Item 1. Business
ITEM 1. BUSINESS
Our Company
We design, engineer, manufacture and market equipment and components used primarily in road building and related construction activities, as well as other products discussed below. Our products are used in each phase of road building, from quarrying and crushing the aggregate to application of the road surface for both asphalt and concrete. We also manufacture 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; commercial and industrial burners; and combustion control systems.
Our products are marketed both domestically and internationally primarily to asphalt producers; highway and heavy equipment contractors; utility contractors; sand and gravel producers; construction, demolition, recycle and crushing contractors; mine and quarry operators; port and inland terminal authorities; power stations and domestic and foreign government agencies. In addition to equipment sales, we manufacture and sell replacement parts for equipment in each of our product lines and replacement parts for some competitors' equipment. The distribution and sale of replacement parts is an integral part of our business.
COVID-19 Pandemic
The COVID-19 pandemic has caused significant disruptions to national and global economies and to our business. While our businesses have generally remained operational throughout the pandemic, with temporary closures in the United Kingdom and South Africa early in the pandemic, we have been significantly affected by the contributory effects of the pandemic such as decreased demand for our products in 2020, material price increases, increased lead times from production materials, supplies and parts and labor shortages. These trends continue to impact our business today and may continue to impact our business in the near-term.
We have also taken precautions to protect our employees and their families and our customers and suppliers from COVID-19 and continually monitor the markets in which we operate for the effects of COVID-19 and the related actions of governments and other authorities to contain COVID-19.
The COVID-19 pandemic may continue to negatively disrupt our business and results of operations in the future. The ongoing impact of the COVID-19 pandemic on our operations and the markets we serve remains uncertain due to constantly evolving developments including, but not limited to, government directives, treatment availability and acceptance, vaccine mandates and the spread of new variants, such as the Delta and Omicron variants, and cannot be accurately predicted. See Part I, Item 1A. Risk Factors in this Annual Report on Form 10-K.
Corporate Strategic Objectives
Beginning in late 2019, we initiated a strategic transformation focused on implementing new business strategies and a new operating structure. This transformation was focused on aligning our operations under the OneASTEC business model with the strategic pillars of Simplify, Focus and Grow.
Simplify
As part of our strategic transformation, we have focused on optimizing our organizational structure and operations to execute our profitable growth strategy.
• Centralizing our organization into sites with common platforms and operating models supports organic sales growth as it is easier for our customers, partners, employees and shareholders to understand and interact with us.
• We are focused on productivity gains and cost reductions across our business through reducing complexity in our organization structure and plan to continue to leverage our global footprint consolidation actions to drive greater efficiencies across our operations while maintaining strong customer relationships.
• Efforts are directed toward product simplification through the development of a rationalized global product portfolio executed through manufacturing centers of excellence.
• We strive to optimize the supply chain through leveraging the size and scale of our global operations to improve lead times, lower logistics costs and introduce localized product support.
Since the inception of these initiatives, we have consolidated four sites and are currently in the process of consolidating our Tacoma site, which is expected to be completed during early 2022.
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In addition, in late 2020 we launched a multi-year phased implementation of a standardized enterprise resource planning ("ERP") system across our global organization, which will replace much of our existing disparate core financial systems. The upgraded ERP will initially convert our internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms. This new ERP system will provide for standardized processes and integrated technology solutions that enable us to better leverage automation and process efficiency.
Focus
We believe enhanced efficiencies across the Astec organization will result from utilizing our OneASTEC business model to concentrate resources on excellence initiatives.
• We are focused on driving commercial excellence and providing a holistic set of solutions to strengthen our relationships with customers and maintain our market leadership positions.
• We intend to streamline our operational excellence processes through the implementation of lean principles in our operations and incorporate production systems that embed continuous improvement into the culture of our manufacturing processes.
• With aligned key performance indicators and incentives, we intend to enhance accountability across the business and drive a performance-based culture.
Grow
We are focused on growing sales and profits organically as well as selectively pursuing strategic acquisitions and partnerships within the "Rock to Road" value chain.
• Organic growth will be focused on reinvigorating innovation with a new product development approach that increases our vitality index over time.
• Through controls and automation as well as other technologies, we expect to leverage technology and digital connectivity to enhance the customer experience.
