What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-27 compared with 2021-08-03 · 123 added, 126 removed, 166 unchanged (60% of the section changed)

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By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.

We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” disclosed in our Annual Report on Form 10-K along with Item 1A of this Form 10-Q.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition, liquidity and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained herein.

In addition, even if our results of operations, financial condition, liquidity, and the development of the industries in which we operate are consistent with the forward-looking statements contained in this quarterly report, those results or developments may not be indicative of results or developments in subsequent periods.

In addition, even if our results of operations, financial condition, liquidity, and the development of the industries in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.

Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements.

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The Company serves customers primarily in North America including renewable energy (solar) developers, home improvement retailers, wholesalers, distributors, institutional and commercial growers of food and plants, and contractors.

As part of our continuing operations at June 30, 2021, we operated 36 facilities, comprised of 26 manufacturing facilities, one distribution center, and nine offices, which are located in 16 states, Canada, China, and Japan.

As part of our continuing operations at September 30, 2021, we operated 36 facilities, comprised of 26 manufacturing facilities, one distribution center, and nine offices, which are located in 16 states, Canada, China, and Japan.

Our operational infrastructure provides the necessary scale to support regional and national customers in each of our markets.

COVID-19 Update

While the Company continues to encounter challenges and uncertainty associated with COVID-19, the pandemic did not have a material adverse effect on our reported results during 2021.

Our top priority continues to be focused on our organization - keeping our team and their families as safe as possible, maintaining the timely and effective functioning of our supply chain operating and providing a high level of responsiveness to customer needs.

Our top priority continues to be focused on our organization - keeping our team and their families as safe as possible, maintaining our supply chain and providing a high level of responsiveness to customer needs.

We continue to proactively execute our pandemic “playbook” in 2021 and make adjustments to our operating protocols as we navigate forward.

The extent to which our operations will be impacted by the outbreak, including but not limited to the current impact of supply chain, transportation and labor challenges, along with new requirements or regulations mandated by government authorities, remains uncertain and challenging to predict, Refer to the Company's Outlook section in this management discussion and analysis for consideration relative to future periods.

Throughout 2021, COVID-19, as well as broader market dynamics this year, have resulted in impacts to our company, including increased material cost inflation, labor availability issues and logistics costs increases.

We have also been impacted from supply constraints for materials and commodities used in our operations.

In certain instances these constraints have resulted in project delays, cost inflation and logistics delays.

We are partnering with our customers to better align pricing in this dynamic environment.

We are also working with our suppliers to understand the existing and potential future impacts to our supply chain and are taking actions in an effort to mitigate such impacts, however, we expect these supply chain and labor availability pressures along with the impact of material cost, labor and logistics inflation will continue into the fourth quarter of 2021.

Refer to the Company's Outlook section in this management discussion and analysis for consideration relative to future periods.

Business Strategy

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We believe doing so helps us attract and retain the best people so we can execute our business plans.

We believe the key elements of our strategy have, and will continue to, enable us to respond timely to changes in the end markets we serve, including evolving changes due to COVID-19 and the challenges noted above.

We believe the key elements of our strategy have, and will continue to, enable us to respond timely to changes in the end markets we serve, including evolving changes due to COVID-19.

We have and expect to continue to examine the need for restructuring of our operations, including consolidation of facilities, reducing overhead costs, curtailing investments in inventory, and managing our business to generate incremental cash.

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Except for TerraSmart, which was financed through a combination of cash on hand and borrowings under the Company's revolving credit facility, all of the above 2020 acquisitions were funded from cash on hand.

The purchase price for the acquisitions of TerraSmart, Sunfig, and Architectural Mailboxes represents the preliminary allocation to the assets acquired and liabilities assumed in each transaction.

The purchase price shown above for Delta and Thermo represents the final purchase price in each transaction.

The purchase price for the acquisition of TerraSmart represents the preliminary allocation to the assets acquired and liabilities assumed.

The purchase price shown above for Sunfig, Architectural Mailboxes, Delta Separations and Thermo represents the final purchase price in each transaction.

Results of Operations

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

The following table sets forth selected results of operations data and its percentage of net sales for the three months ended June 30 (in thousands):

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

The following table sets forth selected results of operations data and its percentage of net sales for the three months ended September 30 (in thousands):

Net sales $ 369,353 100.0 % $ 296,792 100.0 %

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Interest expense 491 0.2 % 217 0.1 %

Other income (4,666) (1.3) % (1,892) (0.7) %

Other expense (income) 72 0.0 % (48) 0.0 %

Income before taxes 37,415 10.1 % 40,774 13.7 %

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Net income $ 27,556 7.5 % $ 33,760 11.4 %

The following table sets forth the Company’s net sales by reportable segment for the three months ended June 30, (in thousands):

The following table sets forth the Company’s net sales by reportable segment for the three months ended September 30, (in thousands):

Change due to

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Consolidated $ 369,353 $ 296,792 $ 72,561 $ 61,157 $ 11,404

Consolidated net sales increased by $93.2 million, or 36.5%, to $348.4 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Consolidated net sales increased by $72.6 million, or 24.5%, to $369.4 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The 24.5% increase in revenue was driven by the Renewables and Residential segments.

