Item 1. Financial Statements
Item 1. Financial Statements (Unaudited)
ASTEC INDUSTRIES, INC.
Consolidated Balance Sheets
(In millions, except share and per share data, unaudited)
September 30, 2021 December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents $ 164.6 $ 158.6
Investments 9.2 4.3
Trade receivables and contract assets, net of allowance for credit losses of $ 2.3 and $ 1.7 , respectively
145.8 115.9
Other receivables 3.7 4.7
Inventories 282.8 249.7
Prepaid and refundable income taxes 15.8 8.8
Prepaid expenses and other assets 17.8 17.5
Assets held for sale 5.1 6.3
Total current assets 644.8 565.8
Property and equipment, net of accumulated depreciation of $ 248.5 and $ 237.6 , respectively
167.5 172.8
Investments 10.5 13.7
Goodwill 38.5 38.7
Intangible assets, net of accumulated amortization of $ 35.6 and $ 31.3 , respectively
24.3 31.2
Deferred income tax assets 15.0 15.0
Other long-term assets 10.1 11.0
Total assets $ 910.7 $ 848.2
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt $ 0.2 $ 0.2
Short-term debt 0.5 1.4
Accounts payable 77.9 52.7
Customer deposits 38.0 34.2
Accrued product warranty 10.5 10.3
Accrued payroll and related liabilities 29.9 20.8
Accrued loss reserves 1.8 3.0
Other current liabilities 53.2 47.7
Total current liabilities 212.0 170.3
Long-term debt 0.2 0.4
Deferred income tax liabilities 0.5 0.5
Other long-term liabilities 34.9 34.0
Total liabilities 247.6 205.2
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock - authorized 4,000,000 shares of $ 1.00 par value; none issued
— —
Common stock – authorized 40,000,000 shares of $ 0.20 par value; issued and outstanding – 22,762,989 as of September 30, 2021 and 22,611,976 as of December 31, 2020
4.6 4.5
Additional paid-in capital 129.2 127.8
Accumulated other comprehensive loss ( 34.6 ) ( 33.5 )
Company stock held by SERP, at cost ( 1.2 ) ( 1.5 )
Retained earnings 564.7 545.2
Shareholders' equity: 662.7 642.5
Noncontrolling interest 0.4 0.5
Total equity 663.1 643.0
Total liabilities and equity $ 910.7 $ 848.2
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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ASTEC INDUSTRIES, INC.
Consolidated Statements of Operations
(In millions, except share and per share data, unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net sales $ 267.0 $ 231.4 $ 829.4 $ 785.5
Cost of sales 204.7 181.2 631.6 602.3
Gross profit 62.3 50.2 197.8 183.2
Selling, general and administrative expenses 48.6 43.2 148.3 130.2
Research and development expenses 6.7 5.7 20.0 17.6
Restructuring, impairment and other asset charges, net 0.3 2.2 1.8 10.3
Income (loss) from operations 6.7 ( 0.9 ) 27.7 25.1
Other income:
Interest expense ( 0.2 ) — ( 0.6 ) ( 0.2 )
Interest income 0.1 0.2 0.4 0.6
Other (expenses) income, net ( 0.1 ) 1.1 ( 0.1 ) 1.4
Income from operations before income taxes 6.5 0.4 27.4 26.9
Income tax (benefit) provision ( 2.8 ) ( 1.2 ) 0.4 ( 4.5 )
Net income 9.3 1.6 27.0 31.4
Net loss attributable to noncontrolling interest — — — 0.1
Net income attributable to controlling interest $ 9.3 $ 1.6 $ 27.0 $ 31.5
Per share data:
Earnings per common share - Basic $ 0.41 $ 0.07 $ 1.19 $ 1.39
Earnings per common share - Diluted $ 0.41 $ 0.07 $ 1.18 $ 1.38
Weighted average shares outstanding - Basic 22,761,203 22,615,492 22,712,894 22,592,779
Weighted average shares outstanding - Diluted 22,913,563 22,945,893 22,922,930 22,837,725
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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ASTEC INDUSTRIES, INC.
Consolidated Statements of Comprehensive Income (Loss)
(In millions, unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net income $ 9.3 $ 1.6 $ 27.0 $ 31.4
Other comprehensive (loss) income:
Foreign currency translation adjustments ( 4.5 ) 0.5 ( 1.2 ) ( 8.3 )
Other comprehensive (loss) income ( 4.5 ) 0.5 ( 1.2 ) ( 8.3 )
Comprehensive income 4.8 2.1 25.8 23.1
Comprehensive loss attributable to noncontrolling interest 0.1 — 0.1 0.2
Comprehensive income attributable to controlling interest $ 4.9 $ 2.1 $ 25.9 $ 23.3
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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ASTEC INDUSTRIES, INC.
Consolidated Statements of Cash Flows
(In millions, unaudited)
Nine Months Ended September 30,
2021 2020
Cash flows from operating activities:
Net income $ 27.0 $ 31.4
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 15.0 15.5
Amortization 7.6 3.9
Provision for credit losses 0.6 0.6
Provision for warranties 8.5 7.1
Deferred compensation (benefit) expense — 0.5
Share-based compensation 4.6 4.8
Deferred tax provision 0.3 14.0
Gain on disposition of property and equipment ( 0.5 ) ( 0.8 )
Gain on disposition of subsidiary — ( 1.1 )
Asset impairment charges 0.2 4.1
Distributions to SERP participants ( 2.4 ) ( 1.2 )
Change in operating assets and liabilities, excluding the effects of acquisitions:
Purchase of trading securities, net ( 2.4 ) ( 0.5 )
Receivables and other contract assets ( 31.3 ) ( 2.0 )
Inventories ( 33.4 ) 43.2
Prepaid expenses 0.2 7.5
Other assets ( 3.0 ) ( 1.7 )
Accounts payable 26.6 ( 8.0 )
Accrued loss reserves 0.1 0.2
Accrued payroll and related expenses 9.3 1.0
Other accrued liabilities 10.3 2.9
Accrued product warranty ( 8.3 ) ( 7.3 )
Customer deposits 4.0 ( 18.0 )
Income taxes payable/prepaid ( 5.7 ) 8.6
Other — ( 2.6 )
Net cash provided by operating activities 27.3 102.1
Cash flows from investing activities:
Acquisitions, net of cash acquired 0.1 ( 28.3 )
Proceeds from (price adjustment on prior) sale of subsidiary ( 1.1 ) 1.1
Expenditures for property and equipment ( 10.9 ) ( 10.9 )
Proceeds from sale of property and equipment 1.7 6.0
Purchase of investments ( 0.8 ) ( 0.9 )
Sale of investments 1.8 1.2
Net cash used by investing activities ( 9.2 ) ( 31.8 )
(Continued)
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ASTEC INDUSTRIES, INC.
