What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-04 · 169 added, 78 removed, 127 unchanged (66% of the section changed)

21 unchanged sentences

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.

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.

At June 30, 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 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.

Recent Trends

As we have navigated through COVID-19, 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” 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.

The broader market dynamics over the past two years, which have included the impact of COVID-19, have resulted in impacts to our company, including 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 and used by our customers in conjunction with the goods and services we provide.

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

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.

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 the 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.

1 unchanged sentence

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.

In June 2022, the President of the United States issued an Executive Order to suspend any tariffs that result from this investigation for two years.

The USDOC has not yet issued a ruling to implement this order.

Furthermore, in June 2022, the Uyghur Forced Labor Prevention Act ("UFLPA") was enacted.

The UFLPA requires traceability of components of imported goods to validate that the components are not sourced from areas in the Xinjiang region of China.

There have been recent reports of solar panels being held at customs until the importer is able to prove where they have been sourced.

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

As such, we continue to work with customers who are assessing their ability to source panels needed to complete projects.

Business Strategy

13 unchanged sentences

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.

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, invest in growth initiatives and return capital to our shareholders through share repurchases.

Overall, we continue to strive to achieve stronger financial results, make more efficient use of capital, and deliver higher stockholder returns.

5 unchanged sentences

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.

As of June 30, 2022, the Company has repurchased 1,194,925 shares for an aggregate price of $50 million under this repurchase program.

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.

The processing equipment business was classified as held for sale as of March 31, 2022 and remains under such classification as of June 30, 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 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):

Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

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

Net sales $ 366,949 100.0 % $ 348,389 100.0 %

4 unchanged sentences

Interest expense 656 0.1 % 245 0.0 %

Other expense 153 0.0 % 315 0.1 %

Other expense (income) 281 0.1 % (4,666) (1.3) %

Income before taxes 39,202 10.7 % 35,830 10.3 %

1 unchanged sentence

Income from continuing operations 29,307 8.0 % 26,373 7.6 %

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

Loss from discontinued operations — 0.0 % (424) (0.2) %

Net income $ 29,307 8.0 % $ 25,949 7.4 %

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

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

2022 2021 Total

5 unchanged sentences

Consolidated $ 366,949 $ 348,389 $ 18,560 $ (4,516) $ 23,076

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.

Consolidated net sales increased by $18.6 million, or 5.3%, to $366.9 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

The 5.3% increase in revenue was driven by the Residential segment, which more than offset volume declines in our Renewables, Agtech and Infrastructure segments.

The improvement year over year was driven by a 13% increase in pricing to customers, partially offset by a net volume decline of 8%.

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.

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

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 as of March 31, 2022, 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 5% to $411 million up from $392 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.

Net sales in our Renewables segment decreased $6.2 million, or 5.8%, to $101.5 million for the three months ended June 30, 2022 compared to $107.8 million for the three months ended June 30, 2021.

Revenue decreased as expected during the quarter as solar project schedules remained dynamic, the result of customers continuing to assess and understand solar panel availability, which has been impacted by the USDOC investigation, the implementation of the UFLPA by the U.S.

Custom and Border Protection Agency, and the Executive Order issued by the administration with respect to solar panel tariff enforcement.

As a result, backlog decreased 2% year over year, yet it is expected to improve once these trade issues are resolved.

Net sales in our Residential segment increased 21.9%, or $36.0 million, to $200.2 million for the three months ended June 30, 2022 compared to $164.2 million for the three months ended June 30, 2021.

The increase from the prior year quarter, the eighth consecutive quarter of double-digit growth, was driven by price management and participation gains.

Net sales in our Agtech segment decreased 18.6%, or $10.0 million, to $43.7 million for the three months ended June 30, 2022 compared to $53.7 million for the three months ended June 30, 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 as projects shifted into the third and fourth quarters, the result of continued licensing and permit delays.

Despite these headwinds, the commercial greenhouse business continued solid growth across its core product lines.

Backlog increased 28% 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):

Net sales in our Infrastructure segment decreased 5.3%, or $1.3 million, to $21.5 million for the three months ended June 30, 2022 compared to $22.7 million for the three months ended June 30, 2021.

The decrease in revenue was due to a very strong prior year quarter comparison, which benefited from the scheduling of customer projects.

While order backlog was essentially flat compared to the prior year quarter, bidding activity is strong and new bookings have accelerated early in the third quarter.

Management continues to expect a positive impact from the infrastructure bill in the second half of 2022.

Our consolidated gross margin increased to 24.6% for the three months ended June 30, 2022 compared to 23.2% for the three months ended June 30, 2021.