Sales generated from our prior year acquisitions of TerraSmart and Architectural Mailboxes contributed 20.6%, or $61.2 million to the growth from the prior year quarter.

The $35.7 million, or 14.0% increase in organic growth during the current year quarter was driven by volume increases across all of our segments, the result of strong end market demand and participation gains, along with increases in pricing to customers.

Consolidated backlog increased 54% to $403 million up from $262 million at the end of the prior year quarter.

Net sales in our Renewables segment increased $51.8 million, or 92.5%, to $107.8 million for the three months ended June 30, 2021 compared to $56.0 million for the three months ended June 30, 2020.

The $11.4 million, or 3.9% increase in organic growth during the current year quarter was driven by increases in pricing to customers, along with strong end market demand and participation gains primarily in our Residential segment.

Consolidated backlog increased 32% to $385 million up from $291 million at the end of the prior year quarter, or on a proforma basis, which includes the impact of prior year acquisitions, increased by 10%.

Net sales in our Renewables segment increased $59.9 million, or 85.5%, to $130.2 million for the three months ended September 30, 2021 compared to $70.2 million for the three months ended September 30, 2020.

Sales generated from the prior year acquisition of TerraSmart of $54.6 million primarily contributed to the increase in the current year quarter.

Organic revenue increased 3.5% during the quarter driven by strong demand across our broad offering of fixed tilt, tracker, canopy and electrical balance-of-system product solutions serving the community and commercial and industrial market segments.

This growth was partially offset by headwinds impacting the solar industry including steel inflation, supply chain challenges with solar panels, as well as, a decline in safe-harbor related demand due to the extension of the investment tax credit in late 2020.

Organic revenue increased 7.7% during the quarter led by continued demand across our broad offering of fixed tilt, tracker, canopy and electrical balance-of-system product solutions serving the community and commercial and industrial market segments.

This growth was partially offset by headwinds impacting the solar industry including regulatory changes resulting in supply chain challenges with solar panels, inflation, and project timing delays.

Backlog improved 80% year over year, or 15% on a proforma basis for this segment.

Net sales in our Residential segment increased 17.7%, or $24.7 million, to $164.2 million for the three months ended June 30, 2021 compared to $139.5 million for the three months ended June 30, 2020.

The increase from the prior year quarter was largely due to continued strong activity across all residential businesses along with increased pricing that offset challenges from supply chain dynamics related to material, labor and logistics availability.

Net sales in our Residential segment increased 13.1%, or $19.8 million, to $171.5 million for the three months ended September 30, 2021 compared to $151.7 million for the three months ended September 30, 2020.

The increase from the prior year quarter was driven by additional price actions, recent weather-related repair demand, and participation gains that offset challenges from supply chain dynamics related to material, labor and logistics availability.

Sales from the prior year acquisition of Architectural Mailboxes also contributed $6.6 million to the increase in the current year quarter.

Net sales in our Agtech segment increased 27.0%, or $11.4 million, to $53.7 million for the three months ended June 30, 2021 compared to $42.3 million for the three months ended June 30, 2020.

The revenue increase was led by solid demand across the produce, commercial, car wash, retail and processing equipment segments, despite the shift in timing of projects from the second quarter into future quarters as schedules have been impacted by permit delays, re-scoping of projects and supply chain disruptions.

While backlog experienced a slight and temporary decrease of 7% year over year, due to the impact of re-scoping of projects and supply chain disruptions impacting project scheduling, subsequent order activity is accelerating backlog momentum.

Net sales in our Infrastructure segment increased 29.7%, or $5.3 million, to $22.7 million for the three months ended June 30, 2021 compared to $17.5 million for the three months ended June 30, 2020.

During the current year quarter, demand for fabricated and non-fabricated products from this segment increased as state project funding improved and the domestic economy strengthened.

Backlog remained strong increasing 11% compared to the prior year quarter.

Our consolidated gross margin decreased to 23.2% for the three months ended June 30, 2021 compared to 25.7% for the three months ended June 30, 2020.

The decrease was the result of lower gross margins generated from our recent acquisitions as we continue to integrate them operationally, along with timing and alignment of higher input costs to price increases, supply chain disruptions, and shifts in project timing in the Agtech and Renewables segments.

Partially offsetting the decrease was improved operating execution in our core businesses compared to the prior year quarter.

Selling, general, and administrative ("SG&A") expenses increased by $14.7 million, or 42.3%, to $49.5 million for the three months ended June 30, 2021 from $34.8 million for the three months ended June 30, 2020.

The $14.7 million increase was primarily due to $6.3 million of incremental SG&A expenses recorded quarter over quarter from our recent acquisitions and transaction costs to complete those acquisitions, along with $1.3 million of higher performance-based compensation expenses as compared to the prior year quarter.

Additionally, we have invested in the development of our organization and safety of our team through actions including but not limited to the expansion of headcount in key positions and the launch of other improvement initiatives.

Furthermore, healthcare costs increased year over year as prior year spend was down due to COVID-related closures of medical facilities, while the current year quarter spend was impacted by deferred treatments due to those closures.

SG&A expenses as a percentage of net sales increased to 14.2% for the three months ended June 30, 2021 compared to 13.7% for the three months ended June 30, 2020.