Consolidated Statements of Cash Flows (Continued)
(In millions, unaudited)
Nine Months Ended September 30,
2021 2020
Cash flows from financing activities:
Payment of dividends ( 7.5 ) ( 7.5 )
Borrowings under bank loans 2.5 0.2
Repayment of bank loans ( 3.6 ) ( 0.5 )
Sale of Company stock by SERP, net 0.6 0.2
Withholding tax paid upon vesting of share-based compensation awards ( 3.4 ) ( 0.7 )
Net cash used by financing activities ( 11.4 ) ( 8.3 )
Effect of exchange rates on cash ( 0.7 ) ( 2.4 )
Increase in cash and cash equivalents 6.0 59.6
Cash and cash equivalents, beginning of period 158.6 48.9
Cash and cash equivalents, end of period $ 164.6 $ 108.5
Supplemental cash flow information:
Cash paid during the year for:
Interest, net of capitalized interest $ 0.2 $ 0.3
Income taxes paid (refunded) $ 6.7 $ ( 21.3 )
Supplemental disclosures of non-cash items:
Non-cash investing activities:
Capital expenditures in accounts payable $ 0.9 $ 0.3
Non-cash financing activities:
Additions to right-of-use assets and lease liabilities $ 1.4 $ 0.5
Liability award converted to equity $ — $ 0.8
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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ASTEC INDUSTRIES, INC.
Consolidated Statements of Equity
(In millions, unaudited)
Common Stock Common Stock Amount Additional Paid-in-Capital Accumulated Other Comprehensive Loss Company Shares Held by SERP Retained Earnings Non-controlling Interest Total Equity
Balance, December 31, 2020 22,611,976 $ 4.5 $ 127.8 $ ( 33.5 ) $ ( 1.5 ) $ 545.2 $ 0.5 $ 643.0
Net income — — — — — 8.7 — 8.7
Other comprehensive loss — — — ( 0.7 ) — — ( 0.1 ) ( 0.8 )
Dividends ($ 0.11 per share)
— — — — — ( 2.5 ) — ( 2.5 )
Share-based compensation — — 1.4 — — — — 1.4
Issuance of common stock under incentive plan 103,541 — — — — — — —
Withholding tax paid upon equity award vesting — — ( 3.0 ) — — — — ( 3.0 )
SERP transactions, net — — 0.1 — 0.1 — — 0.2
Balance, March 31, 2021 22,715,517 $ 4.5 $ 126.3 $ ( 34.2 ) $ ( 1.4 ) $ 551.4 $ 0.4 $ 647.0
Net income — — — — — 9.0 — 9.0
Other comprehensive income — — — 4.0 — — 0.1 4.1
Dividends ($ 0.11 per share)
— — — — — ( 2.5 ) — ( 2.5 )
Share-based compensation — — 1.5 — — — — 1.5
Issuance of common stock under incentive plan 41,809 0.1 — — — — — 0.1
Withholding tax paid upon equity award vesting — — ( 0.2 ) — — — — ( 0.2 )
SERP transactions, net — — 0.2 — 0.1 — — 0.3
Balance, June 30, 2021 22,757,326 $ 4.6 $ 127.8 $ ( 30.2 ) $ ( 1.3 ) $ 557.9 $ 0.5 $ 659.3
Net income — — — — — 9.3 — 9.3
Other comprehensive loss — — — ( 4.4 ) — — ( 0.1 ) ( 4.5 )
Dividends ($ 0.11 per share)
— — — — — ( 2.5 ) — ( 2.5 )
Share-based compensation — — 1.7 — — — — 1.7
Issuance of common stock under incentive plan 5,663 — ( 0.1 ) — — — — ( 0.1 )
Withholding tax paid upon equity award vesting — — ( 0.2 ) — — — — ( 0.2 )
SERP transactions, net — — — — 0.1 — — 0.1
Balance, September 30, 2021 22,762,989 $ 4.6 $ 129.2 $ ( 34.6 ) $ ( 1.2 ) $ 564.7 $ 0.4 $ 663.1
(Continued)
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ASTEC INDUSTRIES, INC.
Consolidated Statements of Equity (Continued)
(In millions, unaudited)
Common
Stock Common
Stock
Amount Additional
Paid-in-
Capital Accumulated Other Comprehensive Loss Company Shares Held by SERP Retained
Earnings Non-controlling
Interest Total
Equity
Balance, December 31, 2019 22,551,183 $ 4.5 $ 122.6 $ ( 31.8 ) $ ( 1.7 ) $ 508.3 $ 0.5 $ 602.4
Net income (loss) — — — — — 20.6 ( 0.2 ) 20.4
Other comprehensive loss — — — ( 9.2 ) — — — ( 9.2 )
Dividends ($ 0.11 per share)
— — — — — ( 2.5 ) — ( 2.5 )
Share-based compensation — — 1.1 — — — — 1.1
Issuance of common stock under incentive plan — — 0.8 — — — — 0.8
Withholding tax paid upon equity award vesting 32,663 — — — — — — —
Change in ownership percentage of subsidiary — — ( 0.5 ) — — — — ( 0.5 )
Balance, March 31, 2020 22,583,846 4.5 124.0 ( 41.0 ) ( 1.7 ) 526.4 0.3 612.5
Net income — — — — — 9.3 0.1 9.4
Other comprehensive income (loss) — — — 0.5 — — ( 0.1 ) 0.4
Dividends ($ 0.11 per share)
— — — — — ( 2.5 ) — ( 2.5 )
Share-based compensation — — 1.9 — — — — 1.9
Issuance of common stock under incentive plan 19,136 — — — — — — —
Withholding tax paid upon equity award vesting — — ( 0.1 ) — — — — ( 0.1 )
SERP transactions, net — — — — 0.1 — — 0.1
Balance, June 30, 2020 22,602,982 $ 4.5 $ 125.8 $ ( 40.5 ) $ ( 1.6 ) $ 533.2 $ 0.3 $ 621.7
Net income — — — — — 1.6 — 1.6
Other comprehensive income — — — 0.5 — — — 0.5
Dividends ($ 0.11 per share)
— — — — — ( 2.5 ) — ( 2.5 )
Share-based compensation — — 1.8 — — — — 1.8
Issuance of common stock under incentive plan 5,882 — — — — — — —
Withholding tax paid upon equity award vesting — — ( 0.1 ) — — — — ( 0.1 )
SERP transactions, net — — — — 0.1 — — 0.1
Balance, September 30, 2020 22,608,864 $ 4.5 $ 127.5 $ ( 40.0 ) $ ( 1.5 ) $ 532.3 $ 0.3 $ 623.1
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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ASTEC INDUSTRIES, INC.