• We seek to identify, analyze and assess potential targets for strategic acquisitions and partnerships globally to establish a presence in attractive new markets, supplement our current product offerings or accelerate technologies or other enhancements that can be leveraged in our existing product portfolio.
Since the inception of our growth initiatives, we have completed three acquisitions. A further discussion of these acquisitions is included in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Business Segments
We operate manufacturing sites and sites that operate as sales offices for our manufacturing locations. During the first quarter of 2020, we completed an internal reorganization from a decentralized management structure to a matrix organizational management structure with major directives and decisions being made at the segment and/or parent company level and, as a result, realigned our reportable segments moving from three to two reportable segments (plus Corporate) - Infrastructure Solutions and Materials Solutions. Our 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 our parent company and Astec Insurance Company ("Astec Insurance"), 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. We evaluate performance and allocate resources to our 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.
Amounts previously reported under the previous segment structure have been restated to conform to the new segment structure. Additionally, in both internal and external communications, we have transitioned references to each individual site by a name associated with its location, as compared to previous references to the individual subsidiary company name.
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Infrastructure Solutions Segment
Overview
The Infrastructure Solutions segment 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 Infrastructure Solutions segment was operated from the following sites in 2021 :
Site Location Site Location
Australia Brisbane, Australia EUG-Airport Rd Oregon, United States
Blair Nebraska, United States LatAm Santiago, Chile
Burlington Wisconsin, United States Parsons Kansas, United States
CHA-Jerome Ave Tennessee, United States St-Bruno Quebec, Canada
CHA-Manufacturers Rd Tennessee, United States Tacoma (1)
Washington, United States
CHA-Wilson Rd Tennessee, United States Thailand Bangkok, Thailand
1 In January 2021, management announced plans to close the Tacoma facility. The Tacoma facility ceased manufacturing operations at the end of 2021. The transfer of the manufacturing and marketing of the Tacoma product lines to other facilities within the Infrastructure Solutions segment is expected to be completed during early 2022.
The sites based in North America within the Infrastructure Solutions segment are primarily manufacturing operations while those located outside of North America generally market, service and install equipment and provide parts in the regions in which they operate for many of the products produced by all of our manufacturing sites. Our Thailand site is in the start-up phase of new sales operations.
Products and Services
The primary products produced by the Infrastructure Solutions segment include:
Asphalt plants and related components Heaters Concrete dust control systems
Asphalt pavers Vaporizers Concrete material handling systems
Screeds Heat recovery units Paste back-fill plants
Asphalt storage tanks Hot oil heaters Bagging plants
Fuel storage tanks Industrial and asphalt burners and systems Blower trucks and trailers
Material transfer vehicles Soil stabilizing/reclaiming machinery Wood chippers and grinders
Milling machines Soil remediation plants Control systems
Pump trailers Concrete batch plants Service, construction and retrofits
Liquid terminals Storage equipment and related parts Engineering and environmental permitting services
Polymer plants Concrete mixers
A typical asphalt mixing plant consists of heating and storage equipment for liquid asphalt; cold feed bins for blending aggregates; a counter-flow continuous type unit (Astec Double Barrel) for drying, heating and mixing; a baghouse composed of air filters and other pollution control devices; hot storage bins or silos for temporary storage of hot-mix asphalt; and a control house. We introduced the concept of high plant portability for asphalt plants in 1979. Our current generation of portable asphalt plants is marketed as the Six Pack and consists of six or more portable components designed to be easily transported from one construction site to another, thereby reducing relocation expenses and interruption of operations. High plant portability is an industry innovation developed and successfully marketed by us.
The components in our asphalt mixing plants are fully automated and use both microprocessor-based and programmable logic control systems for efficient operation. The plants are manufactured to meet or exceed federal and state clean air standards. We also build batch type asphalt plants and have developed specialized asphalt recycling equipment for use with our hot-mix asphalt plants.
Our new Versa Jet burner versatile platform is d eveloped for retrofit applications and has the capacity to fire at a range of rates. The adaptable design is compatible with virtually all drum designs and can be installed with minimal modifications needed to asphalt mixing plants produced by us as well as our competitors.
