GIBRALTAR INDUSTRIES, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Certain information set forth herein includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and, therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “anticipates,” "aspires," “expects,” “estimates,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, competition, strategies and the industries in which we operate. 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 Quarterly Report on 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 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. Any forward-looking statements that we make herein speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data. We use certain operating performance measures, specifically consolidated gross margin, operating margin by segment and consolidated operating margin, to manage our businesses, set operational goals, and establish performance targets for incentive compensation for our employees. We define consolidated gross margin as a percentage of total consolidated gross profit to total consolidated net sales. We define 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. We believe consolidated gross margin, operating margin and consolidated operating margin may be useful to investors in evaluating the profitability of our segments and Company on a consolidated basis. Overview Gibraltar Industries, Inc. (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; and • Infrastructure. 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 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. 24 Table of Contents COVID-19 Update 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. 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 The Company's mission is to create compounding and sustainable value for our stockholders and other stakeholders with strong and relevant leadership positions in higher growth, profitable end markets focused on addressing some of the world's most challenging opportunities. The foundation of the Company's strategy is built on three core pillars: Business System, Portfolio Management, and Organization Development. 1. Business System reflects the necessary systems, processes, and management tools required to deliver consistent and continuous performance improvement, every day. Our Business System is a critical enabler to grow, scale, and deliver our plans. Our Business System is focused on deploying effective tools to drive growth, improve operating performance, and develop the organization. Our Business System challenges existing paradigms, drives day-to-day performance, forces prioritization of resources, challenges our business models, and brings focus to new product and services development and innovation. 2. Portfolio Management is focused on optimizing the Company’s business portfolio and ensures our financial capital and human resources are effectively and efficiently deployed to deliver sustainable, profitable growth while increasing our relevance with customers and shaping our markets. For a description of recent portfolio management activities, see the actions described below in the Recent Developments section. 3. Organization Development drives the Company’s continuous focus on strengthening and scaling the organization to execute the Company’s plans and meet commitments. The Company aspires to make our place of work the "Best Place to Work", where we focus on creating an environment for our people to have the best opportunity for success, continue to develop, grow, and learn. At core of this pillar is the Company’s development process focused on helping employees reach their potential, improve performance, develop career roadmaps, identify ongoing education requirements, and respective succession plans. 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. 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. We believe our enhanced strategy has enabled us to better react to volatility in commodity and other input costs and fluctuations in customer demand, along with helping to improve margins. We have used the improved cash flows generated by these initiatives to pay down debt, improve our liquidity position, and invest in growth initiatives. Overall, we continue to strive to achieve stronger financial results, make more efficient use of capital, and deliver higher stockholder returns. 25 Table of Contents Recent Developments During the first quarter of 2021, the Company sold its Industrial business as a result of its Portfolio Management strategy to focus on participation in higher value and faster growing markets. The Industrial business, previously reported in the Company's Industrial and Infrastructure Products segment, was reported as discontinued operations as of December 31, 2020. During 2020, the Company completed the following acquisitions: Business Acquired Date of Acquisition in 2020 Purchase price ( in millions) 1 Description Segment TerraSmart LLC December 31 $ 223.7 Provider of screw-based, ground-mount solar racking technology, particularly used for solar projects installed on challenging terrain Renewables Sunfig Corporation December 11 $ 3.8 Provider of software solutions that optimize solar energy investments through upstream design, performance and financial modeling Renewables Architectural Mailboxes October 15 $ 26.9 Provider, designer, and developer of decorative residential mailboxes and related products Residential Delta Separations February 13 $ 47.1 Provider of ethanol-based extraction systems manufacturer and training and laboratory design and operations consultative partner Agtech Thermo Energy Systems January 15 $ 7.3 Provider of commercial greenhouse solutions in North America supporting the biologically grown organic food market Agtech Note 1: 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 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. 26 Table of Contents Results of Operations 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): 2021 2020 Net sales $ 369,353 100.0 % $ 296,792 100.0 % Cost of sales 286,101 77.5 % 218,297 73.6 % Gross profit 83,252 22.5 % 78,495 26.4 % Selling, general, and administrative expense 45,274 12.2 % 37,552 12.6 % Income from operations 37,978 10.3 % 40,943 13.8 % Interest expense 491 0.2 % 217 0.1 % Other expense (income) 72 0.0 % (48) 0.0 % Income before taxes 37,415 10.1 % 40,774 13.7 % Provision for income taxes 9,561 2.6 % 9,440 3.1 % Income from continuing operations 27,854 7.5 % 31,334 10.6 % (Loss) income from discontinued operations (298) 0.0 % 2,426 0.8 % 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 September 30, (in thousands): Change due to 2021 2020 Total Change Acquisitions Operations Net sales: Renewables $ 130,162 $ 70,246 $ 59,916 $ 54,553 $ 5,363 Residential 171,545 151,718 19,827 6,604 13,223 Agtech 48,975 58,012 (9,037) — (9,037) Infrastructure 18,671 16,816 1,855 — 1,855 Consolidated $ 369,353 $ 296,792 $ 72,561 $ 61,157 $ 11,404 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 $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 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. 