Notes To Unaudited Consolidated Financial Statements
Note 1. Basis of Presentation and Significant Accounting Policies
Description of Business
Astec Industries, Inc. ("Astec" or the "Company") is a Tennessee corporation which was incorporated in 1972. The Company designs, engineers, manufactures and markets equipment and components used primarily in road building and related construction activities, as well as other products discussed below. The Company's products are used in each phase of road building, from quarrying and crushing the aggregate to application of the road surface. The Company also manufactures certain equipment and components unrelated to road construction, including equipment for the mining, quarrying, construction and demolition industries and port and rail yard operators; industrial heat transfer equipment; commercial whole-tree pulpwood chippers; horizontal grinders; blower trucks; concrete plants; commercial and industrial burners; and combustion control systems.
The Company operates in two reportable segments (plus Corporate) - Infrastructure Solutions and Materials Solutions. The Company's two reportable business segments comprise sites based upon the nature of the products or services produced, the type of customer for the products, the similarity of economic characteristics, the manner in which management reviews results and the nature of the production process, among other considerations.
The Corporate category consists primarily of the parent company and Astec Insurance Company ("Astec Insurance" or the "captive"), a captive insurance company, which do not meet the requirements for separate disclosure as an operating segment or inclusion in one of the other reporting segments. Management evaluates performance and allocates resources to the operating segments based on profit or loss from operations before United States ("U.S.") federal income taxes, state deferred taxes and corporate overhead and, thus, these costs are included in the Corporate category.
Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Astec and its subsidiaries and have been prepared by the Company, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). The Company prepares its financial statements in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP"). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the SEC rules and regulations governing interim financial statements. However, the Company believes that the disclosures made in the unaudited consolidated financial statements and related notes are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. All intercompany balances and transactions between the Company and its affiliates have been eliminated in consolidation.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and assumptions include inventory obsolescence costs, warranty costs, inventory net realizable value, self-insurance loss reserves, employee benefit programs and the measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. The COVID-19 pandemic has resulted in uncertainties in the Company's business, which may result in actual results differing from those estimates. As a result, the Company's accounting estimates and assumptions may change over time in response to COVID-19. Such changes could result in future impairments of goodwill, intangibles, long-lived assets and investment securities and incremental credit losses on receivables, among other issues. On an ongoing basis, the Company evaluates these assumptions, judgments and estimates. Actual results may differ from these estimates.
In the opinion of management, the consolidated financial statements contain all adjustments necessary for a fair statement of the results of operations and comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020, the financial position as of September 30, 2021 and December 31, 2020 and the cash flows for the nine months ended September 30, 2021 and 2020, and except as otherwise discussed herein, such adjustments consist only of those of a normal recurring nature. The interim results are not necessarily indicative of results that may be achieved in a full reporting year.
All dollar amounts, except share and per share amounts, are in millions of dollars unless otherwise indicated.
Reclassifications and Adjustments
Certain reclassifications in amounts previously reported have been made to conform to the current presentation including:
• Reclassification of $ 0.2 million and $ 0.8 million net gain on sale of fixed assets from "Cost of sales" to "Restructuring, impairment and other asset charges, net" for the three and nine months ended September 30, 2020, respectively.
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• Reclassification of $ 1.1 million for proceeds from the sale of the Company's Enid location was made from "Net cash provided by operating activities" to "Net cash used by investing activities" for the nine months ended September 30, 2020.
In addition, the Company recorded a $ 1.5 million out-of-period expense during the first quarter of 2021 in "Selling, general and administrative expenses" for certain vendor hosted software licensing fees for contract costs incurred in the fourth quarter of 2020.
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update 2019-12, "Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes", which eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted this new standard effective January 1, 2021. The adoption of this standard had an immaterial impact on the Company's financial position, results of operations or cash flows.
Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material impact on the Company.
Note 2. Acquisitions
CON-E-CO Acquisition - The Company entered into a Stock Purchase Agreement, dated as of July 20, 2020, by and between Oshkosh Corporation for the purchase of the CON-E-CO concrete equipment company in Nebraska. The purchase price was $ 13.8 million, after adjustments, and was paid in cash. The Company's allocation of the purchase price, net of the adjustments in the first and second quarters of 2021 discussed below, resulted in the recognition of $ 4.3 million of intangible assets primarily consisting of customer relationships ( 8 year life) and trade name ( 3 year life). Significant inputs and assumptions used in determining the fair values of these intangible assets include management's forecasts of future revenues, earnings and cash flows, a discount rate based on the median weighted average cost of capital of the Company and select market competitors, and proportion of intangible assets acquired in relation to tangible assets. The acquisition provides the Company with a broader line of concrete batch plant manufacturing, which will strengthen the Infrastructure Solutions segment. Results of operations have been consolidated from the date of acquisition.
In the first quarter of 2021, the Company recorded a $ 0.4 million adjustment related to a refined valuation of deferred tax liabilities, which was offset in intangible assets. In the second quarter of 2021, the Company recorded a $ 0.3 million adjustment related to right-of-use lease assets, which was offset in accounts payable and other.
The following table summarizes the final allocations of the total purchase price:
(in millions) Amount
Accounts receivable $ 2.3
Inventories 8.1
Other assets 6.3
Intangible assets 4.3
Total assets acquired $ 21.0
Accounts payable and other ( 4.4 )
Advance customer deposits ( 2.8 )
Total liabilities assumed ( 7.2 )
Total purchase price $ 13.8
BMH Systems Acquisition - The Company entered into a Share Purchase Agreement, dated as of August 3, 2020, by and between BMH Systems Corporation ("St. Bruno") for the purchase of the concrete equipment company in Quebec, Canada. The purchase price was $ 15.6 million, after adjustments, and was paid in cash. The Company's allocation of the purchase price resulted in the recognition of $ 6.3 million of goodwill and $ 5.7 million of other intangible assets primarily consisting of customer relationships ( 9 year life) and of trade name ( 15 year life). Significant inputs and assumptions used in determining the fair values of these intangible assets include management's forecasts of future revenues, earnings and cash flows, a discount rate based on the median weighted average cost of capital of the Company and select market competitors, and proportion of intangible assets acquired in relation to tangible assets. The acquisition provides the Company with a broader line of concrete batch plant manufacturing, which will strengthen the Infrastructure Solutions segment. Results of operations have been consolidated from the date of acquisition. The goodwill is not expected to be deductible for income tax purposes.