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 three months ended June 30, (in thousands):

Net sales in our Agtech segment decreased 15.5%, or $9.0 million, to $49.0 million for the three months ended September 30, 2021 compared to $58.0 million for the three months ended September 30, 2020.

The revenue decrease was a result of projects delays in our produce and cannabis businesses due to supply chain disruptions along with state licensing and permit delays.

Despite these headwinds, the commercial greenhouse business remained steady.

While backlog experienced a slight decrease of 4% year over year, due to the impact of the aforementioned headwinds, the pipeline of expected new orders remains strong and is expected to support momentum into the fourth quarter and 2022.

Net sales in our Infrastructure segment increased 11.3%, or $1.9 million, to $18.7 million for the three months ended September 30, 2021 compared to $16.8 million for the three months ended September 30, 2020.

During the current quarter, demand for fabricated and non-fabricated products from this segment increased as state project funding improved driven by overall economic recovery despite raw material supply constraints caused by weather related damage to the industry’s key suppliers.

Backlog increased by 29% compared to the prior year quarter.

Our consolidated gross margin decreased to 22.5% for the three months ended September 30, 2021 compared to 26.4% for the three months ended September 30, 2020.

The decrease was the result of lower gross margins generated from our recent acquisitions as we continue to integrate them operationally and includes the impact of backlog amortization and integration costs.

Timing and alignment of higher input costs to price increases, supply chain disruptions for materials, labor and transportation, and shifts in project timing in the Agtech and Renewables segments also contributed to the decrease.

Partially offsetting the decrease was improved operating execution compared to the prior year quarter.

Selling, general, and administrative ("SG&A") expenses increased by $7.7 million, or 20.6%, to $45.3 million for the three months ended September 30, 2021 from $37.6 million for the three months ended September 30, 2020.

The $7.7 million increase was primarily due to $6.3 million of incremental SG&A expenses recorded quarter over quarter from our recent acquisitions and transaction costs to complete those acquisitions.

We have also invested in the development of our organization and safety of our team through actions including but not limited to the expansion of headcount in key positions and the launch of other improvement initiatives.

In addition, healthcare costs increased year over year as prior year spend was down due to COVID-related closures of medical facilities, while the current year quarter spend was impacted by deferred treatments due to those closures.

Offsetting the above cost increases was $2.4 million of lower performance-based compensation expenses as compared to the prior year quarter Despite the above net increase, SG&A expenses as a percentage of net sales decreased to 12.2% for the three months ended September 30, 2021 compared to 12.6% for the three months ended September 30, 2020.

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 three months ended September 30, (in thousands):

2021 2020 Total

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The decrease in operating margin was partly due to the expected lower margins generated by our recent acquisitions, the result of backlog amortization and integration costs, as we continue to integrate these businesses operationally.

Additionally contributing to the decrease, was a one-time tariff credit received in the prior year quarter along with the impact of timing and alignment of price to input costs and project movement associated

with supply chain challenges.

Partially offsetting the lower margin is improvement in our core business resulting from 80/20 productivity initiatives.

TerraSmart's operating margin nearly doubled over the first quarter and remains on track relative to our full year integration plans.

Additionally contributing to the decrease, was the impact of project timing associated with

supply chain challenges.

Partially offsetting the lower margin was improved margin in our legacy business which continues to benefit from 80/20 productivity initiatives.

The Residential segment generated an operating margin of 17.2% in the current year quarter compared to 21.4% in the prior year quarter.

The decrease in operating margin was the result of accelerated inflation, material and labor availability and the timing and alignment of price actions and input costs.

While multiple price increases have been implemented, historically, operating margin alignment lags and recovers within a one to two quarter period.

Partially offsetting the lower margin is continued solid execution and continued benefits from 80/20 simplification initiatives.

Our Agtech segment generated an operating margin of 1.8% during both the three months ended June 30, 2021 and 2020, respectively.

Operating margin was flat due to the combined results of improvements in the legacy greenhouse structures, cannabis greenhouse structures, and processing equipment businesses along with lower restructuring and acquisition costs incurred as compared to the prior year quarter.

These improvements were essentially offset by abovementioned movement of certain projects into the second half of the year, higher input costs, and supply chain and logistics challenges incurred in the current year quarter.

Our Infrastructure segment generated an operating margin of 18.4% during the three months ended June 30, 2021 compared to 16.0% during the three months ended June 30, 2020.

The increase was driven by higher margin mix resulting from increased non-fabricated product volumes, along with strong execution on higher volumes and continued investment in 80/20 productivity initiatives.

Unallocated corporate expenses increased $1.2 million from $9.2 million during the three months ended June 30, 2020 to $10.4 million during the three months ended June 30, 2021.

The increase in expense was primarily the result of $1.1 million of higher performance-based compensation expenses as compared to the prior year quarter.

Interest expense was $0.2 million for both the three months ended June 30, 2021 and 2020, respectively.

Expense in the current year quarter was the net result of $32.3 million in the outstanding balance on the Company's revolving credit facility as of June 30, 2021, partially offset by interest income.

No amounts were outstanding under our revolving credit facility during the three months ended June 30, 2020.

