What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-04 compared with 2021-10-27 · 117 added, 201 removed, 88 unchanged (78% 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 Quarterly Report on Form 10-Q.

We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” disclosures in our most recent 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.

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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 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.

At March 31, 2022, we operated 33 facilities, comprised of 24 manufacturing facilities, one distribution center, and eight offices, which are located in 15 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

COVID Update and Recent Trends

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

COVID-19, as well as broader market dynamics over the past two years, 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.

We continue to work with our customers and suppliers in this dynamic environment to better align pricing, understand the existing and potential future impacts to our supply chain, and make efforts to mitigate such impacts as we expect these supply chain and labor availability pressures along with the impact of material cost, labor and logistics inflation will continue throughout 2022.

In early 2022, the U.S.

Department of Commerce ("USDOC") was petitioned to investigate alleged circumvention of antidumping and countervailing duties on Chinese imports of solar panels produced in other countries in Southeast Asia.

In March 2022, the USDOC announced that it would investigate the circumvention alleged in the petition.

As the timing and progress of many of our customers’ projects depend upon the supply of solar panels, our operating results could be impacted.

As such, we are working closely with customers to assess any potential exposure to the USDOC’s solar panel anti-circumvention investigation.

Business Strategy

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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.

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.

Our focus is on deploying effective tools to drive growth, improve operating performance, and develop the organization utilizing 80/20 and lean quote-to-cash initiatives along with digital systems for speed, agility and responsiveness.

Our Business System challenges existing paradigms, drives day-to-day performance, forces prioritization of resources, tests our business models, and brings focus to new product and services development and innovation.

Portfolio Management is focused on optimizing the Company’s business portfolio in higher growth markets with leadership positions ensuring 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.

Organization Development drives the Company’s continuous focus on strengthening and scaling the organization to execute the Company’s plans and meet commitments.

Organization Development drives the Company’s continuous focus on ensuring we have the right design and structure to scale the organization in order 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.

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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.

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.

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 broader market dynamics experienced over the past two years.

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 working capital, and managing our business to generate incremental cash.

We believe our strategy enables us to respond to volatility in commodity and other input costs and fluctuations in customer demand, along with striving to maintain

and improve margins.

We have used cash flows generated by these initiatives to minimize 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.

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

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.

In May 2022, the Company's Board of Directors authorized a share repurchase program of up to $200 million of the Company's issued and outstanding common stock.

The program has a duration of three years, ending May 2, 2025.

Repurchases may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other considerations.

Any such repurchases may be executed using open market purchases, privately negotiated agreements or other transactions.

The repurchase program may be suspended or discontinued at any time at the Company's discretion.

The Company has not made repurchases under the repurchase program to date.

During the first quarter of 2022, the Company committed to a plan to sell its processing equipment business, which is a business within the Company's Agtech reportable segment, as a result of its portfolio management strategy in order to focus its resources on the higher growth and more profitable growing business within the Agtech segment.

The processing equipment business has been classified as held for sale as of March 31, 2022.

During the first quarter of 2021, the Company sold its Industrial business which was previously included in the Company's Industrial and Infrastructure Products segment, now the Infrastructure segment and was reported as discontinued operations as of December 31, 2020.

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):

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

The following table sets forth selected results of operations data and its percentage of net sales for the three months ended March 31 (in thousands):

Net sales $ 317,865 100.0 % $ 287,592 100.0 %

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Interest expense 485 0.2 % 444 0.2 %

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

Other expense 153 0.0 % 315 0.1 %

Income before taxes 20,557 6.5 % 12,056 4.2 %

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Income from continuing operations 15,456 4.9 % 10,496 3.6 %

(Loss) income from discontinued operations (298) 0.0 % 2,426 0.8 %

Income from discontinued operations — 0.0 % 2,266 0.8 %

Net income $ 15,456 4.9 % $ 12,762 4.4 %

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

The following table sets forth the Company’s net sales by reportable segment for the three months ended March 31, (in thousands):

2022 2021 Total

Change Acquisitions Operations

Change Portfolio Management Ongoing Operations

Renewables $ 78,783 $ 85,512 $ (6,729) $ — $ (6,729)

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Consolidated $ 317,865 $ 287,592 $ 30,273 $ (3,150) $ 33,423

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.