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In the first quarter of 2021, a working capital adjustment was made that resulted in the decrease of goodwill of $ 0.1 million.
The following table summarizes the final allocations of the total purchase price:
(in millions) Amount
Cash $ 1.2
Accounts receivable and contract assets 6.4
Inventories 2.0
Goodwill 6.3
Other assets 3.8
Intangible assets 5.7
Total assets acquired $ 25.4
Total liabilities assumed ( 9.8 )
Total purchase price $ 15.6
Proforma financial information is not included since not significant.
Note 3. Inventories
Inventories are valued at the lower of cost (first-in, first-out) or net realizable value, which requires the Company to make specific estimates, assumptions and judgments in determining the amount, if any, of reductions in the valuation of inventories to their net realizable values.
Inventories consist of the following:
(in millions) September 30, 2021 December 31, 2020
Raw materials and parts $ 202.1 $ 154.6
Work-in-process 59.2 57.3
Finished goods 17.8 34.0
Used equipment 3.7 3.8
Total $ 282.8 $ 249.7
Note 4. Fair Value Measurements
The Company has various financial instruments that must be measured at fair value on a recurring basis, including marketable debt and equity securities held by Astec Insurance and marketable equity securities held in the Company's deferred compensation programs. The Company's deferred compensation programs include a non-qualified Supplemental Executive Retirement Plan ("SERP") and a separate non-qualified Deferred Compensation Plan. Although the deferred compensation programs' investments are allocated to individual participants and investment decisions are made solely by those participants, they are non-qualified plans. Consequently, the Company owns the assets and the related offsetting liability for disbursement until such time as a participant makes a qualifying withdrawal. The SERP assets and related offsetting liability are recorded in non-current "Investments" and "Other long-term liabilities", respectively, in the Consolidated Balance Sheets. The Company's subsidiaries also occasionally enter into foreign currency exchange contracts to mitigate exposure to fluctuations in currency exchange rates.
The carrying amount of cash and cash equivalents, trade receivables and contract assets, other receivables, accounts payable, short-term debt and long-term debt approximates their fair value because of their short-term nature and/or interest rates associated with the instruments. Investments are carried at their fair value based on quoted market prices for identical or similar assets or, where no quoted prices exist, other observable inputs for the asset. The fair values of foreign currency exchange contracts are based on quotations from various banks for similar instruments using models with market based inputs.
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Financial assets and liabilities are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The inputs used to measure the fair value are identified in the following hierarchy:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - Unadjusted quoted prices in active markets for similar assets or liabilities; or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable for the asset or liability.
Level 3 - Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
As indicated in the tables below, the Company has determined that all of its financial assets and liabilities as of September 30, 2021 and December 31, 2020 are Level 1 and Level 2 in the fair value hierarchy as defined above:
September 30, 2021
(in millions) Level 1 Level 2 Total
Financial assets:
Trading equity securities:
Deferred compensation programs mutual funds $ 4.5 $ — $ 4.5
Preferred stocks 0.3 — 0.3
Equity funds 3.4 — 3.4
Trading debt securities:
Corporate bonds 3.4 — 3.4
Municipal bonds — 0.2 0.2
Floating rate notes 0.4 — 0.4
U.S. government securities 1.4 — 1.4
Asset-backed securities — 1.5 1.5
Other 3.5 1.1 4.6
Derivative financial instruments — 0.3 0.3
Total financial assets $ 16.9 $ 3.1 $ 20.0
Financial liabilities:
Deferred compensation programs liabilities $ — $ 6.4 $ 6.4
Total financial liabilities $ — $ 6.4 $ 6.4
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December 31, 2020
(in millions) Level 1 Level 2 Total
Financial assets:
Trading equity securities:
Deferred compensation programs money market fund $ 0.2 $ — $ 0.2
Deferred compensation programs mutual funds 4.8 — 4.8
Preferred stocks 0.3 — 0.3
Equity funds 1.7 — 1.7
Trading debt securities:
Corporate bonds 4.8 — 4.8
Municipal bonds — 0.9 0.9
Floating rate notes 0.4 — 0.4
U.S. government securities 1.8 — 1.8
Asset-backed securities — 2.1 2.1
Other — 1.0 1.0
Derivative financial instruments — 0.1 0.1
Total financial assets $ 14.0 $ 4.1 $ 18.1
Financial liabilities:
Derivative financial instruments $ — $ 0.5 $ 0.5
Deferred compensation programs liabilities — 7.3 7.3
Total financial liabilities $ — $ 7.8 $ 7.8
Note 5. Product Warranty Reserves
The Company warrants its products against manufacturing defects and performance to specified standards. The warranty period and performance standards vary by market and uses of its products, but generally range from three months to two years or up to a specified number of hours of operation. The Company estimates the costs that may be incurred under its warranties and records a liability at the time product sales are recorded. The product warranty liability is primarily based on historical claim rates, nature of claims and the associated cost.
Changes in the Company's product warranty liability for the three and nine month periods ended September 30, 2021 and 2020 are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2021 2020 2021 2020
Reserve balance, beginning of the period $ 10.5 $ 10.7 $ 10.3 $ 10.3
Warranty liabilities accrued 3.6 2.0 8.5 7.1
Warranty liabilities settled ( 3.6 ) ( 2.8 ) ( 8.3 ) ( 7.3 )
Other — 0.7 — 0.5
Reserve balance, end of the period $ 10.5 $ 10.6 $ 10.5 $ 10.6
Note 6. Accrued Loss Reserves
The Company records reserves for losses related to known workers' compensation and general liability claims that have been incurred but not yet paid or are estimated to have been incurred but not yet reported to the Company. The undiscounted reserves are actuarially determined based on the Company's evaluation of the type and severity of individual claims and historical information, primarily its own claims experience, along with assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause these estimates to change in the future. Total accrued loss reserves were $ 7.2 million at both September 30, 2021 and December 31, 2020, of which $ 5.4 million and $ 4.2 million were included in "Other long-term liabilities" in the Consolidated Balance Sheets at September 30, 2021 and December 31, 2020, respectively.