The Company recorded other income of $4.7 million for the three months ended June 30, 2021, compared to $1.9 million recorded for the three months ended June 30, 2020.

The $2.8 million increase from the prior year quarter was largely the result of a $4.7 million gain recognized on the sale of securities received from the sellers of Thermo Energy Systems, Inc.

("Thermo") to settle indemnification claims, partially offset by a $1.9 million pre-tax gain in the prior year quarter on the sale of the Company's self-guided apartment tour application business within the Residential segment.

We recognized a provision for income taxes of $9.5 million and $8.0 million, with effective tax rates of 26.4% and 24.6% for the three months ended June 30, 2021, and 2020, respectively.

The effective tax rates for the three months ended June 30, 2021 and 2020, respectively, were greater than the U.S.

While multiple price increases have been implemented, historically, operating margin alignment lags and recovers when price inflation moderates.

Partially offsetting the lower margin are continued benefits from 80/20 simplification initiatives.

Our Agtech segment generated an operating margin of 4.5% in the current year quarter compared to 8.8% in the prior year quarter.

Operating margin decreased primarily due to higher input costs, supply chain and logistical challenges incurred in the current year quarter, along with the impact of delays in project schedules.

Partially offsetting this decrease were lower restructuring and acquisition costs incurred as compared to the prior year quarter.

Our Infrastructure segment generated an operating margin of 8.8% during the three months ended September 30, 2021 compared to 13.6% during the three months ended September 30, 2020.

The decrease was due to an unfavorable product margin mix resulting from decreased non-fabricated product volumes, along with supply chain challenges, production inefficiencies and an unfavorable alignment of material costs to customer selling prices.

Unallocated corporate expenses decreased $0.4 million from $8.0 million during the three months ended September 30, 2020 to $7.6 million during the three months ended September 30, 2021.

The decrease in expense was primarily the result of $2.2 million of lower performance-based compensation expenses as compared to the prior year quarter, partially offset by healthcare costs which increased year over year as prior year spend was down due to COVID-related closures of medical facilities, while the current year spend was impacted by deferred treatments due to those closures.

Interest expense was $0.5 million for the three months ended September 30, 2021 and $0.2 million for the three months ended September 30, 2020, respectively.

Expense in the current year quarter was the result of $59.7 million in the outstanding balance on the Company's revolving credit facility as of September 30, 2021.

No amounts were outstanding under our revolving credit facility during the three months ended September 30, 2020.

We recognized a provision for income taxes of $9.6 million and $9.4 million, with effective tax rates of 25.6% and 23.2% for the three months ended September 30, 2021, and 2020, respectively.

The effective tax rates for the three months ended September 30, 2021 and 2020, respectively, were greater than 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.

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

The following table sets forth selected results of operations data and its percentage of net sales for the six months ended June 30 (in thousands):

Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

The following table sets forth selected results of operations data and its percentage of net sales for the nine months ended September 30 (in thousands):

Net sales $ 1,005,334 100.0 % $ 767,377 100.0 %

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Net income $ 66,267 6.6 % $ 73,111 9.5 %

The following table sets forth the Company’s net sales by reportable segment for the six months ended June 30, (in thousands):

The following table sets forth the Company’s net sales by reportable segment for the nine months ended September 30, (in thousands):

Change due to

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Consolidated $ 1,005,334 $ 767,377 $ 237,957 $ 169,277 $ 68,680

Consolidated net sales increased by $165.4 million, or 35.1%, to $636.0 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Consolidated net sales increased by $238.0 million, or 31.0%, to $1.0 billion for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The 31.0% increase in revenue was driven by the Renewables and Residential segments.

Sales generated from our prior year acquisitions of TerraSmart, Thermo, Delta Separations and Architectural Mailboxes contributed 22.1%, or $169.3 million to the growth from the prior year.

The $57.3 million, or 12.1% increase, in organic growth during the current year was primarily the result of an increase in volume across all of our segments, the result of strong end market demand and participation gains, along with increases in pricing to customers.

Consolidated backlog increased 54% to $403 million up from $262 million at the end of the prior year period.

Net sales in our Renewables segment increased $90.1 million, or 87.3%, to $193.3 million for the six months ended June 30, 2021 compared to $103.2 million for the six months ended June 30, 2020.

Sales generated from the prior year acquisition of TerraSmart of $87.1 million, primarily contributed to the increase in the current year.

The $68.7 million, or 8.9% increase, in organic growth during the current year was the result of both increases in pricing to customers and an increase in volume, the result of strong end market demand and participation gains primarily in our Residential segment.

Consolidated backlog increased 32% to $385 million up from $291 million at the end of the prior year period, or 10% on a proforma basis.

Net sales in our Renewables segment increased $150.0 million, or 86.4%, to $323.4 million for the nine months ended September 30, 2021 compared to $173.5 million for the nine months ended September 30, 2020.

Sales generated from the prior year acquisition of TerraSmart of $141.6 million primarily contributed to the increase in the current year period.

Organic revenue increased 4.8% during the current year driven by strong demand across our broad offering of fixed tilt, tracker, canopy and electrical balance-of-system product solutions serving the community and commercial and industrial market segments.

This growth was partially offset by projects impacted by headwinds impacting the solar industry including steel inflation, supply chain challenges with solar panels, as well as, a decline in safe-harbor related demand due to the extension of the investment tax credit in late 2020.