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):

Consolidated net sales increased by $30.3 million, or 10.5%, to $317.9 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The 10.5% increase in revenue was driven by the Residential and Infrastructure segments, which more than offset volume declines in both our Renewables and Agtech segments.

The improvement year over year was driven by a 15% increase in pricing to customers, partially offset by a net volume decline of 5%.

The increase during the current year quarter was driven by participation gains and price in our Residential segment, partially offset by continued supply chain challenges in the Renewables segment.

While the Company committed to a plan of sale of its Processing business within the Agtech segment, and has reclassified the assets and liabilities as held-for-sale on the March 31, 2022 balance sheet, the Company will continue reporting its operating results in the Company's consolidated operating results from continuing operations until the sale of the business is completed.

Consolidated backlog increased 23% to $437 million up from $355 million at the end of the prior year quarter.

Net sales in our Renewables segment decreased $6.7 million, or 7.8%, to $78.8 million for the three months ended March 31, 2022 compared to $85.5 million for the three months ended March 31, 2021.

Revenue decreased as anticipated by 7.8% during the quarter as a result of solar project schedule delays and disruptions related to supply chain challenges as well as impacts from severe winter weather early in the quarter.

Backlog improved 41% year over year, driven by continued end market demand for this segment.

Net sales in our Residential segment increased 28.0%, or $39.3 million, to $179.5 million for the three months ended March 31, 2022 compared to $140.2 million for the three months ended March 31, 2021.

The increase from the prior year quarter, the seventh consecutive quarter of double-digit growth, was driven by market demand, additional price actions, and participation gains, particularly in the building products and mail and package businesses.

Net sales in our Agtech segment decreased 9.2%, or $4.3 million, to $42.4 million for the three months ended March 31, 2022 compared to $46.7 million for the three months ended March 31, 2021.

Excluding the impact of the processing equipment business which has been classified as held for sale as of March 31, 2022, revenue declined in our produce and cannabis businesses due to continued licensing and permit delays, and scheduled timing of projects.

Despite these headwinds, the commercial greenhouse business continued solid growth across its core product lines serving the retail, institutional and car wash markets.

Backlog increased 17% year over year..

Net sales in our Infrastructure segment increased 13.9%, or $2.0 million, to $17.2 million for the three months ended March 31, 2022 compared to $15.1 million for the three months ended March 31, 2021.

The increase in revenue was driven by growth in demand for fabricated products.

While order backlog declined 7% as compared to the prior year quarter, on timing of orders and revenues, the segment's pipeline and bidding activity remain strong.

Management continues to expect the impact of incremental government spending on infrastructure toward the end of 2022.

Our consolidated gross margin decreased to 20.4% for the three months ended March 31, 2022 compared to 20.9% for the three months ended March 31, 2021.

The decrease was largely the result of continued and anticipated supply chain disruptions, materials cost inflation along with labor availability, and severe winter weather related inefficiencies in several of our businesses.

Largely offsetting these impacts were improved operating execution from lean enterprise initiatives, supply chain optimization activities, favorable revenue mix and the impact of participation gains in several of our other businesses.

Selling, general, and administrative ("SG&A") expenses decreased by $3.6 million, or 7.5%, to $43.6 million for the three months ended March 31, 2022 from $47.2 million for the three months ended March 31, 2021.

The decrease year over year was largely due to lower performance-based compensation expense for equity-based awards tied to the Company's 200-day average stock price which declined as compared to the prior year quarter.

SG&A expenses as a percentage of net sales decreased to 13.7% for the three months ended March 31, 2022 compared to 16.4% for the three months ended March 31, 2021.