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In addition, we developed the patented water injection warm mix asphalt system, which allows the asphalt mix to be prepared and placed at lower temperatures than conventional systems and operates with a substantial reduction in emissions during paving and load-out. Previous technologies for warm mix production rely on expensive additives, procedures and/or special asphalt cement delivery systems that significantly increase the cost per ton of mix. Our multi-nozzle device eliminates the need for the expensive additives by mixing a small amount of water and asphalt cement together to create microscopic bubbles that reduce the viscosity of the liquid asphalt coating on the rock, thereby allowing the mix to be handled and worked at lower temperatures.
We are focused on producing equipment with the most advanced mix recycling technology in the industry. More tons of reclaimed asphalt pavement ("RAP") are available than are currently being utilized due to restrictions in the amount of RAP allowed by various governmental agencies. Our recycle technology is continuously being enhanced and is providing the science to alleviate the concerns driving such restrictions and to improve RAP utilization percentages in the asphalt industry. Our latest system improvement, the RAP Pre-Dryer System, was successfully field prototyped in 2018 and is now available to the industry.
Many of our highly technical, sophisticated large asphalt plants, while ideally suited for the United States domestic market, are not as well suited in many international markets. In 2019, we completed testing of our Vantage 140 portable asphalt plant designed specifically for the international market. The Vantage design is based upon our proven Double Barrel drum mixer and has production capacity of 140 metric tons per hour and RAP mixing capabilities of 50%. The Vantage also provides full-size plant features in a compact highly-portable configuration. Additionally, we have expanded our mobile plant offering with the newly designed Ventura 140. The Ventura is designed with a counter-flow drying drum that feeds an external coater and provides production rates up to 140 metric tons per hour of virgin mix and is used where recycled material is not available. The Ventura 140SL portable asphalt plant is also focused on satisfying needs of the international market and introduces a smaller, more mobile plant design with single-load capability. We have also developed the new, hybrid-powered FT4250 mobile impactor plant. Hybrid power allows operators flexible power options using either line power or a genset that allows for reduced noise levels, no engine emissions and the ability to run indoors.
Our pavers have been designed to minimize maintenance costs while exceeding road surface smoothness requirements. Generally, our equipment can be used in tandem with each other or separately with equipment already owned by the customer. Our mobile, self-propelled material transfer vehicle ("Shuttle Buggy") allows continuous paving by separating truck unloading from the paving process while remixing the asphalt. A typical asphalt paver must stop paving to permit truck unloading of asphalt mix. By permitting continuous paving, the Shuttle Buggy allows the asphalt paver to produce a smoother road surface while reducing the time required to pave the road surface and the number of haul trucks required. As a result of the pavement smoothness achieved with this machine, certain states now require the use of the Shuttle Buggy. Studies using infrared technology have revealed problems caused by differential cooling of the hot-mix during hauling, but the Shuttle Buggy remixes the material to a uniform temperature and gradation, thus eliminating these problems. The Shuttle Buggy includes the Guardian System that is designed to anticipate equipment maintenance needs resulting in more uptime reliability while also providing production and performance data as well as real-time location information to the owner. The SB3000 model introduced to the market in 2020, incorporates features and technology to improve the user experience in terms of improved visibility, ground level operation, as well as improved material handling and vehicle transportability. Our Spray Paver model, which is recommended for use with the Shuttle Buggy, is also designed to carry and spray tack coat directly in front of the hot mix asphalt in a single process, thus eliminating the need for a separate tack truck.
Milling machines remove old asphalt from the road surface before new asphalt mix is applied. Our product line of milling machines, which are designed for larger jobs, are manufactured with a simplified control system, wide conveyors, direct drives and a wide range of horsepower and cutting capabilities to provide versatility in product application. In addition to the half-lane and larger highway class milling machines, we also manufacture a smaller, utility class machine for two-to-four foot cutting widths and a utility class cold planer model mounted on steel wheels. The RX-505, our newest cold planer, is equipped with two new safety features that allow for safe cutter drum access and maintenance and obstacle detection while the machine is in reverse.
Soil stabilizers are produced in multiple configurations and double as asphalt reclaiming machines for road rehabilitations, in addition to their primary purpose of stabilizing soil sub-grades with additives to provide an improved base on which to pave.