The increase was largely the result of favorable price / cost management, along with the impact of participation gains in our residential segment, business mix, and improved operating execution from lean enterprise initiatives.

These actions more than offset the impacts of continued and anticipated supply chain challenges that resulted in increased costs due to project disruptions.

Selling, general, and administrative ("SG&A") expenses as a percentage of net sales decreased to 13.7% for the three months ended June 30, 2022 compared to 14.2% for the three months ended June 30, 2021.

SG&A expenses for the current quarter increased by $0.6 million, or 1.2%, to $50.1 million from $49.5 million compared to the prior year quarter.

The increase year over year was the net result of expenses associated with investing in our enterprise resource planning ("ERP") systems to simplify and digitize our businesses, nearly offset by lower compensation and benefits expense as compared to the prior year quarter, largely the result of equity-based awards tied to the Company's 200-day average stock price.

The following table sets forth the Company’s income from operations and income from operations as a percentage of net sales by reportable segment for the three months ended June 30, (in thousands):

2022 2021 Total

8 unchanged sentences

The Renewables segment generated an operating margin of 6.7% in the current year quarter compared to 8.8% in the prior year quarter.

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 decrease in operating margin on lower volume was largely the result of project management inefficiencies related to project delays and disruptions associated with market supply chain challenges.

Project management inefficiencies began to subside as we moved through the quarter, resulting in double-digit margin performance in both May and Ju ne.

Execution of our integration plans, including implementing a common platform for our ERP system and insourcing production, remain on track.

The Residential segment generated an operating margin of 17.8% in the current year quarter compared to 16.5% in the prior year quarter.

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

The increase in operating margin was the result of favorable price / cost management, supply chain initiatives, labor management, volume leverage and 80/20 initiatives.

During the quarter, we completed the implementation a new ERP system in the mail and package business.

Our Agtech segment generated an operating margin of 3.5% in the current year quarter compared to 1.8% in the prior year quarter.

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.

Operating profit and margin improved year over year, the result of business mix, price / cost management, supply chain improvement, 80/20 initiatives, and integration activities.

Our Infrastructure segment generated an operating margin of 13.4% during the three months ended June 30, 2022 compared to 18.4% during the three months ended June 30, 2021.

The margin declined year over year due to unfavorable product mix.

Unallocated corporate expenses decreased $3.6 million from $10.4 million during the three months ended June 30, 2021 to $6.8 million during the three months ended June 30, 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 as compared to the prior year quarter.

Interest expense increased year over year with $0.7 million for the three months ended June 30, 2022 compared to $0.2 million for the three months ended June 30, 2021.

The increase in expense was primarily due to higher outstanding balances on the Company's revolving credit facility during the quarter along with higher interest rates compared to the prior year quarter.

The outstanding balances on the Company's revolving credit facility were $93.5 million and $32.3 million as of June 30, 2022, and 2021, respectively.

The Company recorded other expense of $0.3 million for the three months ended June 30, 2022, compared to other income of $4.7 million for the three months ended June 30, 2021.

The change from income in the prior year quarter

to expense in the current year quarter was primarily the result of a $4.7 million gain recognized on the sale of securities received from the sellers of Thermo Energy Systems, Inc.

("Thermo") to settle indemnification claims recorded in the prior year quarter.

We recognized a provision for income taxes of $9.9 million and $9.5 million, with effective tax rates of 25.2% and 26.4% for the three months ended June 30, 2022, and 2021, respectively.

The effective tax rate for the three months ended June 30, 2022, and 2021, respectively, 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.

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

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

Net sales $ 684,814 100.0 % $ 635,981 100.0 %

Cost of sales 529,699 77.3 % 495,032 77.8 %

Gross profit 155,115 22.7 % 140,949 22.2 %

Selling, general, and administrative expense 93,781 13.7 % 96,725 15.2 %

Income from operations 61,334 9.0 % 44,224 7.0 %

Interest expense 1,141 0.2 % 689 0.1 %

Other expense (income) 434 0.1 % (4,351) (0.6) %

Income before taxes 59,759 8.7 % 47,886 7.5 %

Provision for income taxes 14,996 2.2 % 11,017 1.7 %

Income from continuing operations 44,763 6.5 % 36,869 5.8 %

Income from discontinued operations — 0.0 % 1,842 0.3 %

Net income $ 44,763 6.5 % $ 38,711 6.1 %

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

2022 2021 Total

Change Portfolio Management Ongoing Operations

Renewables $ 180,332 $ 193,263 $ (12,931) $ — $ (12,931)

Residential 379,730 304,426 75,304 — 75,304

Agtech 86,108 100,435 (14,327) (7,666) (6,661)

Infrastructure 38,644 37,857 787 — 787

Consolidated $ 684,814 $ 635,981 $ 48,833 $ (7,666) $ 56,499

Consolidated net sales increased by $48.8 million, or 7.7%, to $684.8 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The 7.7% 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 14% increase in pricing to customers, partially offset by a net volume decline of 6%.