Note 7. Income Taxes
For the three months ended September 30, 2021, the Company recorded an income tax benefit of $ 2.8 million, reflecting a ( 43.1 )% effective tax rate, compared to a $ 1.2 million income tax benefit for the three months ended September 30, 2020, reflecting a ( 300.0 )% effective tax rate. The change in the effective tax rate for the three months ended September 30, 2021 compared to the same period of the prior year is primarily due to a current year discrete benefit of $ 3.5 million from the release of a valuation allowance associated with the Company's Brazilian subsidiary, partially offset by a reduced net benefit of $ 1.2 million from the research and development ("R&D") credit for 2021 and the recently filed 2020 R&D credit as part of the prior year consolidated corporate income tax return.
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For the nine months ended September 30, 2021, the Company recorded an income tax provision of $ 0.4 million, reflecting a 1.5 % effective tax rate, compared to a $ 4.5 million income tax benefit for the nine months ended September 30, 2020, reflecting a ( 16.7 )% effective tax rate. The change in the effective tax rate for the nine months ended September 30, 2021 compared to the same period of the prior year is primarily due to a net discrete tax benefit of $ 9.5 million resulting from provisions of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") in the prior year. Among other provisions, the CARES Act modified the net operating loss ("NOL") carryback provisions, which allowed the Company to carryback its 2018 NOL to prior tax years. This change not only favorably impacted the timing of the NOL benefit, but also increased the tax benefit amount as the federal tax rates in the prior years (35%) were higher than the current federal tax rate (21%). The income tax provision increase was partially offset by the $ 3.5 million release of a valuation allowance associated with the Company's Brazilian subsidiary and a $ 1.4 million higher equity compensation deduction.
The Company's recorded liability for uncertain tax positions was $ 10.7 million and $ 9.7 million as of September 30, 2021 and December 31, 2020, respectively. The increase in 2021 is the result of $ 1.7 million of incremental reserves associated with the increased R&D credit for 2021 and the recently filed 2020 R&D credit as part of the prior year consolidated tax return filing. This increase was offset by a $ 0.7 million reduction from a sustained position from a foreign subsidiary whose liquidation was completed during the second quarter of 2021. The Company does not anticipate a significant change in unrecognized tax benefits due to the expiration of relevant statutes of limitations and federal, state, and foreign tax audit resolutions over the next twelve months.
The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. The Company is currently under audit by the U.S. Internal Revenue Service for the federal income tax return from the 2018 tax year as well as various other state income tax and jurisdictional audits. As of September 30, 2021, the Company believes that it is more-likely-than-not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial position, results of operations and cash flows. However, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company's estimates and/or from its historical income tax provisions and accruals and could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties and/or interest assessments.
Note 8. Commitments and Contingencies
Certain customers have financed purchases of Company products through arrangements with third-party financing institutions in which the Company is contingently liable for customer debt of $ 2.7 million and $ 2.9 million at September 30, 2021 and December 31, 2020, respectively. These arrangements expire at various dates through December 2023. Additionally, the Company is also contingently liable for 1.75 % of the unpaid balance, determined as of December 31 of the prior year (or approximately $ 0.4 million for 2021), on certain past customer equipment purchases that were financed by an outside finance company. The agreements provide that the Company will receive the lender's full security interest in the equipment financed if the Company is required to fulfill its contingent liability under these arrangements. The Company has recorded a liability of $ 1.1 million and $ 2.0 million related to these guarantees as of September 30, 2021 and December 31, 2020, respectively.
The Company reviews off-balance sheet guarantees individually and at the loss pool level based on one agreement. Prior history is considered in regard to the Company having to perform on any off-balance sheet guarantees, as well as future projections of individual customer credit worthiness including consideration of the implications of COVID-19 in regard to assessing credit losses related to off-balance sheet guarantees.
In addition, the Company is contingently liable under letters of credit issued under its $ 150.0 million revolving credit facility (the "Credit Facility") totaling $ 5.3 million as of September 30, 2021, including $ 1.6 million of letters of credit guaranteeing certain credit facilities of the Company's Brazilian subsidiary. The outstanding letters of credit expire at various dates through June 2023. The maximum potential amount of future payments under letters of credit issued under the Credit Facility for which the Company could be liable is $ 30.0 million as of September 30, 2021. As of September 30, 2021, the Company's foreign subsidiaries are contingently liable for a total of $ 1.2 million in letters of credit and bank guarantees securing performance and advance payments. The maximum potential amount of future payments under these letters of credit and bank guarantees for which the Company could be liable is $ 6.7 million as of September 30, 2021.
The Company and certain of its former executive officers were named as defendants in a putative shareholder class action lawsuit filed on February 1, 2019, as amended on August 26, 2019, in the United States District Court for the Eastern District of Tennessee. The action was styled City of Taylor General Employees Retirement System v. Astec Industries, Inc., et al., Case No. 1:19-cv-24-CEA-CHS. The complaint generally alleged that the defendants violated the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements and that the individual defendants were control persons under Section 20(a) of the Exchange Act. The complaint was filed on behalf of shareholders who purchased stock of the Company between July 26, 2016 and October 22, 2018 and sought monetary damages on behalf of the purported class. The Company disputed these allegations and filed a motion to dismiss the lawsuit on October 25, 2019. On February 19, 2021, the motion to dismiss was granted with prejudice and judgment was entered for the defendants. On March 19, 2021, plaintiff filed a Motion to Alter or Amend the Judgment and For Leave to File the Proposed Amended Complaint, which was denied on May 5, 2021. On June 4, 2021, plaintiff filed a notice of appeal to the United States Court of Appeals for the Sixth Circuit, which is pending.
The Company's GEFCO subsidiary has been named a defendant in a lawsuit originally filed on August 16, 2018 with an amended complaint filed on January 25, 2019, in the United States District Court for the Western District of Oklahoma. The action is styled VenVer S.A. and Americas Coil Tubing LLP v. GEFCO, Inc., Case No. CIV-18-790-SLP. The complaint alleges breaches of warranty and other similar claims regarding equipment sold by GEFCO in 2013. In addition to seeking a rescission of the purchase contract, the plaintiff is seeking special and
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consequential damages. The original purchase price of the equipment was approximately $ 8.5 million. GEFCO disputes the plaintiff's allegations and intends to defend this lawsuit vigorously. On July 7, 2020, the plaintiffs filed a separate lawsuit directly against Astec Industries, Inc. Besides a new claim based on fraudulent transfer, the allegations essentially mirror the GEFCO suit. Astec Industries, Inc. is vigorously defending this suit as well. The Company is unable to determine whether or not a future loss will be incurred due to this litigation or estimate the possible loss or range of loss, if any, at this time.
