GIBRALTAR INDUSTRIES, INC. (ROCK) FY 2023 MD&A

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

The Company is a leading manufacturer and provider of products and services for the renewable energy, residential, agtech, and infrastructure markets.

The Company operates and reports its results in the following four reporting segments:

•Renewables

•Residential

•Agtech

•Infrastructure

The Company serves customers primarily in North America including renewable energy (solar) developers, institutional and commercial growers of fruits, vegetables, flowers and other plants, home improvement retailers,

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wholesalers, distributors, and contractors. The Company's operational infrastructure provides the necessary scale to support local, regional, and national customers in each of its markets.

Demand for products and services in the segments and end markets the Company's businesses serve 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, federal subsidies for renewable energy projects, supply limitations that impact the availability of solar modules and therefore solar racking installations, demand for residential construction, demand for repair and remodeling, governmental policies and funding, tax policies and incentives, tariffs, trade policies, weather patterns, the level of non-residential construction and infrastructure projects, demand for renewable energy sources, and climate change. The Company believes the key elements of its strategy outlined in Item 1. Business of this Annual Report on Form 10-K will allow the Company to respond timely to these factors.

Recent Trends

The uncertainty of the current macro-economic environment, including shifting inflation and higher interest rates, along with trade related disruptions that continue to impact the supply of solar modules used by the Company’s customers, along with permitting delays that affected project timing, have impacted and may continue to adversely impact our performance and financial results. Although the disruption in the supply of solar modules is improving, our customers continue to be challenged to obtain permits from relevant government entities to build new solar fields and the Company does expect that these aforementioned dynamics will continue through 2024.

While the Company does not sell or import solar modules, the goods and services the Company provides for its customers depend upon the supply of solar modules. Shortages of solar modules have resulted in project delays over the past two years. The supply has been primarily impacted by two regulatory items: the UFLPA which was enacted in June 2022, and the circumvention of AD/CVD investigation launched by the USDOC in March 2022, against eight solar module manufacturers producing in four countries in Southeast Asia.

The UFLPA requires traceability of components of imported goods to validate components are not sourced from the Xinjiang province in China. This requirement has caused delays in module availability as module manufacturers must follow a stringent importation process with the U.S. Custom and Border Protection Agency. While a few of the larger module manufacturers are experiencing more consistent success with the importation process, other module suppliers need to make further progress with UFLPA and the importation process. The UFLPA continues to create a compliance burden and constrain supply of imported solar modules, but the Company expects continual improvement of supply as more module manufacturers move forward on the learning curve.

As a result of the USDOC’s AD/CVD investigation, and until the final ruling from the USDOC was announced in August 2023, projects were delayed due to the risk of retroactive tariffs being imposed on the import of solar modules produced in four countries in Southeast Asia, where Chinese manufacturers have operations. In addition, of the eight major manufacturers under investigation, five were found to have been circumventing the AD/CVD orders. In parallel to the USDOC investigation, on June 6, 2022, an emergency Presidential Proclamation was issued delaying the imposition of duties on imports from the impacted countries until June 6, 2024. This proclamation provides non-U.S. based module manufacturers time to modify and secure supply chains to ensure compliance with U.S. law. In January 2024, a motion was filed requesting that the delay in the imposition of duties per the Presidential Proclamation be removed retroactively.

On August 16, 2022, the IRA was signed into law. Among other things, the IRA provides for a variety of enhanced ITC and Production Tax Credits for renewable energy subject to specific dates and requirements. Although the Company believes the IRA should assist in driving growth in the renewable energy industry, it is important that the Department of Treasury finalize rules governing the execution of additional investment tax incentives so industry and the Company's customers can move forward with projects currently on hold. Overall, the Company believes the enhanced tax credits under the IRA will provide long-term certainty for the industry and support consistent and accelerating demand for our products. The Company will work with its customers to optimize the various ITC as the final rules are defined and implemented.

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Operating Performance Measures

The Company uses certain operating performance measures, specifically consolidated gross margin, operating margin by segment and consolidated operating margin, to manage its businesses, set operational goals, and establish performance targets for incentive compensation for its employees. The Company defines consolidated gross margin as a percentage of total consolidated gross profit to total consolidated net sales. The Company defines operating margin by segment as a percentage of total income from operations by segment to total net sales by segment and consolidated operating margin as a percentage of total consolidated income from operations to total consolidated net sales. The Company believes gross margin and operating margin may be useful to investors in evaluating the profitability of its segments and the Company on a consolidated basis.