This growth was partially offset by projects impacted by headwinds impacting the solar industry including steel inflation, supply chain challenges with solar panels, as well as, a decline in demand due to the extension of the solar investment tax credit in late 2020.

Backlog improved 80% year over year, or 15% on a proforma basis for this segment.

Net sales in our Residential segment increased 25.3%, or $61.5 million, to $304.4 million for the six months ended June 30, 2021 compared to $242.9 million for the six months ended June 30, 2020.

The increase from the prior year was largely due to continued strong demand across all residential businesses along with increased pricing and participation gains across that offset challenges from supply chain dynamics.

Net sales in our Residential segment increased 20.6%, or $81.4 million, to $476.0 million for the nine months ended September 30, 2021 compared to $394.6 million for the nine months ended September 30, 2020.

The increase from the prior year was due to continued pricing actions resulting from inflation along with strong demand and participation gains across that offset challenges from supply chain dynamics.

Sales from the prior year acquisition of Architectural Mailboxes also contributed $23.0 million to the increase in the current year.

Net sales in our Agtech segment increased 9.7%, or $8.9 million, to $100.4 million for the six months ended June 30, 2021 compared to $91.5 million for the six months ended June 30, 2020.

Sales generated from Thermo and Delta Separations acquired in the first quarter of 2020, contributed $4.6 million, to the increase in this segment.

Organic revenue increased $4.3 million, largely driven by growth in the produce market along with slower but improving market conditions for commercial, car wash, retail and processing equipment segments.

Partially offsetting the segment increase was the shift in timing of projects from the current period into the second half of the year as schedules have been impacted by permit delays, re-scoping of projects and supply chain disruptions.

Net sales in our Infrastructure segment increased 14.9%, or $4.9 million, to $37.9 million for the six months ended June 30, 2021 compared to $32.9 million for the six months ended June 30, 2020.

Net sales in our Agtech segment decreased 0.1%, or $0.1 million, to $149.4 million for the nine months ended September 30, 2021 compared to $149.6 million for the nine months ended September 30, 2020.

Sales generated from Thermo and Delta Separations acquired in the first quarter of 2020, contributed $4.6 million, were more than

offset by a decline in organic revenue which decreased by $4.7 million.

The decline was the result of projects delays in our commercial greenhouse and cannabis businesses due to supply chain disruptions along with state licensing and permit delays.

While backlog experienced a slight and temporary decrease of 4% year over year, due to the impact of the aforementioned headwinds, the pipeline of expected new orders remains strong and is expected to support momentum into the fourth quarter and 2022.

Net sales in our Infrastructure segment increased 13.5%, or $6.8 million, to $56.5 million for the nine months ended September 30, 2021 compared to $49.8 million for the nine months ended September 30, 2020.

During the current year, demand for fabricated and non-fabricated products from this segment increased as the economy strengthened and state project funding improved.

Backlog remained strong increasing 29% compared to the prior year.

Our consolidated gross margin decreased to 22.2% for the six months ended June 30, 2021 compared to 24.5% for the six months ended June 30, 2020.

Our consolidated gross margin decreased to 22.3% for the nine months ended September 30, 2021 compared to 25.3% for the nine months ended September 30, 2020.

This decrease was the result of costs incurred during the current year related to the planned discontinuation of our organic solar tracker solution as we migrate towards the solution offered by our recently acquired TerraSmart business.

Additionally, lower gross margins generated from our recent acquisitions contributed to the decline as we continue to integrate them operationally along with timing and alignment of higher input costs to price increases, supply chain disruptions, and shifts in project timing in the Agtech and Renewables segments.

Partially offsetting the decrease was improved operating execution in all our core businesses compared to the prior year.

Selling, general, and administrative ("SG&A") expenses increased by $24.8 million, or 34.5%, to $96.7 million for the six months ended June 30, 2021 from $71.9 million for the six months ended June 30, 2020.

Additionally, lower gross margins generated from our recent acquisitions, which includes the impact of backlog amortization and integration costs, contributed to the decline as we continue to integrate them operationally along with timing and alignment of higher input costs to price increases, supply chain disruptions, and shifts in project timing in the Agtech and Renewables segments.

Partially offsetting the decrease was improved operating execution compared to the prior year.

Selling, general, and administrative ("SG&A") expenses increased by $32.6 million, or 29.7%, to $142.0 million for the nine months ended September 30, 2021 from $109.4 million for the nine months ended September 30, 2020.

The $32.6 million increase was primarily due to $19.2 million of incremental SG&A expenses recorded year over year from our recent acquisitions and transaction costs to complete those acquisitions, along with $2.3 million of higher performance-based compensation expenses as compared to the prior year.

1 unchanged sentence

Furthermore, healthcare costs increased year over year as prior year spend was down due to COVID-related closures of medical facilities, while the current year spend was impacted by deferred treatments due to those closures.

Despite the above increases, SG&A expenses as a percentage of net sales modestly decreased to 15.2% for the six months ended June 30, 2021 compared to 15.3% for the six months ended June 30, 2020.