Our patented screeds use a hydraulic powered generator to electrify elements that heat a screed plate so asphalt will not stick to it while paving, attach to asphalt paving machines and place asphalt on the roadbed at a desired thickness and width while smoothing and compacting the surface. Our screeds can be configured to fit many types of asphalt paving machines, including machines manufactured by us as well as our competitors.
Concrete is one of the world's most used and durable construction materials. Concrete production equipment is primarily manufactured at three facilities: Blair, Burlington and St-Bruno. Together, these three sites produce a market leading product portfolio. The Blair and St-Bruno sites were acquired in 2020 and joined the Burlington location to expand our concrete product line.
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We manufacture leading portable and stationary concrete production equipment including transit and central mix concrete plants. Our portable concrete plants are known for quick set-up and tear down as well as exceptionable reliability and longevity over numerous relocations. Our stationary concrete production plants are known for custom-engineered design flexibility suitable for various concrete production sites. Our concrete mixer designs include tilt mixers and horizontal reversing mixers. Both mixer types are available as stationary designs with optional mobile and self-erect features. The tilt mixer is our most popular mixer type for concrete paving and ready mix production while the horizontal reversing mixers are a low dust, low noise option primarily marketed to ready mix producers.
We also produce industry leading combustion products for a variety of industrial applications as new applications have grown rapidly. At the present time, our products, most of which are customized for a particular application, are used in a score of different industries and purposes including chemical plants, at oil-and-gas refineries, on off-shore platforms, on barges, at power generation plants, wood product manufacturers, food processors, textile factories, pharmaceutical producers and roofing manufacturers.
We engineer and develop new products dedicated to improving customers' productivity and profitability. Our products share environmentally conscious designs and are crafted from quality materials by an expert staff of dedicated professionals.
Marketing
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.
We market our hot-mix asphalt products domestically and internationally primarily under the Astec trademark. Asphalt plants and related equipment are sold directly to asphalt producers or domestic and foreign government agencies through our domestic and international sales departments.
Our concrete products are marketed domestically and internationally under the RexCon, CON-E-CO and BMH trademarks. Our concrete plants and related equipment are sold directly to concrete producers and foreign agencies through our domestic and international sales departments. The BMH and CON-E-CO products are also marketed through dealers domestically and internationally.
We market our asphalt paving equipment under the Roadtec and Carlson trademarks both domestically and internationally to highway and heavy equipment contractors, utility contractors and domestic and foreign governmental agencies both directly and through dealers. Mobile construction equipment and factory authorized machine rebuild services are marketed both directly and through dealers.
This segment's products are marketed by direct and dealer support sales staff and domestic and international independent distributors, including our Australia, AME and Thailand sites.
Competition
This industry segment faces strong competition in price, service and product performance and competes with both large publicly-traded companies and various smaller manufacturers. The Infrastructure Solutions segment competitors include:
Product Categories Primary Competitors
Asphalt plants and related components ADM, Almix, Ammann, Benninghoven (part of Deere & Company), Marini (part of Fayat Group), Gencor Industries, Inc. and local manufacturers
Concrete equipment Erie-Strayer, Stephens Manufacturing and Vince Hagan
Paving and related equipment Bomag (part of Fayat Group), Caterpillar Paving Products (part of Caterpillar, Inc.), Dynapac (part of Fayat Group), Lee Boy, Vogele (part of Deere & Company), Volvo Construction Equipment (part of Volvo Group AB) and Weiler
Milling equipment Bomag (part of Fayat Group), Caterpillar Paving Products (part of Caterpillar, Inc.), CMI, Dynapac (part of Fayat Group), Volvo Construction Equipment (part of Volvo Group AB) and Wirtgen (part of Deere & Company)
Forestry and recycling equipment Bandit, Doppstadt, Morbark, Rotochopper and Vermeer
Backlog
The backlog for the Infrastructure Solutions segment at December 31, 2021 and 2020 was approximately $449.3 million and $218.2 million, respectively.