Results of Operations

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

For a discussion of the Company's results of operations for the year ended December 31, 2022 and for a comparison of such results of operations for the year ended December 31, 2021 results please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 that was filed with the SEC on February 22, 2023.

The following table sets forth selected results of operations data (in thousands) and its percentages of net sales for the years ended December 31:

The following table sets forth the Company’s net sales by reportable segment for the years ended December 31 (in thousands):

Consolidated net sales decreased from 2022 by $12.2 million, or 0.9%, to $1.4 billion for 2023 compared to 2022. The decrease in revenue was driven by lower organic revenue of 5.0% or $69.3 million, the result of a 6% volume decline. Largely offsetting the year over year decrease were $60.8 million of revenues generated from recent acquisitions, which are reported as part of the Company's Residential segment, along with participation gains. Consolidated backlog increased 10% to $330 million up from $299 million at the end of the prior year.

Net sales in the Renewables segment decreased by 12.4%, or $46.8 million, to $330.7 million in 2023 compared to $377.6 million in 2022. Revenue decreased by 12.4% from the prior year as the market demand for solar racking

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installation continues to be impacted by timing delays due to lengthier permitting processes and pending guidance on final IRA tax credit guidelines, along with the lingering impact of importation challenges resulting from the UFLPA that lessened throughout the year. New order bookings continued to be robust as backlog increased 21% from the prior year.

Net sales in the Residential segment increased 6.2%, or $47.6 million, to $814.8 million in 2023 compared to $767.2 million in 2022. The increase from the prior year was the result of sales generated by recent acquisitions of $60.8 million along with additional participation gains and expanded market presence, which more than offset channel inventory corrections and price declines related to commodity cost reductions and 80/20 initiatives targeting less attractive product lines.

Net sales in the Agtech segment decreased 14.2%, or $23.9 million, to $145.0 million in 2023 compared to $168.9 million in 2022. Revenue declined as both the segment's commercial business and produce projects experienced delayed new project starts throughout most of the year, which began to convert to active projects in the fourth quarter of the year. While backlog decreased 6% year over year, the pipeline of projects is strong.

Net sales in the Infrastructure segment increased 14.3%, or $10.9 million, to $87.2 million in 2023 compared to $76.3 million in 2022. The increase in revenue was driven by continued solid end market demand and ongoing efforts to increase market participation. Backlog increased 3% year over year, benefiting from these efforts.

The Company's consolidated gross margin increased to 26.3% for 2023 compared to 22.9% for 2022. This increase was the result of improved price to material cost alignment, solid execution in field operations, improvement in supply chain management and continued operational efficiencies, along with 80/20 initiatives and favorable business and product mix.

Selling, general, and administrative ("SG&A") expenses increased by $18.8 million, or 10.0%, to $207.4 million for 2023 from $188.6 million for 2022. The $18.8 million increase was primarily due to higher performance-based compensation expense, as compared to the prior year. Incremental SG&A expenses incurred by recent acquisitions also contributed to the increase. SG&A expenses as a percentage of net sales increased to 15.1% for 2023 compared to 13.5% for 2022.

During 2023, the Company recognized intangible asset impairment charges of $3.8 million. The impairment was largely the result of a rebranding initiative that resulted in the discontinuation of an indefinite-lived trademark of $3.2 million in the Agtech segment, and to a lesser extent, the write-off of amortizing intangibles for $0.6 million related to a discontinued product line in the Renewables 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):

The Renewables segment generated an operating margin of 9.1% in 2023 compared to 6.7% in 2022. The increase in operating margin was driven by field operations productivity, favorable price to cost alignment and improved supply chain management that offset lower volumes and higher restructuring charges incurred in the current year related to addressing customer issues arising from the discontinued legacy solar tracker solution.

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The Residential segment operating margin increased to 17.6% in 2023 from 16.5% in 2022. The increase in operating margin was the result of the benefit of improved alignment of price actions and input costs, along with 80/20 productivity initiatives and mix.

The Agtech segment generated an operating margin of (0.6)% in 2023 compared to 1.7% in 2022. The year over year decline in operating margin was the combined impact of a $3.5 million charge to write down a receivable associated with a distressed cannabis customer and the aforementioned $3.2 million indefinite-lived trademark impairment charge, the result of a rebranding initiative. The impact of these charges were partially offset by 80/20 initiatives and improvement in project management systems.