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 March 31, (in thousands):

2022 2021 Total

Change Portfolio Management Ongoing Operations

Income from operations:

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The Renewables segment generated an operating margin of (8.9)% in the current year quarter compared to (0.6)% 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

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 decrease in operating margin on lower volume was the result of project management inefficiencies related to project delays and disruptions associated with market supply chain disruptions and an unanticipated level of inflation on structural steel used in solar canopy projects that carried over from the end of the prior year into the first two months of the current year quarter.

Furthermore, severe winter weather resulted in project inefficiencies during the quarter.

We continue executing our integration plans which remain on track.

The Residential segment generated an operating margin of 18.6% in the current year quarter compared to 16.4% 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.

The increase in operating margin was the result of favorable price / cost management, segment mix, and 80/20 initiatives.

Our Agtech segment generated an operating margin of 0.1% in the current year quarter compared to 2.0% 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):

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

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

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

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

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.

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.

Excluding the impact of the Processing business which has been classified as held for sale as of March 31, 2022, operating profit and margin improved year over year, the result of continued execution from 80/20 and lean enterprise initiatives, ongoing integration activities, improved business mix, and supply chain optimization projects.

Our Infrastructure segment generated an operating margin of 6.9% during the three months ended March 31, 2022 compared to 13.5% during the three months ended March 31, 2021.

The margin declined year over year as plate steel inflation impacted fixed price projects and the fabrication business experienced labor availability and inefficiencies related to adding second shift capacity to support increased demand.

Unallocated corporate expenses decreased $6.1 million from $12.6 million during the three months ended March 31, 2021 to $6.5 million during the three months ended March 31, 2022.

The decrease in expense was primarily the result of lower performance-based compensation expense for equity-based awards tied to the Company's 200-day average stock price which declined as compared to the prior year quarter.

Interest expense increased slightly year over year with $0.5 million for the three months ended March 31, 2022 compared to $0.4 million for the three months ended March 31, 2021.

The outstanding balances on the Company's revolving credit facility were $42.4 million and $58.0 million as of March 31, 2022, and 2021, respectively.

We recognized a provision for income taxes of $5.1 million and $1.6 million, with effective tax rates of 24.8% and 12.9% for the three months ended March 31, 2022, and 2021, respectively.

The effective tax rate for the three months ended March 31, 2022 was greater than the U.S.

federal statutory rate of 21% due to state taxes and

nondeductible permanent differences partially offset by favorable discrete items due to an excess tax benefit on stock-based compensation.

The effective tax rate for the three months ended March 31, 2021 was less than the U.S.

federal statutory rate of 21% due to favorable discrete items due to an excess tax benefit on stock-based compensation, partially offset by state taxes and nondeductible permanent differences.

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

(in thousands) March 31, 2022 December 31, 2021

Cash and cash equivalents $ 15,573 $ 12,849

1 unchanged sentence

$ 367,078 $ 382,154

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.

Sources of Liquidity

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 invest in key business strategies that drive our mission.

We have been able to weather the economic impacts of the COVID-19 pandemic and the broader market dynamics, including the current inflationary cost environment, while continuing to make investments that support our strategy.

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.

We believe our liquidity, together with the cash expected to be generated from operations, should be sufficient to fund working capital needs and stock repurchases and to invest in operational excellence 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 September 30, 2021, our foreign subsidiaries held $8.9 million of cash.

As of March 31, 2022, our foreign subsidiaries held $13.0 million of cash.

Outstanding balances on our revolving credit facility under our Senior Credit Agreement accrue interest at a rate based on LIBOR plus an additional margin.

We do not expect a material change in interest expense as a result of transitioning from a LIBOR rate to a new reference rate.

See Note 7 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 .

Uses of Cash / Cash Requirements

Our material short-term cash requirements primarily include accounts payable, certain employee and retiree benefit-related obligations, operating lease obligations, interest payments on outstanding debt, repayments of borrowing on our revolving credit facility, capital expenditures, and other purchase obligations originating in the normal course of business for inventory purchase orders and contractual service agreements.