The Company is currently a party to various claims and legal proceedings that have arisen in the ordinary course of business. If management believes that a loss arising from such claims and legal proceedings is probable and can reasonably be estimated, the Company records the amount of the loss (excluding estimated legal fees) or the minimum estimated liability when the loss is estimated using a range and no point within the range is more probable than another. As management becomes aware of additional information concerning such contingencies, any potential liability related to these matters is assessed and the estimates are revised, if necessary. If management believes that a loss arising from such claims and legal proceedings is either: (i) probable but cannot be reasonably estimated or (ii) reasonably estimable but not probable, the Company does not record the amount of the loss, but does make specific disclosure of such matter.
Based upon currently available information and with the advice of counsel, management believes that the ultimate outcome of its current claims and legal proceedings, individually and in the aggregate, will not have a material adverse effect on the Company's financial position, cash flows or results of operations. However, claims and legal proceedings are subject to inherent uncertainties and rulings unfavorable to the Company could occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse effect on the Company's financial position, cash flows or results of operations.
Note 9. Share-Based Compensation
Prior to its expiration on February 25, 2021, the Company's 2011 Incentive Plan ("2011 Plan") provided for the grant of share-based awards to its employees, officers, directors and consultants. The 2011 Plan authorized the grant of options, share appreciation rights, restricted stock, restricted stock units, deferred stock units, performance awards, dividend equivalents and other share-based and cash awards. Under the 2011 Plan, the Company has outstanding restricted stock units, performance stock units and deferred stock units none of which participate in Company-paid dividends.
On April 27, 2021 ("Plan Effective Date"), the Company's shareholders approved the 2021 Equity Incentive Plan ("2021 Plan"), which provides for a total of 1,280,000 shares to be reserved and available for issuance pursuant to the grant of new awards under the 2021 Plan, less one share for every one share subject to an award granted under the 2011 Plan after December 31, 2020 and prior to the Plan Effective Date. No new awards were granted between December 31, 2020 and the Plan Effective Date. To the extent that all or a portion of an award (or, after December 31, 2020, an award granted under the 2011 Plan) is canceled, terminates, expires, is forfeited or lapses for any reason (including by reason of failure to meet time-based and/or performance-based vesting requirements), any unissued or forfeited shares originally subject to the award (or, after December 31, 2020, an award granted under the 2011 Plan) will be added back to the 2021 Plan share reserve and again be available for issuance pursuant to awards granted under the 2021 Plan. The 2021 Plan authorizes the grant of options, share appreciation rights, restricted stock, restricted stock units, deferred stock units, performance awards, dividend equivalents and other share-based and cash awards. In addition, the 2021 Plan allows for participants to elect to receive vested units on a deferred basis. Awards granted under the 2021 Plan are entitled to dividend equivalents, which are subject to the same forfeiture and transfer restrictions and deferral terms as apply to the award to which they relate. The Company's annual grants of restricted stock units and performance stock units typically awarded in the first quarter of the year were delayed until April 2021 following the shareholder approval of the 2021 Plan.
Each of the above incentive plans are administered by the Company's Compensation Committee of the Board of Directors.
S hare-based compensation expense was $ 1.7 million and $ 4.6 million for the three and nine months periods ended September 30, 2021, respectively, and $ 1.8 million and $ 4.8 million for the three and nine month periods ended September 30, 2020, respectively.
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Note 10. Revenue Recognition
The following tables disaggregate the Company's revenue by major source for the three and nine month periods ended September 30, 2021 and 2020 (excluding intercompany sales):
Three Months Ended September 30, 2021 Three Months Ended September 30, 2020
(in millions) Infrastructure
Solutions Materials
Solutions Total Infrastructure
Solutions Materials
Solutions Total
Net Sales-Domestic:
Equipment sales $ 94.4 $ 37.6 $ 132.0 $ 73.5 $ 32.7 $ 106.2
Parts and component sales 40.3 20.0 60.3 39.6 18.6 58.2
Service and equipment installation revenue 3.2 0.1 3.3 5.0 0.3 5.3
Used equipment sales 0.9 0.1 1.0 3.4 0.3 3.7
Freight revenue 4.8 1.4 6.2 5.2 1.3 6.5
Other ( 0.4 ) ( 0.6 ) ( 1.0 ) 1.6 ( 0.4 ) 1.2
Total domestic revenue 143.2 58.6 201.8 128.3 52.8 181.1
Net Sales-International:
Equipment sales 22.0 20.5 42.5 13.6 17.3 30.9
Parts and component sales 9.1 9.7 18.8 7.2 8.8 16.0
Service and equipment installation revenue 0.8 0.6 1.4 0.6 0.2 0.8
Used equipment sales 0.8 0.8 1.6 0.9 0.7 1.6
Freight revenue 0.4 0.4 0.8 0.4 0.4 0.8
Other — 0.1 0.1 0.1 0.1 0.2
Total international revenue 33.1 32.1 65.2 22.8 27.5 50.3
Total net sales $ 176.3 $ 90.7 $ 267.0 $ 151.1 $ 80.3 $ 231.4
Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020
(in millions) Infrastructure
Solutions Materials
Solutions Total Infrastructure
Solutions Materials
Solutions Total
Net Sales-Domestic:
Equipment sales $ 276.0 $ 123.0 $ 399.0 $ 278.7 $ 117.3 $ 396.0
Parts and component sales 132.8 59.0 191.8 128.1 54.8 182.9
Service and equipment installation revenue 12.9 0.3 13.2 17.9 1.1 19.0
Used equipment sales 6.6 0.8 7.4 17.7 0.7 18.4
Freight revenue 15.0 4.7 19.7 15.8 4.0 19.8
Other ( 0.8 ) ( 1.5 ) ( 2.3 ) 1.5 ( 1.0 ) 0.5
Total domestic revenue 442.5 186.3 628.8 459.7 176.9 636.6
Net Sales-International:
Equipment sales 78.9 54.3 133.2 48.6 44.2 92.8
Parts and component sales 30.9 25.6 56.5 21.4 24.9 46.3
Service and equipment installation revenue 2.6 1.4 4.0 2.1 0.9 3.0
Used equipment sales 0.9 2.0 2.9 2.3 1.7 4.0
Freight revenue 1.9 1.5 3.4 1.3 1.0 2.3
Other 0.3 0.3 0.6 0.2 0.3 0.5
Total international revenue 115.5 85.1 200.6 75.9 73.0 148.9
Total net sales $ 558.0 $ 271.4 $ 829.4 $ 535.6 $ 249.9 $ 785.5
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Sales into major geographic regions were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2021 2020 2021 2020
United States $ 201.8 $ 181.1 $ 628.8 $ 636.6
Canada 16.8 12.2 54.7 39.8
Australia 10.7 6.8 31.9 18.1
Europe 7.4 7.6 31.8 21.8
Africa 9.9 7.1 26.0 17.9
Brazil 8.0 4.3 17.1 15.2
Mexico 1.3 0.2 11.7 1.6
South America 2.5 7.2 11.5 16.3
Asia 5.5 2.5 9.2 8.1
Other 3.1 2.4 6.7 10.1
Total foreign 65.2 50.3 200.6 148.9
Total net sales $ 267.0 $ 231.4 $ 829.4 $ 785.5
As of September 30, 2021, the Company had contract assets of $ 12.0 million and contract liabilities of $ 30.0 million, including $ 2.8 million of deferred revenue related to extended warranties. As of December 31, 2020, the Company had contract assets of $ 4.3 million and contract liabilities of $ 8.9 million, including $ 2.9 million of deferred revenue related to extended warranties.