The Infrastructure segment operating margin increased to 21.2% in 2023 compared to 11.8% in 2022. The margin improvement was due to strong operating execution, 80/20 productivity initiatives, supply chain efficiency, and product line mix.

Unallocated corporate expenses increased $6.6 million, or 19.6%, to $40.1 million in 2023 from $33.5 million for 2022. The increase in expense was largely the result of higher performance-based compensation expense, as compared to the prior year.

Interest expense decreased $1.0 million to $3.0 million for 2023 from $4.0 million for 2022. The decrease in expense was primarily due to lower average outstanding balances in the current year, $37 million compared to $85 million, for 2023 and 2022, respectively, partially offset by higher interest rates compared to the prior year.

The Company recorded other income of $1.3 million in 2023, compared to other expense of $14.6 million in 2022. The current year income is the combined result of foreign currency translation fluctuations and changes in the fair market valuation allowance related to the liquidation of the processing business, offset by a $0.6 million pre-tax net loss relating to the sale of the Company's Japan-based solar racking business within its Renewables segment. In 2022, the Company recorded a $14.0 million valuation allowance related to the write-down of the processing business to estimated fair market value.

The Company recognized a provision for income taxes of $38.5 million, an effective tax rate of 25.8%, for 2023 compared with a provision for income taxes of $29.1 million, an effective tax rate of 26.1%, for 2022. The effective tax rates for 2023 and 2022 exceeded the U.S. federal statutory rate of 21% due to state taxes and nondeductible permanent differences partially offset by favorable discrete items due to an excess tax benefit on stock-based compensation.

Liquidity and Capital Resources

The following table sets forth the Company's liquidity position as of (in thousands):

Sources of Liquidity

The Company's sources of liquidity are comprised of cash on hand and available borrowing capacity provided under the Company's Credit Agreement (the "Credit Agreement"), entered into on December 8, 2022. The Credit Agreement maintains similar capacity as the prior agreement in which it provides for a revolving credit facility and letters of credit in an aggregate amount equal to $400 million. The Company can request additional financing 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 Credit Agreement. The Company believes that these sources provide the Company with ample liquidity and capital resources to invest in operational excellence, growth initiatives and the development of the organization.

The Company has been able to weather the economic impacts of the broader market dynamics, including the inflationary cost environment, while continuing to make investments that support the Company's strategy. The Company continues to remain focused on managing its working capital, closely monitoring customer credit and

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collection activities, working with suppliers and challenging business process to optimize investment, and working to extend payment terms with its vendors. The Company believes its liquidity, together with the cash expected to be generated from operations, should be sufficient to fund working capital needs and growth initiatives for the foreseeable future.

The Company can and does use its revolving credit facility to provide liquidity and capital resources primarily for the Company's U.S. operations when necessary. Generally, the Company's foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements. As of December 31, 2023 and 2022, the Company's foreign subsidiaries held $6.9 million and $15.2 million of cash, respectively.

Outstanding balances on the Company's revolving credit facility under the Company's Credit Agreement accrue interest at a rate, at the Company's option, equal to the applicable margin plus (a) a base rate, (b) a daily simple secured overnight financing rate ("SOFR"), (c) a term SOFR rate, or (d) for certain foreign currencies, a foreign currency rate. See Note 9 to the Company's consolidated financial statements in Part II, Item 8, Financial Statements, of this Annual Report on Form 10-K for further information on the Company’s Credit Agreement.

Uses of Cash / Cash Requirements

The Company's material short-term cash requirements primarily include accounts payable, certain employee and retiree benefit-related obligations, operating lease obligations, capital expenditures, and other purchase obligations originating in the normal course of business for inventory purchase orders and contractual service agreements. The Company's principal capital requirements are to fund its operations' working capital and capital improvements, as well as provide capital for acquisitions and to strategically allocate capital through repurchases of Company stock. The Company 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 its business. The Company intends to fund its cash requirements through cash generated from operations and, as necessary, from the availability on its revolving credit facility. See Notes 8, 10, 12, 18 and 20 to the Company's consolidated financial statements in Part II, Item 8, Financial Statements, of this Annual Report on Form 10-K for further detail on the Company's accrued expenses, employee and retiree benefit-related obligations, operating lease obligations and historical capital expenditures.