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Materials Solutions Segment
Overview
The Materials Solutions segment 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 Materials Solutions segment was operated from the following sites in 2021 :
Site Location Site Location
AME Johannesburg, South Africa Omagh Omagh, United Kingdom
Belo Horizonte Belo Horizonte, Brazil Sterling Illinois, United States
EUG-Franklin Blvd Oregon, United States Thornbury Ontario, Canada
India Ahmedabad, India Yankton South Dakota, United States
Johannesburg Johannesburg, South Africa
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 our manufacturing sites. Belo Horizonte manufactures asphalt plants in addition to certain core products produced in the Materials Solutions segment. Belo Horizonte also markets products in the Brazilian market that are produced by all of our manufacturing sites. Our India site is in the start-up phase of new sales operations.
Belo Horizonte was a start-up in 2014 and delivered its first asphalt plant in early 2016; however, sales in the South American market have continued to be hampered by the economic downturn in South America and more specifically in Brazil. We plan to position ourselves to significantly increase the production and sales volumes by Belo Horizonte and have begun manufacturing other product lines at the facility. At December 31, 2021, we had an ownership interest of approximately 93% in Belo Horizonte.
Products and Services
The primary products produced and services provided by the Materials Solutions segment include:
Crushing equipment
Mobile plants Bulk material handling solutions
Vibrating equipment Screening equipment Electrical control centers
Modular plants and systems Conveying equipment Plant automation products
Portable plants Mineral processing equipment Consulting and engineering services
In conjunction with the Materials Solutions products we manufacture, we offer consulting and engineering services to provide complete "turnkey" processing systems, which often include electrical control centers and plant automation products we produce.
We are a world leader in the development of hydraulic relief jaw crushers having patented our first model in 2002. Hydraulic relief jaw crushers are a significant improvement in safety, adjustment and clearing of material in jaw crushers. In addition, we offer a range of cone crushers to meet critical aggregate or mining needs, which include technology features that deliver a distinct performance advantage, such as hydraulic overload protection, chamber clearing, push button adjustment and a proprietary anti-spin system.
Our vibrating screen line features multiple sizes of single deck to quadruple deck screens and contains the "Neverwear" sealing system guaranteed to keep lubricants in and to never wear out.
We manufacture a complete line of primary, secondary, tertiary and quaternary crushers, including jaw, horizontal shaft impactor, vertical shaft impactor and cone rock crushers as well as industry related washing and conveying equipment, mobile screening plants, portable and stationary screen structures and vibrating and high frequency screens. These rock crushers are used by mining, quarrying and sand and gravel producers to crush oversized aggregate to salable size, in addition to their use for recycled concrete and asphalt. This equipment can be purchased as individual components, as portable plants for flexibility or as completely engineered systems for both portable, stationary and RAP applications. We offer the highly-portable Fast Pack System, featuring quick setup and teardown, thereby maximizing production time and minimizing downtime. We also offer portable fully self-contained and self-propelled Fast Trax track-mounted jaw, cone, vertical shaft impactors and horizontal shaft crushers, which are ideal for either recycle or hard rock applications, allowing the producer to move the equipment to the material. The expanded GT line of track-mounted crushing and screening plants focuses more specifically on the needs of global markets.
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Portable plants combine various combinations of crushing, screening and conveying equipment mounted on tow away chassis and track chassis configurations. Due to high transportation costs of construction materials, many producers use portable equipment to process materials they need in close proximity to their job sites. Portable plants allow aggregate producers the ability to quickly and efficiently move equipment from one location to another as their jobs necessitate. The portable track plants are fully self-contained and allow operators to be producing materials within minutes of unloading equipment off of their transport trucks. Track-mounted crushing and screening plants enable contractors to perform jobs that in the past were not economically feasible and also allow our dealers to compete in the large track-mounted rental market.
Sand classifying and washing equipment is designed to clean, separate and re-blend material from sand deposits to meet the size specifications for critical applications. Products offered include fine and coarse material washers, log washers, blade mills, sand classifying tanks, cyclones, dewatering screens, density classifiers, sieve bend screens and attrition cells. Additional portable and stationary plants are also offered to handle the growing needs in construction sands, specialty sands and fines recovery. Screening plants are available in both stationary and highly portable models and are complemented by a full line of radial stacking and overland belt conveyors. Screening plants also serve the recycle, crushed stone, industrial and general construction industries.
Conveying equipment is designed to move or store aggregate and other bulk materials in radial cone-shaped or windrow stockpiles. Our SuperStacker telescoping conveyor and Wizard Touch automated controls are designed to add efficiency and accuracy to whatever the stockpile specifications require. Additionally, high capacity rail and barge loading/unloading material handling systems are an important part of our product lines.