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 six months ended June 30, (in thousands):

Despite the above increases, SG&A expenses as a percentage of net sales modestly decreased to 14.1% for the nine months ended September 30, 2021 compared to 14.3% for the nine months ended September 30, 2020.

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 nine months ended September 30, (in thousands):

2021 2020 Total

6 unchanged sentences

Consolidated income from operations $ 82,202 8.2 % $ 84,468 11.0 % $ (2,266)

The Renewables segment generated an operating margin of 4.7% in the current year compared to 12.4% in the prior year.

The Renewables segment generated an operating margin of 6.6% in the current year period compared to 12.6% in the prior year period.

The decrease in operating margin was the combined result of costs incurred during the current year related to the discontinuation of our organic solar tracker solution along with expected lower margins generated by our recent acquisitions, the result of backlog amortization and integration costs, as we continue to integrate them operationally.

Additionally contributing to the decrease, was a one-time tariff credit received in the prior year along with the impact of timing and alignment of price to input costs and project movement associated with supply chain challenges.

Partially offsetting the lower margin is improvement in our core business resulting from 80/20 productivity initiatives.

TerraSmart's operating margin continues to improve in the first half of 2021 and remains on track relative to our full year integration plans.

The Residential segment generated an operating margin of 16.5% in the current year compared to 17.2% in the prior year.

The decrease in operating margin was the result of accelerated inflation, material and labor availability

and the timing and alignment of price actions and input costs.

While multiple price increases have been implemented, historically, operating margin alignment lags and recovers within a one to two quarter period.

Partially offsetting the lower margin is continued solid execution and continued benefits from 80/20 simplification initiatives.

Our Agtech segment generated an operating margin of 1.9% during the six months ended June 30, 2021 compared to 2.3% during the six months ended June 30, 2020.

The decrease in operating margin was the combined result of the abovementioned movement of certain projects into the second half of the year, higher input costs and supply chain and logistics challenges incurred in the current year along with integration delays incurred by Thermo during the earlier months of 2021.

Partially offsetting the lower margin was improvements in the legacy greenhouse structures, cannabis greenhouse structures, and processing equipment businesses along with lower restructuring and acquisition costs incurred as compared to the prior year period.

Our Infrastructure segment generated an operating margin of 16.4% during the six months ended June 30, 2021 compared to 13.3% during the six months ended June 30, 2020.

The increase was driven by higher margin mix resulting from increased non-fabricated product volumes, along with strong execution on higher volumes and higher revenue and continued investment in 80/20 productivity initiatives.

Unallocated corporate expenses increased $5.6 million from $17.4 million during the six months ended June 30, 2020 to $23.0 million during the six months ended June 30, 2021.

The increase in expense was primarily the result of $4.2 million of higher performance-based compensation expenses as compared to the prior year.

Interest expense increased by $0.4 million to $0.7 million for the six months ended June 30, 2021 compared to $0.3 million for the six months ended June 30, 2020.

The increase in expense was primarily the result of $32.3 million in the outstanding balance on the Company's revolving credit facility as of June 30, 2021.

No amounts were outstanding under our revolving credit facility during the six months ended June 30, 2020.

The Company recorded other income of $4.4 million for the six months ended June 30, 2021 compared to the $1.4 million recorded for the six months ended June 30, 2020.

The $3.0 million increase from the prior year was largely the result of a $4.7 million gain recognized on the sale of securities received from the sellers of Thermo to settle indemnification claims, partially offset by the prior year period $1.9 million pre-tax gain on the sale of the Company's self-guided apartment tour application business within the Residential segment.

We recognized a provision for income taxes of $11.0 million and $10.3 million, with effective tax rates of 23.0% for both the six months ended June 30, 2021, and 2020, respectively.

The effective tax rates for the six months ended June 30, 2021 and 2020, respectively, were greater than the U.S.

Additionally contributing to the decrease, was the impact of timing and alignment of price to input costs and project timing associated with supply chain challenges.

Partially offsetting the lower margin is improvement resulting from 80/20 productivity initiatives.

The Residential segment generated an operating margin of 16.7% in the current year period compared to 18.8% in the prior year period.

The decrease in operating margin was the result of accelerated inflation, material and labor availability and the timing and alignment of price actions and input costs.

While multiple price increases have been

implemented, historically, operating margin alignment lags and recovers within a one to two quarter period.

Partially offsetting the lower margin is continued solid execution resulting from 80/20 productivity initiatives.

Our Agtech segment generated an operating margin of 2.8% during the nine months ended September 30, 2021 compared to 4.8% during the nine months ended September 30, 2020.

The decrease in operating margin was the combined result of the impact of delays in project schedules, higher input costs, supply chain and logistics challenges incurred in the current year period.

Partially offsetting the margin decline was lower restructuring and acquisition costs incurred as compared to the prior year period.

Our Infrastructure segment generated an operating margin of 13.9% during the nine months ended September 30, 2021 compared to 13.4% during the nine months ended September 30, 2020.

The increase was driven by higher margin mix, and continued investment in 80/20 productivity initiatives, partially offset by unfavorable alignment of pricing to material costs.

Unallocated corporate expenses increased $5.1 million from $25.4 million during the nine months ended September 30, 2020 to $30.6 million during the nine months ended September 30, 2021.