In May 2022, the Company's Board of Directors authorized a share repurchase program of up to $200 million of the Company's issued and outstanding common stock. The program has a duration of three years, ending May 2, 2025. Repurchases may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other considerations. Any such repurchases may be executed using open market purchases, privately negotiated agreements or other transactions. The repurchase program may be suspended or discontinued at any time at the Company's discretion. As of December 31, 2023, the Company has repurchased 2,518,941 shares for an aggregate price of $111.0 million under this repurchase program, including 521,575 shares repurchased for an aggregate price of $25.2 million during the year ended December 31, 2023.

Over the long-term, the Company expects that future investments, including strategic business opportunities such as acquisitions, may be financed through a number of sources, including internally available cash, availability under the Credit Agreement, new debt financing, the issuance of equity securities, or any combination of the aforementioned. The $10.4 million preliminary purchase price for the acquisition of a privately held Utah-based company was financed primarily through borrowing on the Company's revolving credit facility. All potential acquisitions are evaluated based on the Company's acquisition strategy, which includes the enhancement of the Company's existing products, operations, and/or capabilities, as well as expanding the Company's access to new products, markets, and customers, with the goal of creating compounding and sustainable stockholder value.

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, the Company's future liquidity may be adversely affected. See Item 1A. "Risk Factors - Risks Related to Financing and Accounting Matters - Increases in future levels of leverage and size of debt service obligations could adversely affect the Company's ability to raise additional capital to fund the Company's operations, limit the Company's ability to react to changes in the economy or the Company's industries and prevent the Company from meeting the Company's obligations."

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Cash Flows

The following table sets forth selected cash flow data for the years ended December 31 (in thousands):

Operating Activities

Net cash provided by operating activities for 2023 of $218.5 million consisted of income from continuing operations of $110.5 million, non-cash net charges totaling $67.0 million, which include depreciation, amortization, intangible asset impairment, stock compensation, exit activity costs, provision for deferred income taxes and other non-cash charges, and $41.0 million of cash generated from working capital and other net operating assets largely due to the Company's focus on reducing its investment in inventory to better align with lower sales volumes while still meeting customer demand.

Net cash provided by operating activities for 2022 of $102.7 million consisted of income from continuing operations of $82.4 million, non-cash net charges totaling $58.6 million, which include depreciation, amortization, stock compensation, exit activity costs, provision for deferred income taxes and other non-cash charges, offset by a net investment in working capital and other net assets of $38.3 million. The net investment in working capital was largely the result of the timing and the settlement of payables in 2022 related to inventory received in 2021. Further, offsetting the impact of the decline in payables, the Company also reduced its investment in inventory as supply chain challenges subsided in 2022 and the Company was able to better align inventory levels with lower sales volumes. The decrease in accounts receivable as a result of lower sales volume in the fourth quarter of 2022 compared to the fourth quarter of 2021 also partially offset the investment in working capital.

Investing Activities

Net cash used in investing activities for 2023 of $15.7 million consisted of net cash paid of $10.4 million for the acquisition of a privately held Utah-based company in the third quarter of 2023 and net capital expenditures of $13.9 million offset by net proceeds of $8.0 million from the sale of the Company's Japan-based solar racking business in the Company's Renewables segment in the fourth quarter of 2023 and receipt of the $0.6 million final working capital settlement related to the 2022 acquisition of QAP.

Net cash used in investing activities for 2022 of $71.7 million consisted of net cash paid of $51.6 million for the acquisition of QAP in the third quarter of 2022 and capital expenditures of $20.1 million.

Financing Activities

Net cash used in financing activities for 2023 of $120.3 million consisted of net long-term debt payments of $91.0 million and $29.3 million of common stock repurchases. Net long-term debt payments consisted of $141.0 million in long-term debt payments, offset by $50.0 million in proceeds from borrowing on the Company's long-term debt credit facility. The Company paid $26.0 million in the current year to repurchase of 538,575 shares under the Company's authorized share repurchase program. The remainder of the repurchased common stock of $3.3 million related to the net settlement of tax obligations for participants in the Company's equity incentive plans.

Net cash used in financing activities for 2022 of $25.0 million consisted of $89.5 million of common stock repurchases, $2.0 million payment of debt issuance costs, offset by net proceeds from borrowings of $66.5 million. Repurchases of 1,997,366 shares under the Company's authorized share repurchase program totaled $85.1 million with the balance of $4.4 million of common stock repurchases related to the net settlement of tax obligations for participants in the Company's equity incentive plans. Net proceeds from borrowings consisted of $204.5 million in proceeds from borrowing on the Company's long-term credit facility, offset by $138.0 million in payments on long-term debt.