Note 11. Segment Information
The Company has two reportable segments, each of which comprise sites based upon the nature of the products or services produced, the type of customer for the products, the similarity of economic characteristics, the manner in which management reviews results and the nature of the production process, among other considerations. A brief description of each segment is as follows:
Infrastructure Solutions – The Infrastructure Solutions segment comprises 12 active sites and designs, engineers, manufactures and markets a complete line of asphalt plants, concrete plants and their related components and ancillary equipment as well as supplying other heavy equipment. The U.S. based sites within the Infrastructure Solutions segment are primarily manufacturing operations while those located internationally market, service and install equipment and provide parts in the regions in which they operate for many of the products produced by all of the Company's manufacturing sites. The primary purchasers of the products produced by this segment are asphalt producers, highway and heavy equipment contractors, ready mix concrete producers, contractors in the construction and demolition recycling markets and domestic and foreign governmental agencies.
Materials Solutions – The Materials Solutions segment comprises 9 active sites and designs and manufactures heavy processing equipment, in addition to servicing and supplying parts for the aggregate, metallic mining, recycling, ports and bulk handling markets. The sites within the Materials Solutions segment are primarily manufacturing operations with the AME and India sites functioning to market, service and install equipment and provide parts in the regions in which they operate for many of the products produced by all of the Company's manufacturing sites. Additionally, the Materials Solutions segment offers consulting and engineering services to provide complete "turnkey" processing systems. The principal purchasers of aggregate processing equipment include distributors, highway and heavy equipment contractors, sand and gravel producers, recycle and crushing contractors, open mine operators, quarry operators, port and inland terminal authorities, power stations and foreign and domestic governmental agencies.
Corporate – The Corporate category consists primarily of the parent company and the Company's captive insurance company, Astec Insurance, which do not meet the requirements for separate disclosure as an operating segment or inclusion in one of the other reporting segments. The parent company and the captive insurance company provide support and corporate oversight for all of the sites. The Company evaluates performance and allocates resources to its operating segments based on profit or loss from operations before U.S. federal income taxes, state deferred taxes and corporate overhead and thus these costs are included in the Corporate category.
The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Intersegment sales and transfers between foreign subsidiaries are valued at prices comparable to those for unrelated parties.
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Segment Information:
Three Months Ended September 30, 2021 Three Months Ended September 30, 2020
(in millions) Infrastructure Solutions Materials Solutions Corporate Total Infrastructure Solutions Materials Solutions Corporate Total
Revenues from external customers $ 176.3 $ 90.7 $ — $ 267.0 $ 151.1 $ 80.3 $ — $ 231.4
Intersegment sales 10.0 16.1 — 26.1 6.7 11.7 — 18.4
Segment profit (loss) 13.8 8.0 ( 12.8 ) 9.0 6.3 7.2 ( 11.7 ) 1.8
Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020
(in millions) Infrastructure Solutions Materials Solutions Corporate Total Infrastructure Solutions Materials Solutions Corporate Total
Revenues from external customers $ 558.0 $ 271.4 $ — $ 829.4 $ 535.6 $ 249.9 $ — $ 785.5
Intersegment sales 35.4 38.9 — 74.3 25.0 26.8 — 51.8
Segment profit (loss) 46.6 27.3 ( 47.5 ) 26.4 37.7 21.7 ( 28.2 ) 31.2
A reconciliation of total segment profit to the Company's consolidated totals is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2021 2020 2021 2020
Net income attributable to controlling interest
Total profit for reportable segments $ 21.8 $ 13.5 $ 73.9 $ 59.4
Corporate expenses, net ( 12.8 ) ( 11.7 ) ( 47.5 ) ( 28.2 )
Net loss attributable to noncontrolling interest — — — 0.1
Recapture (elimination) of intersegment profit 0.3 ( 0.2 ) 0.6 0.2
Total consolidated net income attributable to controlling interest $ 9.3 $ 1.6 $ 27.0 $ 31.5
Note 12. Strategic Transformation and Restructuring and Other Asset Charges
In 2018, the Company made several strategic decisions to divest of underperforming manufacturing sites or product lines, including to close certain of its subsidiaries, close and sell its manufacturing sites and relocate the product lines manufactured at each of these sites to other Company locations; exit the oil, gas and water well product lines; and sell certain assets. These actions, which have subsequently been incorporated into the Company's Simplify, Focus and Grow Strategic Transformation ("SFG") initiative beginning in 2019, generally include facility rationalization, asset impairment, workforce reduction and the associated costs of organizational integration activities. The Company has incurred $ 2.4 million and $ 7.7 million in incremental costs for the SFG initiative in the three and nine months ended September 30, 2021, which are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations. In addition, the Company periodically sells or disposes of its assets in the normal course of its business operations as they are no longer needed or used and may incur gains or losses on these disposals. Certain of the costs associated with these decisions are separately identified as restructuring. The Company reports asset impairment charges and gains or losses on the sales of property and equipment collectively, with restructuring charges in "Restructuring, impairment and other asset charges, net" in the Consolidated Statements of Operations.