27 Table of Contents 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 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 Change Income from operations: Renewables $ 12,206 9.4 % $ 9,070 12.9 % $ 3,136 Residential 29,482 17.2 % 32,454 21.4 % (2,972) Agtech 2,227 4.5 % 5,125 8.8 % (2,898) Infrastructure 1,640 8.8 % 2,283 13.6 % (643) Unallocated Corporate Expenses (7,577) (2.1) % (7,989) (2.7) % 412 Consolidated income from operations $ 37,978 10.3 % $ 40,943 13.8 % $ (2,965) The Renewables segment generated an operating margin of 9.4% in the current year quarter compared to 12.9% in the prior year quarter. 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 the impact of project timing associated with 28 Table of Contents 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 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. 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): 29 Table of Contents 2021 2020 Net sales $ 1,005,334 100.0 % $ 767,377 100.0 % Cost of sales 781,133 77.7 % 573,460 74.7 % Gross profit 224,201 22.3 % 193,917 25.3 % Selling, general, and administrative expense 141,999 14.1 % 109,449 14.3 % Income from operations 82,202 8.2 % 84,468 11.0 % Interest expense 1,180 0.1 % 483 0.1 % Other income (4,279) (0.4) % (1,422) (0.2) % Income before taxes 85,301 8.5 % 85,407 11.1 % Provision for income taxes 20,578 2.1 % 19,714 2.5 % Income from continuing operations 64,723 6.4 % 65,693 8.6 % Income from discontinued operations 1,544 0.2 % 7,418 0.9 % 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 nine months ended September 30, (in thousands): Change due to 2021 2020 Total Change Acquisitions Operations Net sales: Renewables $ 323,425 $ 173,459 $ 149,966 $ 141,634 $ 8,332 Residential 475,971 394,609 81,362 23,043 58,319 Agtech 149,410 149,555 (145) 4,600 (4,745) Infrastructure 56,528 49,754 6,774 — 6,774 Consolidated $ 1,005,334 $ 767,377 $ 237,957 $ 169,277 $ 68,680 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 $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 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 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 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 30 Table of Contents 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 22.3% 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, 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. 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 additional developmental 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 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 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 Change Income from operations: Renewables $ 21,195 6.6 % $ 21,851 12.6 % $ (656) Residential 79,571 16.7 % 74,143 18.8 % 5,428 Agtech 4,133 2.8 % 7,231 4.8 % (3,098) Infrastructure 7,863 13.9 % 6,660 13.4 % 1,203 Unallocated Corporate Expenses (30,560) (3.0) % (25,417) (3.3) % (5,143) Consolidated income from operations $ 82,202 8.2 % $ 84,468 11.0 % $ (2,266) 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 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 31 Table of Contents 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. Outlook 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. 32 Table of Contents Liquidity and Capital Resources Our principal capital requirements are to fund our operations' working capital and capital improvements and to provide capital for acquisitions. We will continue to invest in growth opportunities as appropriate while focusing on working capital efficiency and profit improvement opportunities to minimize the cash invested to operate our business. The following table sets forth our liquidity position as of: (in thousands) September 30, 2021 December 31, 2020 Cash and cash equivalents $ 13,934 $ 32,054 Availability on revolving credit facility 332,879 309,175 $ 346,813 $ 341,229 We believe that our cash on hand and available borrowing capacity provided under our Sixth Amended and Restated Credit Agreement (the "Senior Credit Agreement") provide us with ample liquidity and capital resources to weather the economic impacts of the COVID-19 pandemic while continuing to invest in operational excellence, growth initiatives and the development of our organization. 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 for the foreseeable future. Our Senior Credit Agreement provides us with liquidity and capital resources for use by our U.S. operations. Historically, our foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements. As of 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 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. These expectations are forward-looking statements based upon currently available plans and 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 or expected levels, or sources of financing are not available or not available at acceptable terms, our future liquidity may be adversely affected. Cash Flows The following table sets forth selected cash flow data for the nine months ended September 30, (in thousands): 2021 2020 Cash (used in) provided by: Operating activities of continuing operations $ (14,523) $ 45,316 Investing activities of continuing operations 28,954 (60,200) Financing activities of continuing operations (30,276) (6,031) Discontinued operations (2,178) 9,926 Effect of foreign exchange rate changes (97) (558) Net decrease in cash and cash equivalents $ (18,120) $ (11,547) Operating Activities 33 Table of Contents 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 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 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 We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Contractual Obligations Our contractual obligations have not changed materially from the disclosures included in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Critical Accounting Estimates In the current year, there have been no changes to our critical accounting estimates from those disclosed in the consolidated financial statements and accompanying notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. 34 Table of Contents Recent Accounting Pronouncements 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.