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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 the most difficult, subjective and complex judgments include:

•revenue recognition on contracts with customers;

•the determination of fair value of assets acquired in significant business combination transactions; 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 with Customers

The vast majority of the Company's sales contracts are for standard products with revenue recognized at the point in time the Company transfers control to the customer. The point in time the Company transfers control is based on when the Company determines the customer has legal title, significant risks and rewards of ownership of the asset, and the Company has a present right to payment for the product. However, revenue representing approximately 35%, 40% and 47% of the Company's 2023, 2022 and 2021 consolidated net sales, respectively, was recognized over time under the cost-to-cost method as the Company satisfied its performance obligations. This method of revenue recognition pertains to activities within the Renewables, Agtech, and Infrastructure 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 involve 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. The Company continuously reviews its estimates and the progress and performance of the performance obligation for substantially all contracts that the Company recognizes 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 the Company's 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.

Accounting for Fair Value of Assets Acquired in a Significant Business Combination

When the Company acquires a business, the Company allocates the purchase price to the assets acquired and liabilities assumed in the transaction at their respective estimated fair values. The Company records any premium over the fair value of net assets acquired as goodwill. Significant judgment is necessary to determine the fair value of the purchase price. The allocation of the purchase price involves judgments and estimates both in characterizing the assets and in determining their fair value. The way the Company characterizes the assets has important

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implications, as long-lived assets with definitive lives, for example, are depreciated or amortized, whereas goodwill is tested annually for impairment, as explained above.

With respect to determining the fair value of assets acquired in a significant business combination, the most subjective estimates involve valuations of long-lived assets, such as identified intangible assets and property, plant, and equipment. The Company uses all available information to make these fair value determinations and engage independent valuation specialists to assist in the fair value determination of the acquired long-lived assets. The fair values of long-lived assets are determined using valuation techniques that use discounted cash flow methods, independent market appraisals, and other acceptable valuation techniques. The significant assumptions used to estimate the value of the intangible assets included discount rates, customer attrition, and certain assumptions that form the basis of the forecasted results (e.g., revenue growth rates and operating profit margin). The significant assumptions related to estimating the fair value of the intangible assets above are forward looking and could be affected by future economic market conditions.

Goodwill and Other Indefinite-lived Intangible Asset Impairment Testing

The Company's goodwill and indefinite-lived intangible asset balances of $513.4 million and $52.3 million, respectively, which in aggregate represent approximately 45% of total assets as of December 31, 2023, are subject to impairment testing. The Company tests 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.

The Company tests goodwill for impairment at the reporting unit level. The Company identifies the Company's reporting units by assessing whether the components of the Company constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components. The Company has seven reporting units, all of which have goodwill. The Company tests its 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.

During interim periods, the Company evaluates the potential for goodwill and indefinite-lived intangible asset 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 the Company's products and services, regulatory and political developments, entity specific factors such as strategy, changes in key personnel, and overall financial performance. Upon completing this assessment, if it is determined that it is more likely than not that the fair value is less than its carrying value, the Company proceeds to a quantitative impairment test. During the interim periods of 2023, the Company 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 as of October 31, during which the Company tests 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 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 assumptions used to determine the fair value of the Company's indefinite-lived intangible assets are consistent with the assumptions employed in the determination of the fair values of the Company's 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.

The annual quantitative impairment tests require 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, estimated royalty rates, 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 Company performs sensitivity analyses 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.

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As a result of the Company's quantitative testing, none of the reporting units as of the Company's testing date had carrying values in excess of their fair values, nor were any of the reporting units "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.

There were no impairment charges against goodwill recorded during the years ended December 31, 2023, 2022, and 2021.

The Company recognized intangible asset impairment charges of $3.8 million during the year ended December 31, 2023 related to indefinite-lived trademark intangible assets due to a rebranding initiative that resulted in the discontinuation of certain indefinite-lived trademarks in the Agtech segment, along with the write-off of amortizing intangibles related to a discontinued product line in the Renewables segment. The Company recognized no impairment charges related to intangible assets during the year ended December 31, 2022. The Company recognized $8.3 million of impairment charges on its indefinite-lived intangible assets during the year ended December 31, 2021 due to a rebranding initiative resulting in the discontinuation of two indefinite-lived trademarks in the Agtech segment.

Recent Accounting Pronouncements

New accounting pronouncements are issued periodically that affect the Company's current and future operations. See Note 1 to the Company's consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information on recent accounting pronouncements in accordance with U.S. generally accepted accounting principles.