Our complete line of industry leading rock breaker systems for the mining, quarry and recycling markets provide large-scale stationary rock breakers for open pit mining, as well as mid-sized stationary rock breakers for underground applications. In addition, we offer a full line of smaller rock breaker systems for mobile track and portable primary crushing plants as well as a full line of four-wheel drive articulated production and utility vehicles, scalers and rock breakers for underground mining and a complete line of hydraulic breakers, compactors and demolition attachments for the North American construction and demolition markets.
Our mobile bulk material handling solutions are designed to handle all free-flowing bulk materials, including but not limited to ores, coal, aggregates, fertilizers, grains, woodchips and pellets and are sold globally.
Many of our facilities maintain internationally recognized industry standard quality, environmental and health and safety assurance accreditations.
Marketing
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 domestic and foreign governmental agencies.
Materials Solutions' equipment and aftermarket sales and service program are primarily marketed through an extensive network of dealers by dealer support sales employees and domestic and international independent distributors.
Competition
The Materials Solutions segment faces strong competition in price, service and product performance. Materials Solutions equipment competitors include the following as well as smaller manufacturers, both domestic and international:
CDE Global McCloskey Terex
Deister McLanahan Thor
Epiroc Metso Minerals Weir Minerals (Trio)
Edge Innovate Sandvik Mining and Construction Kleemann (part of Deere & Company)
Masaba Superior Industries
Backlog
At December 31, 2021 and 2020, the backlog for the Materials Solutions Group was approximately $313.3 million and $142.3 million, respectively.
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Corporate
The Corporate category consists of our parent company and our 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. Our parent company and our captive insurance company provide support and corporate oversight for all the sites. We record U.S. federal income tax expenses and state deferred taxes for all business segments on the parent company's books; therefore, these taxes are included in the Corporate category for segment reporting.
Common to Both Reporting Segments
The following information applies to both the Infrastructure Solutions and the Materials Solutions reporting segments.
Manufacturing
We manufacture many of the component parts and related equipment for our products, while several large components of our products are purchased "ready-for-use", such items include engines, axles, tires and hydraulics. In many cases, we design, engineer and manufacture custom component parts and equipment to meet the particular needs of individual customers. Manufacturing operations during 2021 took place through 16 of our sites. Our manufacturing operations consist primarily of fabricating steel components and the assembly and testing of our products to ensure that we achieve quality standards.
Raw Materials
We purchase raw materials and some manufactured components and replacement parts for our products from leading suppliers both domestically and internationally. Raw materials used in the manufacture of our products include carbon steel, pipe and various types of alloy steel, which are normally purchased from distributors and other sources. Most steel is delivered on a "just-in-time" arrangement from the supplier to reduce inventory requirements at the manufacturing facilities, but is occasionally inventoried after purchase. Raw materials for manufacturing are normally readily available; however, certain highly customized components may require longer than normal lead times. In addition, we have experienced challenges related to our supply chain attributable to the ongoing impact of the COVID-19 pandemic. Other components used in the manufacturing processes include engines, gearboxes, power transmissions and electronic systems.
Government Regulations
We are subject to various laws and governmental regulations concerning environmental matters and employee safety and health in the United States and other countries. The Environmental Protection Agency, the Occupational Safety & Health Administration, other federal agencies and certain state agencies have the authority to promulgate regulations that have an effect on our operations. Many of these federal and state agencies may seek fines and penalties for violations of these laws and regulations. We have been able to operate under these laws and regulations without any material adverse effect on our business.
None of our reporting operations are within highly regulated industries. However, air pollution control equipment we manufacture, principally for hot-mix asphalt plants, must comply with certain performance standards promulgated by the Environmental Protection Agency under the Clean Air Act applicable to "new sources" or new plants. We believe our products meet all material requirements of such regulations, applicable state pollution standards and environmental protection laws.
In addition, due to the size and weight of certain equipment we manufacture, we and our customers may encounter various state regulations on maximum weights transportable on highways. Also, some states have regulations governing the operation of asphalt mixing plants, and most states have regulations relating to the accuracy of weights and measures, which affect some of the control systems we manufacture.