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Restructuring, asset impairment charges and the net gain on sale of property and equipment are presented below:
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2021 2020 2021 2020
Restructuring charges:
Costs associated with closing Tacoma $ 0.1 $ — $ 1.1 $ —
Costs associated with closing Mequon — 0.7 0.6 2.1
Costs associated with closing Enid 0.4 1.9 0.4 2.2
Costs associated with closing Albuquerque — 0.3 — 1.3
Costs associated with closing AMM — — — 0.3
Workforce reductions at multiple sites — — — 1.3
Other restructuring charges — 0.2 — 0.2
Total restructuring related charges 0.5 3.1 2.1 7.4
Asset impairment charges:
Airplane impairment charges (recovery) — ( 0.3 ) — 2.3
Goodwill impairment charges — — — 1.6
Other impairment charges — — 0.2 0.2
Total asset impairment charges — ( 0.3 ) 0.2 4.1
Gain on sale of property and equipment, net:
Gain on sale of property and equipment, net ( 0.2 ) ( 0.6 ) ( 0.5 ) ( 1.2 )
Total gain on sale of property and equipment, net ( 0.2 ) ( 0.6 ) ( 0.5 ) ( 1.2 )
Restructuring, impairment and other asset charges, net $ 0.3 $ 2.2 $ 1.8 $ 10.3
Restructuring charges by segment are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2021 2020 2021 2020
Infrastructure Solutions $ 0.5 $ 2.2 $ 1.5 $ 5.0
Materials Solutions — 0.9 0.6 2.3
Corporate — — — 0.1
Total restructuring related charges $ 0.5 $ 3.1 $ 2.1 $ 7.4
Impairment charges by segment are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2021 2020 2021 2020
Infrastructure Solutions $ — $ — $ — $ 1.6
Materials Solutions — — 0.2 0.1
Corporate — ( 0.3 ) — 2.4
Total impairment charges $ — $ ( 0.3 ) $ 0.2 $ 4.1
The net gain on sale of property and equipment by segment are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2021 2020 2021 2020
Infrastructure Solutions $ ( 0.2 ) $ ( 0.6 ) $ ( 0.4 ) $ ( 1.2 )
Materials Solutions — — ( 0.1 ) —
Total gain on sale of property and equipment, net $ ( 0.2 ) $ ( 0.6 ) $ ( 0.5 ) $ ( 1.2 )
Restructuring charges accrued, but not paid, were $ 1.2 million and $ 1.1 million as of September 30, 2021 and December 31, 2020, respectively.
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On October 21, 2019, the Company announced the closing of its Albuquerque, New Mexico location. The decision to close the site was based in part on market conditions and manufacturing facilities underutilization. The marketing and manufacturing of products previously produced by the site were transferred to other Company facilities. The site was closed as of March 31, 2020.
In late 2019, the oil and gas drilling product lines produced at the Enid, Oklahoma location were impaired and discontinued. The Company incurred $ 1.9 million and $ 2.2 million in severance related costs during the three and nine month periods ended September 30, 2020 associated with exiting the oil and gas line of business at Enid. Additional restructuring costs of $ 0.4 million were incurred during the three months ended September 30, 2021. Enid's land and building assets totaling $ 5.1 million are included in "Assets held for sale" in the Consolidated Balance Sheets at September 30, 2021 and December 31, 2020.
The Company incurred $ 1.3 million of severance pay associated with workforce reductions at other of the Company's locations in the nine months ended September 30, 2020, none of which were incurred during the three months ended September 30, 2020.
During the three months ended March 31, 2020, the Company incurred $ 1.6 million of goodwill impairment charges due to a full impairment of goodwill associated with its mobile asphalt equipment operations included in the Infrastructure Solutions segment.
In June 2020, the Company announced the closing of the Mequon site in order to simplify and consolidate operations. The Mequon facility ceased production operations in August 2020. Charges primarily related to inventory relocation and integration activities of $ 0.7 million were incurred during the three months ended September 30, 2020. Charges totaling $ 0.6 million and $ 2.1 million were recognized in the nine month periods ended September 30, 2021 and 2020, respectively.
In October 2020, the Company closed a transaction for the sale of water well assets of the Company's Enid location, which included equipment, inventories and intangible assets. The purchase price for this transaction was approximately $ 6.9 million, net of purchase price adjustments completed in January 2021 whereby the Company had an obligation to pay the buyer $ 1.1 million. This obligation is included in "Other current liabilities" in the Consolidated Balance Sheets at December 31, 2020 and was settled in the first quarter of 2021. The Company recorded a $ 1.1 million gain on the sale of this business in the third quarter of 2020 in "Other (expenses) income, net" in the Consolidated Statements of Operations.
In January 2021, the Company announced plans to close the Tacoma facility in order to simplify and consolidate operations. The Tacoma facility is currently expected to cease operations at the end of 2021. Manufacturing and marketing of Tacoma product lines are expected to be fully transferred to other facilities within the Infrastructure Solutions segment by early 2022. In conjunction with this action, the Company recorded $ 1.1 million of restructuring related charges primarily associated with severance and retention costs during 2021, $ 0.1 million of which was recorded in the three months ended September 30, 2021.
Note 13. Earnings Per Common Share
Basic earnings per common share is determined by dividing "Net income attributable to controlling interest" by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share includes the dilutive effect of common stock equivalents consisting of restricted stock units, performance stock units and stock held in the Company's supplemental executive retirement plan, using the treasury stock method. Performance stock units, which are considered contingently issuable, are considered dilutive when the related performance criterion has been met.
The following table sets forth a reconciliation of the number of shares used in the computation of basic and diluted earnings per common share:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Denominator:
Denominator for basic earnings per common share 22,761,203 22,615,492 22,712,894 22,592,779
Effect of dilutive securities 152,360 330,401 210,036 244,946
Denominator for diluted earnings per common share 22,913,563 22,945,893 22,922,930 22,837,725
Note 14. Subsequent Event
Pension Plan Termination
During the third quarter of 2021, the Company was in the process of terminating its defined benefit pension plan, which was fully funded as of September 30, 2021. In October 2021, the Company settled its obligations under the plan by providing $ 5.5 million in lump sum payments to eligible participants who elected to receive them and through the purchase of annuity contracts from a highly rated insurance company for $ 12.2 million. The settlement of the plan resulted in excess plan assets of approximately $ 1.5 million, which is subject to a 50 % excise tax. Management estimates that the Company will record a total non-cash pre-tax, both income and excise, charge of between $ 4.5 million and $ 5.5 million in the fourth quarter of 2021.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.