The increase in net sales during the current year was driven by price management and participation gains in our Residential segment, partially offset by continued project delays caused by supply chain challenges in the Agtech and Renewables segments.

Consolidated backlog increased 5% to $411 million up from $392 million at the end of the prior year period.

Net sales in our Renewables segment decreased $12.9 million, or 6.7%, to $180.3 million for the six months ended June 30, 2022 compared to $193.3 million for the six months ended June 30, 2021.

Revenue decreased as anticipated by 6.7% during the current year as a result of solar project schedule delays, disruptions related to supply chain challenges and uncertainty related to the pending preliminary ruling surrounding the USDOC global trading investigation during the year and further impacted by the recent implementation of the UFLPA by the U.S.

Custom and Border Protection Agency and the Executive Order issued by the administration with respect to solar panel tariff enforcement.

As a result, backlog decreased 2% year over year, yet it is expected to improve once these trade issues are resolved.

Net sales in our Residential segment increased 24.7%, or $75.3 million, to $379.7 million for the six months ended June 30, 2022 compared to $304.4 million for the six months ended June 30, 2021.

The increase from the prior year was primarily driven by pricing actions, along with participation gains.

Net sales in our Agtech segment decreased 14.2%, or $14.3 million, to $86.1 million for the six months ended June 30, 2022 compared to $100.4 million for the six months ended June 30, 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 project delays, the result of continued licensing and permit delays.

Despite these headwinds, the commercial greenhouse business continued solid growth across its core product lines.

Backlog for the segment increased 28% year over year.

Net sales in our Infrastructure segment increased 1.8%, or $0.8 million, to $38.6 million for the six months ended June 30, 2022 compared to $37.9 million for six months ended June 30, 2021.

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

While order backlog was essentially flat compared to the prior year period, bidding activity is strong and new bookings have accelerated early in the third quarter.

Management continues to expect a positive impact from the infrastructure bill in the second half of 2022.

Our consolidated gross margin increased to 22.7% for the six months ended June 30, 2022 compared to 22.2% for the six months ended June 30, 2021.

The increase was primarily the result of favorable price / cost management, along with participation gains in our residential segment, favorable revenue mix and improved operating execution from lean enterprise initiatives.

These actions more than offset the impacts of continued and anticipated supply chain challenges and severe weather in the early part of the year that resulted in increased costs due to project disruptions.

Selling, general, and administrative ("SG&A") expenses as a percentage of net sales decreased to 13.7% for the six months ended June 30, 2022 compared to 15.2% for the six months ended June 30, 2021.

The decrease of $2.9 million, or 3.0%, to $93.8 million for the current year period compared to $96.7 million for the prior year period was primarily due to lower performance-based compensation expense for equity-based awards tied to the Company's 200-day average stock price.

The following table sets forth the Company’s income from operations and income from operations as a percentage of net sales by reportable segment for the six months ended June 30, (in thousands):

2022 2021 Total

Change Portfolio Management Ongoing Operations

Income from operations:

Renewables $ (155) (0.1) % $ 8,989 4.7 % $ (9,144) $ — $ (9,144)

Residential 69,099 18.2 % 50,089 16.5 % 19,010 — 19,010

Agtech 1,573 1.8 % 1,906 1.9 % (333) (2,332) 1,999

Infrastructure 4,068 10.5 % 6,223 16.4 % (2,155) — (2,155)

Unallocated Corporate Expenses (13,251) (1.9) % (22,983) (3.6) % 9,732 — 9,732

Consolidated income from operations $ 61,334 9.0 % $ 44,224 7.0 % $ 17,110 $ (2,332) $ 19,442

The Renewables segment generated an operating margin of (0.1)% in the current year compared to 4.7% in the prior year.

structural steel used in solar canopy projects.

However, project execution is showing signs of improvement and the above mentioned impacts are beginning to subside resulting in double-digit margin performance in both May and Ju ne .

Execution of our integration plans, including the investment in a common platform for our ERP systems, remain on track.

The Residential segment generated an operating margin of 18.2% in the current year compared to 16.5% in the prior year.

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

During the year, we completed the implementation a new ERP system in the mail and package business.

Our Agtech segment generated an operating margin of 1.8% in the current year compared to 1.9% in the prior year.

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 improved business mix, price / cost management, continued execution from 80/20 and lean enterprise initiatives and ongoing integration activities.