Compliance with these government regulations has not had a material effect on our capital expenditures, earnings or competitive position within the market to date.
Patents and Trademarks
We seek to obtain patents to protect the novel features of our products and processes. Our subsidiaries hold 116 United States patents and 142 foreign patents. Our subsidiaries have 16 United States and 40 foreign patent applications pending.
We have 83 trademarks registered in the United States, including logos for Astec, Carlson Paving, Heatec, KPI-JCI, Peterson Pacific, Power Flame, Roadtec and Telsmith, and the names ASTEC, CARLSON, HEATEC, JCI, KOLBERG, PETERSON, POWER FLAME, ROADTEC and TELSMITH, as well as a number of other product names. We also have 126 trademarks registered in foreign jurisdictions, including Argentina, Australia, Brazil, Canada, China, European Union, France, Germany, India, Italy, Kazakhstan, Mexico, New Zealand, Paraguay, Peru, Russia, South Africa, South Korea, Taiwan, Thailand, United Kingdom, Ukraine, Uruguay and Vietnam. We have 13 United States and 24 foreign trademark registration applications pending.
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Engineering and Product Development
We conduct research and development activities to develop new products and to enhance the functionality, effectiveness, ease of use and reliability of our existing products. We believe that our engineering and research and development efforts are key drivers of our success in the marketplace and dedicate substantial resources to engineering and product development activities including establishing an Innovation Services team. Our Innovation Services team has experts in advanced fields, such as simulation and digital twin creation, who support our development initiatives. In addition, we are focused on innovation in our products to support the "Rock to Road" value chain.
Seasonality and Backlog
Revenues typically are strongest during the first, second and fourth quarters with the third quarter consistently generating weaker results. We expect future operations in the near term to be typical of this historical trend.
As of December 31, 2021 and 2020, we had a backlog for delivery of products at certain dates in the future of approximately $762.6 million and $360.5 million, respectively. Approximately $346.4 million of the increase in backlog between periods relates to orders from domestic customers. Our contracts reflected in the backlog generally are not, by their terms, subject to termination.
Competition
Each business segment operates in domestic markets that are highly competitive with respect to price, service and product quality. While specific competitors are named within each business segment discussion above, imports do not generally constitute significant competition for us in the United States, except for milling machines and track-mounted crushers. In international sales, however, we often compete with foreign manufacturers that may have a local presence in the market we are attempting to penetrate.
In addition, asphalt and concrete are generally considered competitive products as a surface choice for new roads and highways. A portion of the interstate highway system is surfaced in concrete, but over 90% of all surfaced roads in the U.S. are paved with asphalt. Although concrete is used for some new road surfaces, asphalt is used for most resurfacing. Our customers generally offer both asphalt and concrete surfacing options. Our investment in concrete batch plants in 2020 enables us to be a singular provider to our customers for both asphalt and concrete equipment.
Human Capital Resources and Management
Our employees around the world are each guided by our purpose: Built to Connect, and our vision: To connect people, processes and products, advancing innovative solutions from "Rock to Road" as OneASTEC. Every employee is also guided by our values and our code of business conduct. In everyday work, our employees embody our core values of Safety, Devotion, Integrity, Respect and Innovation. They do so by living our winning behaviors of Open and Honest Communications, Drive Creativity, Customer Driven Innovation and OneASTEC in all we do. We strive to be an employer of choice, attracting and retaining top talent committed to creating a diverse, equitable and inclusive workplace where individuals are respected and valued for their diverse backgrounds and experiences. Through comprehensive compensation and benefits and a focus on safety, we strive to support our employees' overall well-being.
In 2021, we executed our first global employee engagement survey. In total, 73% of our workforce responded and provided us with valuable feedback. Throughout the year we have focused on the three main areas of opportunity identified: communication, performance management and diversity.
Employee Profile
As of December 31, 2021, we employed 4,041 individuals, including 3,437 employees in the U.S. and Canada. We also retain consultants, independent contractors and temporary and part-time workers. As of December 31, 2021, the functional representation of our employees was as follows: 2,646 were engaged in manufacturing, 393 in engineering, including support staff, and 1,002 in selling, administrative and management functions.
