Gains and losses resulting from foreign currency transactions are recognized currently in income and those resulting from the translation of financial statements are accumulated as a separate component of comprehensive income. The following table summarizes the foreign currency transaction gains and losses recognized during the years ended December 31 (in thousands):


	2011		2010		2009
Foreign currency loss	$	232	$	271	$	325

Shareholders' Equity

Shareholders' equity

During 2011, 2010, and 2009, the Company acquired 62,000, 68,000, and 76,000 shares of stock, respectively, as satisfaction of statutory minimum tax withholdings related to stock compensation. These reacquired shares and related cost are reflected as treasury stock in the consolidated balance sheets at December 31, 2011 and 2010.

Comprehensive Income

Comprehensive income

Comprehensive income includes net income as well as other comprehensive income. The Company's other comprehensive income consists of unrealized gains and losses on interest rate swaps and retirement liability adjustments, which are recorded net of related taxes, along with foreign currency translation adjustments.

Earnings Per Share

Earnings per share

Earnings per share equals net income divided by the weighted average shares outstanding during the year. The computation of diluted earnings per share includes all dilutive common stock equivalents in the weighted average shares outstanding. A reconciliation between basic and diluted earnings per share for the years ended December 31, 2011, 2010, and 2009 is displayed in Note 17 of the consolidated financial statements.

Income Taxes

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.

Equity-Based Compensation

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. Equity-based compensation consists of grants of stock options, 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.

Collective Bargaining Agreements

Collective bargaining agreements

At December 31, 2011, the Company employed 2,221 people, of which approximately 21% were represented by unions through various collective bargaining agreements (CBAs). One CBA, representing 4% of our workforce, expired and is currently being re-negotiated. Another four CBAs, representing 13% of our workforce, will expire during 2012. Our other CBAs expire between June 30, 2013 and December 31, 2013. We historically have had good relationships with our unions. We expect the current and future negotiations with our unions to result in contracts that provide benefits that are consistent with those provided in our current agreements.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (Update) 2011-04, "Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs." Update 2011-04 generally clarifies the requirements for measuring fair value and for disclosing information about fair value measurements. This Update results in common principles and requirements regarding fair value measurements for U.S. GAAP and International Financial Reporting Standards. The amendments are effective for interim and annual periods beginning after December 15, 2011 and are to be applied prospectively. The Company does not expect the adoption of Update 2011-04 will have a material impact on the Company's consolidated financial statements.

In June 2011, the FASB issued Update 2011-05, "Comprehensive Income (Topic 220) – Presentation of Comprehensive Income." Under the amendments included in Update 2011-05, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and are to be applied retrospectively. The Company adopted Update 2011-05 retrospectively in 2011 which did not have a material impact on the Company's consolidated results from operations, financial position, or cash flows.

In September 2011, the FASB issued Update 2011-08, "Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment." Under the amendments included in Update 2011-08, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, the two-step impairment test is required. The amendments are effective for fiscal years beginning after December 15, 2011 although early adoption is permitted. Although the amendments may change how goodwill is tested for impairment, the Company does not expect the adoption of Update 2011-08 will have a material impact on the timing or measurement of any goodwill impairments.

In September 2011, the FASB issued Update 2011-09, "Compensation – Retirement Benefits – Multiemployer Plans (Subtopic 715-80) – Disclosures about an Employer's Participation in a Multiemployer Plan". The amendments included in Update 2011-09 require employers to provide additional separate disclosures for multiemployer pension plans and multiemployer other postretirement benefit plans. The amended disclosures provide users with more detailed information about an employer's involvement in these plans. The Company participates in various multiemployer pension plans and was required to disclose additional information about these plans in the consolidated financial statements for the year ended December 31, 2011, the date that the Update was effective for public entities. The additional disclosures are provided in Note 9 of the consolidated financial statements.

Reclassifications

Certain 2010 and 2009 amounts have been reclassified to conform to the 2011 presentations. The Company reclassified the effect of exchange rate changes on cash on the consolidated statement of cash flows.