The increase in expense was primarily the result of $2.0 million of higher performance-based compensation expenses as compared to the prior year, along with an increase in healthcare costs as prior year spend was down due to COVID-related closures of medical facilities, while the current year spend was impacted by deferred treatments due to those closures.

Interest expense increased by $0.7 million to $1.2 million for the nine months ended September 30, 2021 compared to $0.5 million for the nine months ended September 30, 2020.

The increase in expense was primarily the result of our $59.7 million outstanding balance on the Company's revolving credit facility as of September 30, 2021.

No amounts were outstanding under our revolving credit facility as of or during the nine months ended September 30, 2020.

The Company recorded other income of $4.3 million for the nine months ended September 30, 2021 compared to the $1.4 million recorded for the nine months ended September 30, 2020.

The $2.9 million increase from the prior year was largely the result of a $4.7 million gain recognized on the sale of securities received from the sellers of Thermo to settle indemnification claims, while the prior year period reflected a $1.9 million pre-tax gain on the sale of the Company's self-guided apartment tour application business within the Residential segment.

We recognized a provision for income taxes of $20.6 million and $19.7 million, with effective tax rates of 24.1% and 23.1% for the nine months ended September 30, 2021, and 2020, respectively.

The effective tax rates for the nine months ended September 30, 2021 and 2020, respectively, were greater than 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.

The Company expects that the current business environment, which has been dynamic since the beginning of the year, to remain so throughout the second half of 2021, and will continue to manage inflation, minimize supply chain disruptions, operate in a tight labor market, and continue with its COVID operating protocols.

The Company is currently positioned well with solid end market demand, record order backlog, a very healthy balance sheet, and strong focus on daily execution, acquisition integrations, and strengthening its organization and operating systems.

As such, the Company is maintaining its full year guidance of revenues based on its performance to date in 2021, which is consistent with its historical patterns, and outlook and initiatives for improving profitability across each business Consolidated revenue is expected to range between $1.30 billion and $1.35 billion, up from $1.03 billion in 2020 and GAAP EPS from continuing operations between $2.78 and $2.95, compared with $2.53 in 2020.

Given year-to-date results and the ongoing dynamics surrounding today’s business environment, the Company is adjusting its full year guidance as follows, consolidated revenue is expected to range between $1.31 billion and $1.35 billion and GAAP EPS from continuing operations is expected to range from $2.45 and $2.56 compared to $2.53 in 2020.

With these adjustments, the Company anticipates full year revenue growth in the range of 27% - 31%.

The new EPS range assumes today’s current cost environment and supply chain disruption (material, labor, transportation) remain elevated throughout the fourth quarter as well as incremental costs and potential labor and productivity impacts associated with administering upcoming COVID mandates.

GAAP EPS from continuing operations from continuing operations for the fourth quarter is expected to range between $0.48 and $0.60, compared to $0.53, in fourth quarter 2020.

Liquidity and Capital Resources

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The following table sets forth our liquidity position as of:

(in thousands) June 30, 2021 December 31, 2020

(in thousands) September 30, 2021 December 31, 2020

Cash and cash equivalents $ 13,934 $ 32,054

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We continue to remain focused on managing our working capital, closely monitoring customer credit and collection activities, and working to extend payment terms.

We believe our liquidity, together with the cash expected to be generated from operations, should be sufficient to fund working capital needs and growth initiatives.

We believe our 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.

Our Senior Credit Agreement provides us with liquidity and capital resources for use by our U.S.

Historically, our foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements.

As of June 30, 2021, our foreign subsidiaries held $14.9 million of cash in U.S.

As of September 30, 2021, our foreign subsidiaries held $8.9 million of cash.

During 2020, we opted to defer remittance of the employer portion of Social Security tax as provided in the Coronavirus, Aid, Relief and Economic Security Act ("CARES Act"), which allowed us to retain $4.4 million in cash during 2020 that would have otherwise been remitted to the federal government.

The deferred tax payments will be repaid equally on December 31, 2021 and 2022.

Over the long-term, we expect that future investments, including strategic business opportunities such as acquisitions, may be financed through a number of sources, including internally available cash, availability under our revolving credit facility, new debt financing, the issuance of equity securities, or any combination of the above.

Over the long-term, we expect that future investments, including strategic business opportunities such as acquisitions, may be financed through a number of sources, including internally available cash, availability under our Senior Credit Agreement, new debt financing, the issuance of equity securities, or any combination of the above.

All potential acquisitions are evaluated based on our acquisition strategy, which includes the enhancement of our existing products, operations, or capabilities, expanding our access to new products, markets, and customers, with the goal of creating compounding and sustainable stockholder value.

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To the extent that operating cash flows are lower than current or expected levels, or sources of financing are not available or not available at acceptable terms, our future liquidity may be adversely affected.

The following table sets forth selected cash flow data for the six months ended June 30, (in thousands):

Cash provided by (used in):

The following table sets forth selected cash flow data for the nine months ended September 30, (in thousands):

Cash (used in) provided by:

Operating activities of continuing operations $ (14,523) $ 45,316

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Operating Activities

Net cash provided by operating activities of continuing operations for the six months ended June 30, 2021 of $12.8 million consisted of income from continuing operations of $36.9 million and non-cash net charges totaling $22.4

million, which include depreciation, amortization, stock compensation, exit activity costs and other non-cash charges, offset by a $46.5 million investment in working capital and other net assets.