Unions are certified as bargaining agents for approximately two percent of our U.S. direct employees. From time to time, our collective bargaining agreements expire and come up for renegotiation. Approximately 82 of our active U.S. employees are covered by a collective bargaining agreement with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC on behalf of its local affiliate Local Union No. 11-508-03, with an expiration date of December 8, 2022. Unions also represent approximately 25% of our employees at our manufacturing facilities outside the U.S. We consider our employee relations to be good.
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Compensation and Benefits
As we strive to be an employer of choice, we provide competitive and robust compensation and benefits. We achieve this by regularly conducting market reviews and adjusting as needed. In addition to salaries, we provide regional programs, that can include annual bonuses, share-based compensation awards, a 401(k) plan with employee matching opportunities, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, adoption and surrogacy assistance, employee assistance programs, tuition assistance and on-site services.
Health and Safety
The well-being and safety of our employees is a paramount value for us and this is consistent with our core values. We manage safety at (and from) the highest levels, using the same tools we employ to measure and improve other aspects of business performance, such as continuous improvement, key performance indicators, scorecards and performance management. More particularly, we undertake the following actions:
• provide mandatory safety trainings each month at our production facilities, which are designed to focus on empowering our employees with the knowledge and tools they need to make safe choices and to mitigate risks;
• track safety leading and lagging indicators;
• local management cascades safety practices throughout the organization, including daily "safety huddles" for each work-shift;
• we use safety scorecards, standardized signage, and visual management throughout our facilities, in addition to traditional safety training;
• regularly conduct monthly safety calls to discuss and share best practices with the local safety managers; and
• distribute monthly employee newsletters and executive-led town hall meetings.
We aspire to reduce lost time and recordable injuries each year. During the year ended December 31, 2021, we had zero recordable injuries at five of our sites. However, we experienced a 23% increase in our recordable injuries across all sites compared to the year ended December 31, 2020. Our Occupational Safety and Health Administration Incident Rate experienced an increase from 1.39 for the year ended December 31, 2020 to 1.71 for the year ended December 31, 2021.
In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, partners and the communities in which we operate, and which complied with government orders. This included having those employees who could, work from home and implementing additional safety measures for our production and other employees continuing critical on-site work. Closely following the recommendations of the World Health Organization, the U.S. Centers for Disease Control and local governments, we took numerous actions to ensure the health and safety of our employees.
As a result of the effects of the COVID-19 pandemic, we have experienced a shortage of necessary production personnel and increasing labor costs to attract staff in our manufacturing operations. This has resulted in a variety of challenges in running our operations efficiently as well as meeting manufacturing demand. We continue to adjust our production schedules and manufacturing workload distribution, outsource components, implement efficiency improvements and actively modify our recruitment process and compensation and benefits to attract and retain production personnel in our manufacturing facilities.
Talent Development, Diversity, Equity and Inclusion
Talent and Diversity are key components of our OneASTEC business model. We strive to create an environment that attracts top talent and where high performance is fostered and thrives, continuous learning is engrained, diverse experience is leveraged as a competitive advantage and careers are propelled forward.
In 2021, we developed and implemented a new Performance Management model and process company-wide to align our efforts to achieve company goals and targets. This new model includes values, professional development and cascaded common performance goals.
We provide all employees a wide range of professional development experiences, both formal and informal, at various stages in their careers. In addition, talent development and succession planning for critical roles is a cornerstone of our talent program. Development plans are created and monitored for critical roles to ensure progress is made along the established timelines.
One of our core values – Respect – reflects the behavior we strive to include in every aspect of the way we conduct business. We recognize that our best performance comes when our teams are diverse and inclusive. We continue to define our diversity, equity and inclusion strategy. These efforts touch all levels of our organization including our Board of Directors, which is currently comprised of 20% women.
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Corporate and Available Information
Astec Industries, Inc. is a Tennessee corporation which was incorporated in 1972. We make available, free of charge on or through our website (www.astecindustries.com), access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements on Schedule 14A Section 16 reports, amendments to those reports, and other documents filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is filed with, or furnished to, the Securities and Exchange Commission ("SEC"). Information contained in our website is not part of, and is not incorporated into, this Annual Report on Form 10-K or any other report we file with or furnish to the SEC.
The SEC also maintains electronic versions of our reports on its website at www.sec.gov.