Our principal capital requirements are to fund our operations' working capital and capital improvements, to provide capital for acquisitions and to strategically allocate capital through repurchases of Company stock.

We intend to fund our cash requirements through cash generated from operations and, as necessary, from the availability on our revolving credit facility.

In May 2022, the Company's Board of Directors authorized a share repurchase program of up to $200 million of the Company's issued and outstanding common stock.

The program has a duration of three years, ending May 2, 2025.

Any such repurchases may be executed using open market purchases, privately negotiated agreements or other transactions.

The repurchase program may be suspended or discontinued at any time at the Company's discretion.

The Company has not made repurchases under the repurchase program to date.

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.

The deferred tax payments were

required to be repaid in two installments occurring near the end of each year 2021 and 2022, of which $1.9 million was repaid in 2021 and the remaining $2.5 million will be repaid by the end of 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.

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

These expectations are forward-looking statements based upon currently available information and may change if conditions in the credit and equity markets deteriorate or other circumstances change.

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

Except as disclosed above, there have been no material changes in our cash requirements since December 31, 2021, the end of fiscal year 2021.

See Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021.

The following table sets forth selected cash flow data for the three months ended March 31, (in thousands):

Cash (used in) provided by:

4 unchanged sentences

Effect of foreign exchange rate changes (159) (134)

Net decrease in cash and cash equivalents $ (18,120) $ (11,547)

Net increase (decrease) in cash and cash equivalents $ 2,724 $ (11,323)

Operating Activities

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.

Net cash used in operating activities of continuing operations for the three months ended March 31, 2022 of $7.7 million consisted of income from continuing operations of $15.5 million and non-cash net charges totaling $10.3 million, which include depreciation, amortization, stock compensation, exit activity costs and other non-cash charges, offset by a $33.5 million investment in working capital and other net assets.

The investment in working capital and other net assets was due to increases in inventory as a result of provisioning for potential supply chain disruptions and raw material and freight costs, along with an increase in accounts receivable as the result of seasonal increases in demand and a decrease in accounts payable as the result of timing of vendor payments.

This was offset by an increase in accrued expenses and other non-current liabilities due to an increase in unbilled project revenues.

Net cash used in operating activities of continuing operations for the three months ended March 31, 2021 of $1.2 million consisted of income from continuing operations of $10.5 million and non-cash net charges totaling $11.4 million, which include depreciation, amortization, stock compensation, exit activity costs and other non-cash charges, offset by a $23.1 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 strong sales demand in our Residential segment and rising raw material prices, along with a decrease in accrued expenses correlated to payments made during the quarter under the Company's performance based incentive programs.

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.

Net cash used in investing activities of continuing operations for the three months ended March 31, 2022 of $4.4 million was primarily due to capital expenditures of $4.4 million.

Net cash provided by investing activities of continuing operations for the three months ended March 31, 2021 of $22.6 million was primarily due to $27.0 million in net proceeds received from the sale of the Company's Industrial business and capital expenditures of $4.4 million.

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.

Net cash provided by financing activities of continuing operations for the three months ended March 31, 2022 of $15.0 million was the result of $47.5 million in proceeds from borrowing on our long-term credit facility, offset by $29.0 million in payments on long-term debt and $3.5 million of common stock repurchases related to the net settlement of tax obligations for participants in the Company's equity incentive plans.

Net cash used in financing activities of continuing operations for the three months ended March 31, 2021 of $30.4 million was primarily the result of $46.6 million in payments on long-term debt and $4.7 million of common stock repurchases related to the net settlement of tax obligations for participants in the Company's equity incentive plans, offset by $20.0 million in proceeds from long-term debt and $0.9 million from the issuance of common stock from stock option exercises during the period.

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.

In the current year, there have been no material changes to our critical accounting estimates during the three months ended March 31, 2021 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, 2021.

Recent Accounting Pronouncements

1 unchanged sentence

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