Our Infrastructure segment generated an operating margin of 10.5% during the six months ended June 30, 2022 compared to 16.4% during the six months ended June 30, 2021.

The margin declined year over year due to the impact of plate steel inflation on fixed price projects and unfavorable product mix.

Unallocated corporate expenses decreased $9.7 million from $23.0 million during the six months ended June 30, 2021 to $13.3 million during the six months ended June 30, 2022.

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

Interest expense increased year over year with $1.1 million for the six months ended June 30, 2022 compared to $0.7 million for the six months ended June 30, 2021.

The increase in expense was primarily due to higher outstanding balances on the Company's revolving credit facility during the current year along with higher interest rates compared to the prior year period.

The outstanding balances on the Company's revolving credit facility were $93.5 million and $32.3 million as of June 30, 2022, and 2021, respectively.

The Company recorded other expense of $0.4 million for the six months ended June 30, 2022, compared to other income of $4.4 million for the six months ended June 30, 2021.

The change from income in the prior year to expense in the current year was primarily the result of the $4.7 million gain recognized on the sale of securities received from the sellers of Thermo Energy Systems, Inc.

("Thermo") to settle indemnification claims recorded in the prior year.

We recognized a provision for income taxes of $15.0 million and $11.0 million, with effective tax rates of 25.1% and 23.0% for the six months ended June 30, 2022, and 2021, respectively.

The effective tax rate for the six months ended June 30, 2022, and 2021, respectively, 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.

Liquidity and Capital Resources

The following table sets forth our liquidity position as of:

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

(in thousands) June 30, 2022 December 31, 2021

Cash and cash equivalents $ 17,149 $ 12,849

5 unchanged sentences

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 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.

We believe our liquidity, together with the cash expected to be generated from operations, should be sufficient to fund working capital needs and to invest in operational excellence, growth initiatives and stock repurchases for the foreseeable future.

We use our Senior Credit Agreement to provide liquidity and capital resources primarily for 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 March 31, 2022, our foreign subsidiaries held $13.0 million of cash.

As of June 30, 2022, our foreign subsidiaries held $15.5 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.

11 unchanged sentences

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.

As of June 30, 2022, the Company has repurchased 1,194,925 shares for an aggregate price of $50 million under this repurchase program.

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 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.

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.

4 unchanged sentences

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:

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

Cash provided by (used in):

Operating activities of continuing operations $ 544 $ 12,777

5 unchanged sentences

Operating Activities

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.

Net cash provided by operating activities of continuing operations for the six months ended June 30, 2022 of $0.5 million consisted of income from continuing operations of $44.8 million and non-cash net charges totaling $20.7 million, which include depreciation, amortization, stock-based compensation, exit activity costs and other non-cash charges, offset by a $64.9 million investment in working capital and other net assets.

The investment in working capital and other net assets was due to increases in accounts receivable and inventory, largely the result of seasonal increases in demand along with increased raw material and freight costs impacting inventory.

A decrease in accounts payable as a result of the correlation between the timing of inventory receipts and vendor payments also contributed to the increase.

The overall increase was partially offset by an increase in accrued expenses and other non-current liabilities due to increases in advance payments from and billings to customers on projects.

Net cash provided by operating activities of continuing operations for the six months ended June 30, 2021 of $12.8 million consisted of income from continuing operations of $36.9 million and non-cash net charges totaling $22.4 million, which include depreciation, amortization, stock-based compensation, exit activity costs and other non-cash charges, offset by a $46.5 million investment in working capital and other net assets.

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

Investing Activities

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.

Net cash used in investing activities of continuing operations for the six months ended June 30, 2022 of $11.2 million was primarily due to capital expenditures of $11.3 million.

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

Financing Activities

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.

Net cash provided by financing activities of continuing operations for the six months ended June 30, 2022 of $16.0 million was the result of $120.5 million in proceeds from borrowing on our long-term credit facility, offset by $51.0 million in payments on long-term debt and $53.5 million of common stock repurchases.

Share repurchases of 1,194,925 under the Company’s recently authorized share repurchase program totaled $50.0 million with the balance repurchased for 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 six months ended June 30, 2021 of $56.3 million was primarily the result of $83.6 million in payments on long-term debt and $4.8 million of stock repurchases related to the net settlement of tax obligations for participants in the Company's equity incentive plans, offset by

$31.2 million in proceeds from borrowing on our long-term credit facility and $0.9 million from the issuance of common stock from stock option exercises during the period.

Critical Accounting Estimates

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.

There have been no material changes to our critical accounting estimates during the six months ended June 30, 2022 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