What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-01 compared with 2023-11-02 · 78 added, 194 removed, 96 unchanged (74% of the section changed)

17 unchanged sentences

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

• Renewables;

• Residential

• Infrastructure

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

At September 30, 2023, the Company operated 31 facilities, comprised of 23 manufacturing facilities, one distribution center, and seven offices, which are located in 16 states, Canada, China, and Japan.

The Company's operational infrastructure provides the necessary scale to support regional and national customers in each of the Company's markets.

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

The Company's operational infrastructure provides the necessary scale to

support local, regional, and national customers in each of its markets.

At March 31, 2024, the Company operated thirty facilities, comprised of twenty-three manufacturing facilities, one distribution center, and six offices, which are located in sixteen states, Canada, and China.

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

Recent Trends

The uncertainty of the current macro-economic environment, including shifting inflation and higher interest rates, along with trade related disruptions that continue to impact the supply of solar modules used by the Company’s customers, have impacted and may continue to adversely impact our performance and financial results.

the disruption in the supply of solar modules is improving, our customers are being challenged to obtain permits from relevant government entities to build new solar fields and the Company does expect that these aforementioned dynamics will continue in the remainder of 2023.

While the Company does not sell or import solar modules, the goods and services the Company provides for its customers depend upon the supply of solar modules for which such shortages have resulted in project delays over the past two years.

The supply has been primarily impacted by two regulatory items:

the Uyghur Forced Labor Prevention Act ("UFLPA") which was enacted in June 2022, and the circumvention of anti-dumping and countervailing duties (“AD/CVD”) investigation launched by the U.S.

Department of Commerce ("USDOC") in March 2022, against eight solar module manufacturers producing in four countries in Southeast Asia.

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

This requirement has caused delays in module availability as module manufacturers must follow a stringent importation process with the U.S.

Custom and Border Protection Agency.

While a few of the larger module manufacturers are experiencing more consistent success with the importation process, other module suppliers need to make further progress with UFLPA and the importation process.

The UFLPA continues to create a compliance burden and constrain supply of imported solar modules, but the Company expects continual improvement of supply as more module manufacturers move forward on the learning curve.

As a result of the USDOC’s AD/CVD investigation, and until the final ruling from the USDOC was announced in August 2023, projects were delayed due to the risk of retroactive tariffs being imposed on the import of solar modules produced in four countries in Southeast Asia, where Chinese manufacturers have operations.

In addition, of the eight major manufacturers under investigation, five were found to have been circumventing the AD/CVD orders.

In parallel to the USDOC investigation, on June 6, 2022, an emergency Presidential Proclamation was issued delaying the imposition of duties on imports from the impacted countries until June 6, 2024.

This proclamation provides non-U.S.

based module manufacturers time to modify and secure supply chains to ensure compliance with U.S.

On August 16, 2022, the Inflation Reduction Act ("IRA") was signed into law.

Among other things, the IRA provides for a variety of enhanced Investment Tax Credits ("ITC") and Production Tax Credits for renewable energy subject to specific dates and requirements.

Although the Company believes the IRA should assist in driving growth in the renewable energy industry, it is important that the Department of Treasury finalize rules governing the execution of additional investment tax incentives so industry and the Company's customers can move forward with projects currently on hold.

Overall, the Company believes the enhanced tax credits under the IRA will provide long-term certainty for the industry and support consistent and accelerating demand for our products.

The Company will work with its customers to optimize the various ITCs as the final rules are defined and implemented.

The effect on the Company's customers in the Renewables business due to the trade related disruption in the supply of solar modules from the impacts of the Uyghur Forced Labor Prevention Act ("UFLPA") and the Department of Commerce's ("USDOC") anti-dumping and countervailing duties ("AD/CVD") investigation, both initiated in 2022, continues to diminish.

These customers have continued to adapt to the ongoing disruption in this space and have identified alternative sources for modules not impacted by these regulatory items that require either traceability of components imported and/or potentially impose tariffs on the modules.

However, some of these customers continue to pause on executing new renewable energy projects while they are awaiting final guidance from the Department of Treasury relative to rules under the Inflation Reduction Act (IRA) in order to maximize tax incentives.

Furthermore, a continued challenge to manage project specific permitting delays from relevant government entities to build new solar fields has also affected the execution of new renewable energy projects.

The Company believes that these dynamics will continue throughout 2024.

On April 24, 2024, a new petition was filed with the USDOC claiming potentially illegal trade practices with Cambodia, Malaysia, Thailand and Vietnam, the same four countries named in the 2022 AD/CVD case.

The USDOC has 20 days to determine whether to initiate an investigation on the matter.

Business Strategy

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Portfolio Management is focused on optimizing the Company’s business portfolio in higher growth markets with leadership positions while ensuring its financial capital and human resources are effectively and efficiently deployed to deliver sustainable, profitable growth while increasing its relevance with customers and shaping its markets.

Recent acquisitions to help achieve these objectives include the assets of a small privately held manufacturing and distributing company of roof flashing and accessory products in July 2023

and Quality Aluminum Products ("QAP") in 2022, both within the Residential segment.

To further these objectives, the Company made the decision in 2022 to divest its non-core Processing business and is currently in the final stages of liquidation of this business.

In 2023, the Company acquired the assets of a privately held Utah-based company in the Residential segment and sold its Japan-based solar racking business within the Renewables segment to help achieve these objectives.

Organization Development drives the Company’s continuous focus on ensuring it has 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 its place of work the "Best Place to Work", where focus is on creating an environment for our people to have the best opportunity for success, continue to develop, grow and learn.

The Company's focus is on creating an environment for our people to have the best opportunity for success, continue to develop, grow and learn.

At core of this pillar is the Company’s development process focused on helping employees reach their potential, improve performance, develop career roadmaps, identify ongoing education requirements, and respective succession plans.

The Company believes doing so helps it attract and retain the best people to execute its business plans.

The Company believes the key elements of the Company's strategy enable the Company to respond timely to changes in the end markets the Company serves, including the broader market dynamics experienced over the past two years.

The Company continues to examine the need for restructuring of the Company's operations, including consolidation of facilities, reducing overhead costs, curtailing investments in working capital, and managing the Company's business to generate incremental cash.

The Company believes its strategy enables the Company to respond to volatility in commodity and other input costs and fluctuations in customer demand, along with striving to maintain and improve margins.

The Company has used cash flows generated by these initiatives to minimize debt, improve the Company's liquidity position, invest in growth initiatives and return capital to the Company's shareholders through share repurchases.

The Company has used cash flows generated by these initiatives to improve the Company's liquidity position, invest in growth initiatives and return capital to the Company's shareholders through share repurchases.

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

Recent Developments

On December 1, 2023, the Company sold its Japan-based solar racking business within its Renewables segment to a third party and received net proceeds of $8.0 million.

On July 5, 2023, the Company acquired the assets of a privately held Utah based company that manufactures and distributes roof flashing and accessory products for $10.4 million.

On December 8, 2022, the Company entered into a Credit Agreement (the "Credit Agreement"), and concurrently with entering into the Credit Agreement, the Company paid off all amounts owed under the Sixth Amended and Restated Credit Agreement dated as of January 24, 2019, which was terminated with no prepayment penalties.

The Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount equal to $400 million.

The Company can request additional financing to increase the revolving credit facility to $700 million or enter into a term loan of up to $300 million subject to conditions set forth in the Credit Agreement.

The Credit Agreement contains two financial covenants.

As of September 30, 2023, the Company was in compliance with both financial covenants.

The Credit Agreement terminates on December 8, 2027.

On August 22, 2022, the Company purchased all the issued and outstanding membership interests of QAP, a manufacturer of soffit, fascia, trim coil, rain carrying products and aluminum siding for an aggregate purchase price of $52.1 million.

The acquisition of QAP was financed primarily through borrowings under the Company's revolving credit facility.

The results of operations of QAP have been included in the Residential segment of the Company's consolidated financial statements from the date of acquisition.

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

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

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

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

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

As of September 30, 2023, the Company has repurchased 2,518,941 shares for an aggregate price of $111.0 million under this repurchase program.

Results of Operations

Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

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, 2024 Compared to the Three Months Ended March 31, 2023

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 $ 292,506 100.0 % $ 293,267 100.0 %

3 unchanged sentences

Income from operations 31,736 10.8 % 29,370 10.0 %

Interest expense 417 0.1 % 1,048 0.2 %

Other (income) expense (1,040) (0.3) % 363 0.1 %

Interest (income) expense (750) (0.3) % 1,491 0.5 %

Other income (1,021) (0.4) % (397) (0.1) %

Income before taxes 33,507 11.5 % 28,276 9.6 %

1 unchanged sentence

Net income $ 24,946 8.5 % $ 21,099 7.2 %

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

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

2024 2023 Total

5 unchanged sentences

Consolidated $ 292,506 $ 293,267 $ (761) $ 1,287 $ (4,464) $ 2,416

Consolidated net sales were essentially flat at $390.7 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

Revenue of $18.9 million generated from recent acquisitions in the Residential segment was essentially offset by a $17.9 million or 5.0% decrease in organic revenue, the result of a 4% volume decline along with a 1% decrease in pricing to customers due to price management initiatives.

Consolidated backlog increased 5% to $375 million, as compared to the end of the prior year quarter.

Net sales in the Company's Renewables segment decreased $4.8 million, or 4.2%, to $106.4 million for the three months ended September 30, 2023 compared to $111.1 million for the three months ended September 30, 2022.

Revenue declined as module supply, local permitting delays and pending guidance on final IRA tax credit guidelines delayed the timing of contracted and active projects.

Module imports have declined as a result of continued, yet improving, importation challenges resulting from the UFLPA implemented in June 2022.

New order bookings remained robust as backlog increased 13% from the prior year, as customers and solar module importers gain a better understanding of documentary compliance requirements relative to the UFLPA.

Net sales in the Company's Residential segment increased $12.2 million, or 5.6%, to $227.7 million for the three months ended September 30, 2023 compared to $215.6 million for the three months ended September 30, 2022.

Sales of $18.9 million generated from recent acquisitions along with the positive impact of participation gains and expanded market presence offset the year over year impact of market price adjustments in response to lower commodity prices and 80/20 initiatives targeting less attractive product lines.

Net sales in the Company's Agtech segment decreased 28.3%, or $12.6 million, to $31.7 million for the three months ended September 30, 2023 compared to $44.2 million for the three months ended September 30, 2022.

The revenue decline was driven by timing of new project construction shifting from the third quarter to the fourth

quarter, partially offset by new project construction activity commencing at the end of the quarter.

Backlog decreased 6% year over year.

Net sales in the Company's Infrastructure segment increased 22.5%, or $4.6 million, to $25.0 million for the three months ended September 30, 2023 compared to $20.4 million for the three months ended September 30, 2022.

The increase in revenue was due to strong end market demand and ongoing efforts to increase market participation.

Backlog also benefited from these efforts resulting in a 6% increase year over year.

The Company's consolidated gross margin increased to 27.0% for the three months ended September 30, 2023 compared to 24.2% for the three months ended September 30, 2022.

The increase was driven by improved price to material cost alignment, solid execution in field operations and continued operational efficiencies, along with 80/20 initiatives and favorable business and product mix.

Selling, general, and administrative ("SG&A") expenses increased by $5.0 million, or 10.7% to $52.2 million for the three months ended September 30, 2023 compared to $47.2 million for the three months ended September 30, 2022.

Consolidated net sales were essentially flat for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, the net result of a slight increase in pricing to customers offset by a decrease due to portfolio management activities in the prior year.

Growth in the Company's Residential and Infrastructure segments, along with revenue of $1.3 million generated from a recent acquisition, was more than offset by $4.5 million of sales related to portfolio management along with an anticipated decline in revenue in the Company's Renewables segment.

Consolidated backlog decreased 3% to $340 million, as compared to the end of the prior year quarter.

Net sales in the Company's Renewables segment decreased $7.7 million, or 13.0%, to $51.5 million for the three months ended March 31, 2024 compared to $59.2 million for the three months ended March 31, 2023.

Revenue declined due to the rapid customer transition to a recently launched tracker product, which currently has a longer supply lead time than fixed tilt products which largely comprised the demand for prior year quarter's orders and revenues.

Portfolio management activities related to the sale of the segment's Japan renewables business in December 2023 also contributed to the decline.

Backlog increased 8% from the prior year, on pace with expectations, as end market demand remains robust even as customers await final domestic content tax credit guidance related to the Inflation Reduction Act and navigate project-specific permitting delays.

Net sales in the Company's Residential segment increased $5.6 million, or 3.1%, to $185.1 million for the three months ended March 31, 2024 compared to $179.5 million for the three months ended March 31, 2023.

Organic growth of 2.4% was driven by continuing participation gains, growth with customers and geographic expansion.

In addition, $1.3 million of revenue was generated by the recent acquisition.

Net sales in the Company's Agtech segment decreased 5.3%, or $1.8 million, to $34.0 million for the three months ended March 31, 2024 compared to $35.9 million for the three months ended March 31, 2023.

The revenue declined due to $2.5 million of revenues recorded in the prior year related to portfolio management actions which were partially offset by a slight increase in volume.

While backlog decreased 21% year over year due to timing of order flow, subsequent project bookings in April will contribute to backlog and revenue in the coming months.

Net sales in the Company's Infrastructure segment increased 17.1%, or $3.2 million, to $21.9 million for the three months ended March 31, 2024 compared to $18.7 million for the three months ended March 31, 2023.

The increase in revenue was due to strong execution, continued solid end market demand and market participation gains.

Backlog decreased 10% as expected from the prior year due to the continued progress on a large project, while demand, project design and quoting remain strong.

The Company's consolidated gross margin increased to 28.9% for the three months ended March 31, 2024 compared to 26.2% for the three months ended March 31, 2023.

The increase was driven by improved price to material cost alignment, and continued operational efficiencies, along with 80/20 initiatives and favorable business and product mix.

Selling, general, and administrative ("SG&A") expenses increased by $5.1 million, or 10.7% to $52.7 million for the three months ended March 31, 2024 compared to $47.6 million for the three months ended March 31, 2023.

The $5.1 million increase was primarily due to higher performance-based compensation expense as compared to the prior year quarter.

SG&A expenses as a percentage of net sales increased to 13.4% for the three months ended September 30, 2023 compared to 12.1% for the three months ended September 30, 2022.

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):

SG&A expenses as a percentage of net sales increased to 18.1% for the three months ended March 31, 2024 compared to 16.2% for the three months ended March 31, 2023.

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):

2024 2023 Total

7 unchanged sentences

The Renewables segment generated an operating margin of 3.2% in the current year quarter compared to 3.8% in the prior year quarter.

The decrease in operating margin was a result of restructuring charges incurred in the current year quarter related to addressing customer issues arising from the discontinued legacy solar tracker solution, largely offset by favorable price to cost alignment and field operations efficiencies.

The decrease in operating margin was a result of lower volumes and product line mix associated with the ramp up of the new tracker product line in the current year quarter.

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 expansion in operating margin was the result of increased volume, improved alignment of price/cost, implementation of additional 80/20 initiatives, and favorable product line mix.

Operating margin improved year over year, driven by continued improvement in execution and ongoing improvement in price/cost management.

The Agtech segment generated an operating margin of 7.7% in the current year quarter compared to 6.5% in the prior year quarter.

Operating margin declined year over year due to less favorable price to cost alignment, volume deleverage and product mix, partially offset by 80/20 initiatives.

The Infrastructure segment generated an operating margin of 25.6% during the three months ended September 30, 2023 compared to 12.6% during the three months ended September 30, 2022.

The margin improved year over year driven by strong operating execution, strategic pricing, 80/20 productivity, supply chain productivity and favorable product line mix.

Unallocated corporate expenses increased $1.4 million from $9.0 million during the three months ended September 30, 2022 to $10.4 million during the three months ended September 30, 2023.

Operating margin improved year over year due to the impact of restructuring costs incurred in the prior year partially offset by project start date delays and market and product mix across the segment.

The Infrastructure segment generated an operating margin of 22.4% during the three months ended March 31, 2024 compared to 14.5% during the three months ended March 31, 2023.

The margin improved year over year driven by increased volume, favorable price/cost alignment, ongoing strong operating execution, 80/20 productivity, and improving product mix.

Unallocated corporate expenses increased $4.3 million from $7.5 million during the three months ended March 31, 2023 to $11.8 million during the three months ended March 31, 2024.

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

Interest expense decreased $0.6 million to $0.4 million for the three months ended September 30, 2023 compared to $1.0 million for the three months ended September 30, 2022.

Despite higher interest rates in the current year quarter as compared to the prior year quarter, the decrease in interest expense was primarily due to lower average outstanding balances on the Company's revolving credit facility during these respective quarters.

The Company recorded other income of $1.0 million for the three months ended September 30, 2023, compared to other expense of $0.4 million recorded for the three months ended September 30, 2022.

The change year over year is the combined result of foreign currency translation fluctuations and changes in the fair market valuation allowance related to the liquidation of the processing business.

The Company recognized a provision for income taxes of $14.5 million and $11.7 million, with effective tax rates of 27.0% and 25.4% for the three months ended September 30, 2023, and 2022, respectively.

The effective tax rate for the three months ended September 30, 2023, and 2022, 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.

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

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 $ 1,048,925 100.0 % $ 1,076,105 100.0 %

Cost of sales 769,873 73.4 % 826,434 76.8 %

Gross profit 279,052 26.6 % 249,671 23.2 %

Selling, general, and administrative expense 153,415 14.6 % 140,941 13.1 %

Income from operations 125,637 12.0 % 108,730 10.1 %

Interest expense 3,216 0.3 % 2,189 0.2 %

Other (income) expense (1,946) (0.2) % 797 0.1 %

Income before taxes 124,367 11.9 % 105,744 9.8 %

Provision for income taxes 33,268 3.2 % 26,686 2.5 %

Net income $ 91,099 8.7 % $ 79,058 7.3 %

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

2023 2022 Total

Change Acquisitions Portfolio Management Ongoing Operations

Renewables $ 243,026 $ 291,451 $ (48,425) $ — $ — $ (48,425)

Residential 635,476 595,322 40,154 58,709 — (18,555)

Agtech 102,546 130,325 (27,779) — (2,838) (24,941)

Infrastructure 67,877 59,007 8,870 — — 8,870

Consolidated $ 1,048,925 $ 1,076,105 $ (27,180) $ 58,709 $ (2,838) $ (83,051)

Consolidated net sales decreased by $27.2 million, or 2.5%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The decrease in revenue was driven by a $83.1 million or 7.7% decrease in organic revenue, largely the result of a 8% volume decline.

Partially offsetting the year over year decrease were $58.7 million of revenues generated by recent acquisitions, which are reported as part of the Company's Residential segment, along with participation gains.

Consolidated backlog increased 5% to $375 million, as compared to the end of the prior year period.

Net sales in the Company's Renewables segment decreased $48.4 million, or 16.6%, to $243.0 million for the nine months ended September 30, 2023 compared to $291.5 million for the nine months ended September 30, 2022.

The decline was the result of decreased demand for solar racking installations, which continues to be impacted by importation challenges resulting from the UFLPA, timing delays incurred due to lengthier permitting processes, and pending guidance on final IRA tax credit guidelines.

New order bookings continued to accelerate during the year and backlog increased 13% from the prior year.

Net sales in the Company's Residential segment increased $40.2 million, or 6.8%, to $635.5 million for the nine months ended September 30, 2023 compared to $595.3 million for the nine months ended September 30, 2022.

Sales of $58.7 million generated by recent acquisitions, along with the positive impact of participation gains and expanded market presence more than offset channel inventory corrections and price declines related to commodity cost reductions and 80/20 initiatives targeting less attractive product lines.

Net sales in the Company's Agtech segment decreased 21.3%, or $27.8 million, to $102.5 million for the nine months ended September 30, 2023 compared to $130.3 million for the nine months ended September 30, 2022.

Revenue declined as both the segment's commercial business and produce projects experienced delayed new project starts, driven by the timing of project construction.

While backlog decreased 6% year over year, the Company expects new project execution that is underway to help drive revenue growth in the fourth quarter of 2023.

Net sales in the Company's Infrastructure segment increased 15.1%, or $8.9 million, to $67.9 million for the nine months ended September 30, 2023 compared to $59.0 million for the nine months ended September 30, 2022.

The increase in revenue was due to continued solid market demand and ongoing efforts to increase market participation.

Backlog also benefited from these efforts resulting in a 6% increase year over year.

The Company's consolidated gross margin increased to 26.6% for the nine months ended September 30, 2023 compared to 23.2% for the nine months ended September 30, 2022.

The increase was driven by improved price to material cost alignment, solid execution in field operations, improvement in supply chain management and continued operational efficiencies, along with 80/20 initiatives and favorable business and product mix.

Selling, general, and administrative ("SG&A") expenses increased by $12.5 million, or 8.9%, to $153.4 million for the nine months ended September 30, 2023 compared to $140.9 million for the nine months ended September 30, 2022.

The $12.5 million increase was primarily due to higher performance-based compensation expense as compared to the prior year.

Incremental SG&A expenses incurred by recent acquisitions also contributed to the increase.

SG&A expenses as a percentage of net sales increased to 14.6% for the nine months ended September 30, 2023 compared to 13.1% for the nine months ended September 30, 2022.

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):

2023 2022 Total

Income from operations:

Renewables $ 21,084 8.7 % $ 14,061 4.8 % $ 7,023

Residential 115,626 18.2 % 104,901 17.6 % 10,725

Agtech 3,349 3.3 % 5,350 4.1 % (2,001)

Infrastructure 14,928 22.0 % 6,640 11.3 % 8,288

Unallocated Corporate Expenses (29,350) (2.8) % (22,222) (2.1) % (7,128)

Consolidated income from operations $ 125,637 12.0 % $ 108,730 10.1 % $ 16,907

The Renewables segment generated an operating margin of 8.7% in the current year compared to 4.8% in the prior year.

The increase in operating margin was driven by field operations productivity, favorable price to cost alignment and improved supply chain management that offset lower volumes and higher restructuring expenses recorded in the current year.

The Residential segment generated an operating margin of 18.2% in the current year compared to 17.6% in the prior year.

The increase in operating margin was the result of continued price/cost rebalancing, 80/20 activities and mix, offset by the anticipated lower margins from the Company's recent acquisitions.

The Agtech segment generated an operating margin of 3.3% in the current year compared to 4.1% in the prior year.

Operating margin declined year over year due to volume deleverage and product mix, partially offset by 80/20 initiatives and improvement in project management systems.

The Infrastructure segment generated an operating margin of 22.0% during the nine months ended September 30, 2023 compared to 11.3% during the nine months ended September 30, 2022.

The margin improved year over year driven by strong operating execution, 80/20 productivity, supply chain efficiency, and product line mix.

Unallocated corporate expenses increased $7.1 million from $22.2 million during the nine months ended September 30, 2022 to $29.4 million during the nine months ended September 30, 2023.

The increase in expense was primarily due to higher performance-based compensation expense as compared to the prior year.

Interest expense increased year over year with $3.2 million for the nine months ended September 30, 2023 compared to $2.2 million for the nine months ended September 30, 2022.

The increase in expense was due to higher interest rates which nearly tripled compared to the prior year, largely offset by higher average outstanding balances in the prior year, $50 million compared to $73 million, for September 30, 2023 and 2022, respectively.

The Company recorded other income of $1.9 million for the nine months ended September 30, 2023, compared to other expense of $0.8 million recorded for the nine months ended September 30, 2022.

The change year over year is the combined result of foreign currency translation fluctuations and changes in the fair market valuation allowance related to the liquidation of the processing business.

The Company recognized a provision for income taxes of $33.3 million and $26.7 million, with effective tax rates of 26.7% and 25.2% for the nine months ended September 30, 2023 and 2022, respectively.

The effective tax rate for the nine months ended September 30, 2023, and 2022, respectively, was greater than the U.S.

The Company recorded interest income of $0.8 million for the three months ended March 31, 2024, compared to interest expense of $1.5 million for the three months ended March 31, 2023.

Expense in the prior year quarter was the result of a $49.9 million outstanding balance on the Company's revolving credit facility as of March 31, 2023, while no amounts were outstanding during the three months ended March 31, 2024.

Other income increased year over year with $1.0 million recorded for the three months ended March 31, 2024, compared to $0.4 million recorded for the three months ended March 31, 2023.

The change year over year is the combined result of $1.0 million of working capital and other adjustments recorded in the current year quarter, relating to the sale of the Company's Japan-based solar racking business within its Renewables segment and foreign currency translation fluctuations.

The Company recognized a provision for income taxes of $8.6 million and $7.2 million, with effective tax rates of 25.6% and 25.4% for the three months ended March 31, 2024, and 2023, respectively.

The effective tax rate for the three months ended March 31, 2024, and 2023, 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.

1 unchanged sentence

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Cash and cash equivalents $ 146,665 $ 99,426

2 unchanged sentences

Sources of Liquidity

The Company's sources of liquidity are comprised of cash on hand and available borrowing capacity under the Company's Credit Agreement (the "Credit Agreement"), entered into on December 8, 2022.

The Credit Agreement replaced and paid off all amounts owed under the Sixth Amended and Restated Credit Agreement dated as of January 24, 2019.

The Credit Agreement maintains similar capacity as the prior agreement in which it provides for a revolving credit facility and letters of credit in an aggregate amount equal to $400 million.

The Company's primary sources of liquidity are comprised of cash on hand and its available borrowing capacity provided under the Company's Credit Agreement (the "Credit Agreement").

The Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount equal to $400 million and terminates on December 8, 2027.

The Company believes that these sources provide the Company with ample liquidity and capital resources to invest in operational excellence, growth initiatives and the development of the organization.

The Company has been able to weather the economic impacts of the broader market dynamics, including the inflationary cost environment, while continuing to make investments that support the Company's strategy.

The Company continues to remain focused on managing its working capital, closely monitoring customer credit and collection activities, and working to extend payment terms with its vendors.

The Company believes its liquidity, together with the cash expected to be generated from operations, will be sufficient to fund working capital needs and growth initiatives for the foreseeable future.

The Company can and does use the Credit Agreement to provide liquidity and capital resources primarily for the Company's U.S.

operations when necessary.

Generally, the Company's foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements.

As of September 30, 2023 and December 31, 2022, the Company's foreign subsidiaries held $22.3 million and $15.2 million of cash, respectively.

Outstanding balances on the Company's revolving credit facility under the Company's Credit Agreement accrue interest at a rate, at the Company's option, equal to the applicable margin plus (a) a base rate, (b) a daily simple secured overnight financing rate ("SOFR"), (c) a term SOFR rate, or (d) for certain foreign currencies, a foreign currency rate.

See Note 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 Credit Agreement.

Generally, the Company's foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements.

As of March 31, 2024 and December 31, 2023, the Company's foreign subsidiaries held $4.7 million and $6.9 million of cash, respectively.

The Company believes that these sources, together with cash expected to be generated from operations, should provide the Company with ample liquidity and capital resources to meet its cash requirements and to continue to invest in operational excellence, growth initiatives and the development of the organization.

Uses of Cash / Cash Requirements

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

The Company's principal capital requirements are to fund its operations' working capital and capital improvements, as well as provide capital for acquisitions and to strategically allocate capital through repurchases of Company stock.

The Company's material short-term cash requirements primarily include accounts payable, certain employee and retiree benefit-related obligations, operating lease obligations, capital expenditures, and other purchase obligations originating in the normal course of business for inventory purchase orders and contractual service agreements.

The Company will continue to invest in growth opportunities as appropriate while focusing on working capital efficiency and profit improvement opportunities to minimize the cash invested to operate its business.

The Company intends to fund its cash requirements through cash generated from operations and, as necessary, from the availability on its revolving credit facility.

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.

As of September 30, 2023, the Company has repurchased 2,518,941 shares for an aggregate price of $111.0 million under this repurchase program, including 521,575 shares repurchased for an aggregate price of $25.2 million during the nine months ended September 30, 2023.

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

The $10.4 million preliminary purchase price for the acquisition of a privately held Utah-based company was financed primarily through borrowing on our revolving credit facility.

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

the Credit Agreement, new debt financing, the issuance of equity securities, or any combination of the aforementioned.

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.

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See Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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

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

Cash provided by (used in):

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Effect of foreign exchange rate changes (142) (11)

Net increase in cash and cash equivalents $ 67,857 $ 9,070

Net increase (decrease) in cash and cash equivalents $ 47,239 $ (10,111)

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2023 of $206.7 million consisted of net income of $91.1 million, non-cash net charges totaling $31.5 million, which include depreciation, amortization, stock-based compensation, exit activity recoveries and other non-cash charges, and $84.1 million of cash generated from working capital and other net operating assets.

The cash generated from working capital and other net operating assets was largely due to increases in accounts payable, the result of the timing of purchases and

vendor payments, and billings in excess of costs, the result of increased advance payments from and billings to customers on projects.

In addition, cash was generated due to the Company's focus on reducing its investment in inventory to better align with lower sales volumes while still meeting customer demand.

These activities were partially offset by an increase in accounts receivable largely the result of seasonal increases in demand.

Net cash provided by operating activities for the nine months ended September 30, 2022 of $38.6 million consisted of income from continuing operations of $79.1 million and non-cash net charges totaling $30.3 million, which include depreciation, amortization, stock-based compensation, exit activity costs and other non-cash charges, offset by a $70.8 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, holding increased quantities due to general supply chain disruption, 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.

Net cash provided by operating activities for the three months ended March 31, 2024 of $53.2 million consisted of net income of $24.9 million, non-cash net charges totaling $11.0 million, which include depreciation, amortization, stock-based compensation, exit activity recoveries and other non-cash charges, and $17.3 million of cash generated from working capital and other net operating assets.

The cash generated from working capital and other net operating assets was largely due to increases in accounts payable, the result of the timing of purchases and vendor payments, partially offset by investment in inventory to align with anticipated seasonal sales volumes increases.

Net cash provided by operating activities for the three months ended March 31, 2023 of $38.0 million consisted of net income of $21.1 million, non-cash net charges totaling $9.3 million, which include depreciation, amortization, stock-based compensation, exit activity recoveries and other non-cash charges, and $7.6 million of cash generated from working capital and other net assets.

The cash generated from working capital and other net assets was due to an increase in accounts payable as a result of the timing of purchases and vendor payments, offset by an increase in accounts receivable as revenues increased in the latter part of the quarter.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2023 of $17.8 million consisted of cash paid of $10.4 million for the acquisition of a privately held Utah-based company offset by receipt of the $0.6 million final working capital settlement related to the 2022 acquisition of QAP and net capital expenditures of $8.0 million.

Net cash used in investing activities for the nine months ended September 30, 2022 of $67.3 million consisted of net cash paid of $51.6 million for the acquisition of QAP and net capital expenditures of $15.7 million.

Net cash used in investing activities for the three months ended March 31, 2024 of $4.4 million consisted of net capital expenditures.

Net cash used in investing activities for the three months ended March 31, 2023 of $1.6 million was primarily due to capital expenditures of $2.2 million, offset by receipt of the $0.6 million final working capital settlement resulting from the 2022 acquisition of QAP.

Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2023 of $120.2 million consisted of net long-term debt payments of $91.0 million and $29.2 million of common stock repurchases.

Net cash used in financing activities for the three months ended March 31, 2024 of $1.4 million consisted 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 for the three months ended March 31, 2023 of $46.5 million consisted of net long-term debt payments of $39.0 million and $7.5 million of common stock repurchases.

Net long-term debt payments consisted of $50.0 million in long-term debt payments, offset by $11.0 million in proceeds from borrowing on the Company's long-term debt credit facility.

The Company paid $26.0 million during the nine months ended September 30, 2023 related to repurchase of 538,575 shares under the Company's authorized share repurchase program.

The remainder of the repurchased common stock of $3.2 million related to the net settlement of tax obligations for participants in the Company's equity incentive plans.

Net cash provided by financing activities for the nine months ended September 30, 2022 of $39.7 million was the result of $197.8 million in proceeds from borrowing on our long-term credit facility, offset by $100.0 million in payments on long-term debt and $58.1 million of common stock repurchases.

Share repurchases of 1,333,453 under the Company’s authorized share repurchase program totaled $55.5 million with the balance repurchased for the net settlement of tax obligations for participants in the Company's equity incentive plans.

The Company repurchased 153,537 shares under the Company's

authorized share repurchase program which totaled $5.6 million paid during the three months ended March 31, 2023 with the balance repurchased common stock of $1.9 million related to the net settlement of tax obligations for participants in the Company's equity incentive plans.

Critical Accounting Estimates

There have been no material changes to the Company's critical accounting estimates during the nine months ended September 30, 2023 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, 2022.

There have been no material changes to the Company's critical accounting estimates during the three months ended March 31, 2024 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, 2023.

Recent Accounting Pronouncements

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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