The investment in net working capital and other net assets was largely driven by an increase in inventory due to rising material costs and accounts receivable due to seasonal increases in demand, offset by an increase in accounts payable as the result of seasonal increases in manufacturing activity.

Net cash used in operating activities of continuing operations for the six months ended June 30, 2020 of $11.0 million consisted of net income of $34.4 million and non-cash net charges totaling $12.8 million, which include depreciation, amortization, stock compensation, and other non-cash charges, more than offset by a $58.1 million investment in working capital and other net assets.

Net cash used in operating activities of continuing operations for the nine months ended September 30, 2021 of $14.5 million consisted of income from continuing operations of $64.7 million and non-cash net charges totaling $32.6 million, which include depreciation, amortization, stock compensation, exit activity costs and other non-cash charges, offset by a $111.8 million investment in working capital and other net assets.

The investment in net working capital and other net assets was largely driven by an increase in inventory due to both rising material costs and provisioning for potential supply chain disruptions along with accounts receivable due to seasonal increases in demand, offset by an increase in accounts payable as the result of seasonal increases in manufacturing activity.

Net cash provided by operating activities of continuing operations for the nine months ended September 30, 2020 of $45.3 million consisted of net income of $65.7 million and non-cash net charges totaling $22.0 million, which include depreciation, amortization, stock compensation, and other non-cash charges, partially offset by a $42.4 million investment in working capital and other net assets.

The working capital investment was largely comprised of $42.4 million related to our acquisition of Thermo, which was undercapitalized at time of purchase in the first quarter of 2020.

Investing Activities

Net cash provided by investing activities of continuing operations for the six months ended June 30, 2021 of $30.5 million was primarily due to $40.0 million in net proceeds received from the sale of the Company's Industrial business, offset by capital expenditures of $9.5 million.

Net cash used in investing activities of continuing operations for the six months ended June 30, 2020 of $57.8 million primarily consisted of net cash paid for the acquisitions of Delta Separations of $47.1 million and Thermo of $7.3 million and capital expenditures of $4.2 million, offset by $0.8 million in proceeds from the sale of a business within the Residential Products segment and the sale of property and equipment.

Net cash provided by investing activities of continuing operations for the nine months ended September 30, 2021 of $29.0 million was primarily due to $38.1 million in net proceeds received from the sale of the Company's Industrial business and receipt of the $4.1 million final working capital settlement resulting from the prior year acquisition of TerraSmart, offset by capital expenditures of $13.3 million.

Net cash used in investing activities of continuing operations for the nine months ended September 30, 2020 of $60.2 million primarily consisted of net cash paid for the acquisitions of Delta Separations of $47.1 million and Thermo of $7.3 million and capital expenditures of $7.9 million, offset by $2.1 million in proceeds from the sale of a business within the Residential Products segment and the sale of property and equipment.

Financing Activities

Net cash used in financing activities of continuing operations for the six months ended June 30, 2021 of $56.3 million was primarily the result of $83.6 million in payments on long-term debt and $4.8 million of purchases of treasury stock related to the net settlement of tax obligations for participants in the Company's equity incentive plans, offset by $31.2 million in proceeds from borrowing on our long-term credit facility and $0.9 million from the issuance of common stock from stock option exercises during the period.

Net cash used in financing activities of continuing operations for the six months ended June 30, 2020 of $4.4 million was primarily the result of purchases of treasury stock related to the net settlement of tax obligations for participants in the Company's equity incentive plans.

See Note 8 to the Company's consolidated financial statements in Part I, Item 1, Financial Statements, of this Form 10-Q for further information on the Company’s Senior Credit Agreement .

Net cash used in financing activities of continuing operations for the nine months ended September 30, 2021 of $30.3 million was primarily the result of $83.6 million in payments on long-term debt and $6.2 million of common stock repurchases related to the net settlement of tax obligations for participants in the Company's equity incentive plans, offset by $58.5 million in proceeds from borrowing on our long-term credit facility and $1.0 million from the issuance of common stock from stock option exercises during the period.

Net cash used in financing activities of continuing operations for the nine months ended September 30, 2020 of $6.0 million was primarily the result of $6.4 million in common stock repurchases related to the net settlement of tax obligations for participants in the Company's equity incentive plans partially offset by $0.4 million from the issuance of common stock from stock option exercises during the period.

See Note 8 to the Company's consolidated financial statements in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for further information on the Company’s Senior Credit Agreement .

Off Balance Sheet Financing Arrangements

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Recent Accounting Pronouncements

See Note 2 to the Company's consolidated financial statements in Part I, Item 1 of this Form 10-Q for further information on recent accounting pronouncements.

Qualitative and Quantitative Disclosures About Market Risk

In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition, foreign exchange rates, and raw materials pricing and availability.

In addition, the Company is exposed to other financial market risks, primarily related to its foreign operations.

Refer to Item 7A in the Company's Form 10-K for the year ended December 31, 2020 for more information about the Company's exposure to market risk.

See Note 2 to the Company's consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on recent accounting pronouncements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis