RESTRUCTURING AND ASSET DISPOSITIONS

6 Months Ended

Jun. 30, 2024

Restructuring and Related Activities [Abstract]

Restructuring

The Company began a restructuring plan (the "Restructuring Plan") in 2022, and undertook significant actions to streamline operations, reduce costs and improve efficiencies. The major initiatives of the first phase of the Restructuring Plan included (i) narrowing the Company's product and brand portfolio and (ii) the relocation and consolidation of certain manufacturing and distribution centers, including headcount reductions and reorganization to drive a solution based approach. During the three and six months ended June 30, 2023, the Company recorded pre-tax expense of $788 and $2,199, respectively, relating primarily to the relocation and termination of certain facilities in Canada. The Company incurred $417 and $744 of non-cash charges during the three and six months ended June 30, 2023, respectively, relating to asset dispositions and write-downs. The Company recorded $720 and $1,957 of restructuring related charges within Cost of goods sold on the consolidated statements of operations for the three and six months ended June 30, 2023, respectively. The Company recorded $68 and $242 within Selling, general and administrative ("SG&A") expenses on the consolidated statements of operations for the three and six months ended June 30, 2023, respectively. Total costs incurred relating to this first phase of the Restructuring Plan, from its inception in 2022 to its completion in 2023, were (i) $6,398 relating primarily to inventory markdowns, and (ii) $3,373 relating primarily to the relocation and termination of certain facilities in Canada.

As a result of the continued adverse market conditions, the Company implemented a second phase of the Restructuring Plan beginning in the third quarter of 2023, including U.S. manufacturing facility consolidations, in particular with respect to production of certain durable equipment products. During the three and six months ended June 30, 2024, the Company recorded pre-tax restructuring charges of $927 and $1,065, respectively, for the second phase, relating primarily to cash charges associated with the consolidation and closure of U.S. manufacturing facilities including termination and disposal costs. The non-cash charges consist of fixed asset and inventory write-downs. Of the $927 and $1,065 recorded charges, $890 and $981, was recorded within Cost of goods sold on the condensed consolidated statements of operations during the three and six months ended June 30, 2024, respectively. The Company recorded $37 and $84 within Selling, general and administrative ("SG&A") expenses on the condensed consolidated statements of operations during the three and six months ended June 30, 2024, respectively. Total costs incurred relating to this second phase of the Restructuring Plan, from its commencement in the third quarter of 2023 through June 30, 2024, are (i) $9,179 of non-cash charges relating primarily to inventory markdowns of durable equipment products, and (ii) $1,071 of cash charges relating primarily to the consolidation of U.S. manufacturing facilities including termination and disposal costs.

The following tables present the activity in accrued expenses and other current liabilities for restructuring costs related to the Restructuring Plan for the three and six months ended June 30, 2024, respectively:


	Three Months Ended June 30, 2024
Restructuring Accruals as of March 31, 2024	$	137
Expense	620
Cash Payments	(448)
Restructuring Accruals as of June 30, 2024	$	309


	Six Months Ended June 30, 2024
Restructuring Accruals as of December 31, 2023	$	187
Expense	750
Cash Payments	(628)
Restructuring Accruals as of June 30, 2024	$	309


	Three Months Ended June 30, 2023
Restructuring Accruals as of March 31, 2023	$	624
Expense	371
Cash Payments	(502)
Restructuring Accruals as of June 30, 2023	$	493


	Six Months Ended June 30, 2023
Restructuring Accruals as of December 31, 2022	$	696
Expense	1,455
Cash Payments	(1,658)
Restructuring Accruals as of June 30, 2023	$	493

Refer to Item 2. Management’s Discussion And Analysis Of Financial Condition And Results of Operations – Market Conditions for further explanation of the Restructuring Plan and estimates of additional costs that may be incurred. The amounts the Company will ultimately realize or disburse could differ from these estimates.

Asset Disposition

On May 10, 2024, in connection with the Company's restructuring of its durable manufacturing operations, the Company entered into an agreement (the “Purchase Agreement”) with CM Fabrication, LLC (the “Buyer”) to sell assets relating to the production of Innovative Growers Equipment ("IGE") durable equipment products for $8,660 (the “Asset Sale”) and retain the proprietary brand and customer relationships. The Asset Sale closed on May 31, 2024, and the Company continues to sell its IGE branded durable products, including horticulture benches, racking and LED lighting systems. In connection with the transaction, the Company entered into an exclusive supply agreement with the Buyer to provide for contract manufacturing, which is expected to yield a more efficient cost model.

Assets and liabilities that were sold, disposed or terminated in connection with the Asset Sale included $11,616 of inventories, $3,721 of property, plant and equipment, technology intangible assets of $2,573, and other net liabilities of $90. The Company paid cash to terminate the facility operating lease for $1,275 and certain equipment finance leases for $668. The Company incurred an estimated $417 of transaction costs, including legal fees and other transaction-related expenses. The Company recorded a Loss on asset disposition of $11,520 on the condensed consolidated statements of operations for the three and six months ended June 30, 2024, which included the aforementioned assets and liabilities derecognized, and operating and finance lease termination payments. The Company estimated the amount of cash proceeds associated with the sale of inventories as $4,960 and property, plant and equipment as $3,700, and classified the amounts within net cash from operating activities and investing activities, respectively, on the condensed consolidated statements of cash flows for the six months ended June 30, 2024.

Pursuant to requirements in the Company's Revolving Credit Facility, consent was obtained from JPMorgan Chase Bank, N.A., as administrative agent to permit the Asset Sale. The Company intends to reinvest the net proceeds from the Asset Sale into certain permitted investments, such as capital expenditures, in accordance with provisions of the Term Loan.

The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 10.4 to this Quarterly Report on Form 10-Q.

Assets Held for Sale

During the three months ended June 30, 2024, the Company entered into an agreement to sell approximately 20 acres of the 140 acres of excess owned land at the Goshen, New York location. The transaction is expected to close in the second half

of 2024. The estimated sale price less costs to sell are consistent with the carrying value of the land, and therefore no estimated gain or loss was recorded in the three months ended June 30, 2024. The $470 carrying value of the land was reclassified from "Property, plant and equipment, net" to "Assets held for sale" on the Company's condensed consolidated balance sheet as of June 30, 2024.