What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-03 · 164 added, 326 removed, 390 unchanged (56% of the section changed)

3 unchanged sentences

(In millions, except share and per share data, unaudited)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Current assets:

22 unchanged sentences

Accrued product warranty 12.4 11.9

Accrued payroll and related liabilities 34.9 23.6

Accrued employee related liabilities 34.6 35.3

Accrued loss reserves 2.3 1.9

9 unchanged sentences

Common stock – authorized 40,000,000 shares of $ 0.20 par value;

issued and outstanding – 22,710,427 as of September 30, 2022 and 22,767,052 as of December 31, 2021

issued and outstanding – 22,690,567 as of March 31, 2023 and 22,624,031 as of December 31, 2022

Additional paid-in capital 135.2 135.8

10 unchanged sentences

(In millions, except share and per share data, unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net sales $ 347.9 $ 291.2

2 unchanged sentences

Selling, general and administrative expenses 67.9 59.7

Research and development expenses 8.5 6.7 23.0 20.0

Restructuring, impairment and other asset charges, net 0.1 0.3 4.5 1.8

Restructuring and other asset charges, net 3.7 1.0

Income from operations 17.6 4.0

Other income:

Other (expenses) income, net:

Interest expense ( 2.0 ) ( 0.4 )

Interest income 0.5 0.2

Other expenses, net ( 0.3 ) ( 0.1 ) ( 0.8 ) ( 0.1 )

Income from operations before income taxes 1.2 6.1 1.5 25.8

Income tax provision (benefit) 0.7 ( 2.9 ) 0.8 —

Other income, net 0.4 1.2

Income before income taxes 16.5 5.0

Income tax provision 4.4 0.9

Net income 12.1 4.1

8 unchanged sentences

ASTEC INDUSTRIES, INC.

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income

(In millions, unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net income $ 12.1 $ 4.1

Other comprehensive loss:

Other comprehensive income:

Foreign currency translation adjustments 0.1 4.2

Other comprehensive loss ( 9.2 ) ( 4.5 ) ( 13.5 ) ( 1.2 )

Comprehensive (loss) income ( 8.7 ) 4.5 ( 12.8 ) 24.6

Comprehensive loss attributable to noncontrolling interest 0.2 0.1 0.1 0.1

Comprehensive (loss) income attributable to controlling interest $ ( 8.5 ) $ 4.6 $ ( 12.7 ) $ 24.7

Other comprehensive income 0.1 4.2

Comprehensive income 12.2 8.3

Comprehensive income attributable to noncontrolling interest ( 0.1 ) ( 0.1 )

Comprehensive income attributable to controlling interest $ 12.1 $ 8.2

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2 unchanged sentences

(In millions, unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income $ 12.1 $ 4.1

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization 6.3 6.7

1 unchanged sentence

Provision for warranties 3.9 3.2

Deferred compensation (benefit) expense ( 1.1 ) —

Deferred compensation benefit — ( 0.8 )

Share-based compensation 0.8 1.8

Deferred tax (benefit) provision ( 12.6 ) 0.3

Deferred tax benefit ( 2.6 ) ( 4.0 )

Gain on disposition of property and equipment ( 3.4 ) —

Asset impairment charges, net 3.4 0.2

Amortization of debt issuance costs 0.1 —

Distributions to deferred compensation programs' participants ( 0.1 ) ( 0.1 )

Change in operating assets and liabilities, excluding the effects of acquisitions:

Purchase of trading securities, net ( 0.7 ) ( 2.4 )

Change in operating assets and liabilities:

(Purchase) sale of trading securities, net ( 0.8 ) 0.6

Receivables and other contract assets ( 4.5 ) 5.3

4 unchanged sentences

Accrued loss reserves 0.4 ( 0.2 )

Accrued payroll and related expenses 11.2 9.3

Accrued employee related liabilities ( 0.8 ) 3.7

Other accrued liabilities ( 5.9 ) ( 3.0 )

2 unchanged sentences

Income taxes payable/prepaid 7.0 4.4

Net cash (used in) provided by operating activities ( 56.8 ) 27.3

Net cash used in operating activities ( 19.2 ) ( 9.6 )

Cash flows from investing activities:

Acquisitions, net of cash acquired ( 17.8 ) 0.1

Price adjustment on prior sale of subsidiary — ( 1.1 )

Expenditures for property and equipment ( 8.0 ) ( 11.6 )

1 unchanged sentence

Purchase of investments ( 0.2 ) ( 0.3 )

Sale of investments 0.5 1.8

Net cash used in investing activities ( 45.0 ) ( 9.2 )

Net cash provided by (used in) investing activities 11.8 ( 11.7 )

ASTEC INDUSTRIES, INC.

1 unchanged sentence

(In millions, unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from financing activities:

Payment of dividends ( 2.9 ) ( 2.8 )

Proceeds from borrowings on credit facility and bank loans 50.1 2.5

Repayments of borrowings on credit facility and bank loans ( 42.5 ) ( 3.6 )

Sale of Company stock by deferred compensation programs, net 0.2 0.6

Proceeds from borrowings on credit facilities and bank loans 32.1 5.4

Repayments of borrowings on credit facilities and bank loans ( 44.0 ) ( 3.6 )

Withholding tax paid upon vesting of share-based compensation awards ( 1.4 ) ( 1.3 )

Repurchase of Company stock ( 6.1 ) —

Net cash used in financing activities ( 16.2 ) ( 2.3 )

Effect of exchange rates on cash 0.1 0.9

(Decrease) increase in cash and cash equivalents and restricted cash ( 113.6 ) 6.0

Cash and cash equivalents and restricted cash, beginning of period 134.4 158.6

Cash and cash equivalents and restricted cash, end of period $ 20.8 $ 164.6

Decrease in cash, cash equivalents and restricted cash ( 23.5 ) ( 22.7 )

Cash, cash equivalents and restricted cash, beginning of period 66.0 134.4

Cash, cash equivalents and restricted cash, end of period $ 42.5 $ 111.7

Supplemental cash flow information:

10 unchanged sentences

Consolidated Statements of Equity

(In millions, unaudited)

(In millions except share and per share data, unaudited)

Common Stock Common Stock Amount Additional Paid-in-Capital Accumulated Other Comprehensive Loss Company Shares Held by SERP Retained Earnings Noncontrolling Interest Total Equity

8 unchanged sentences

Balance, March 31, 2023 22,690,567 $ 4.5 $ 135.2 $ ( 40.1 ) $ ( 1.1 ) $ 537.0 $ 0.1 $ 635.6

Net loss — — — — — ( 3.9 ) — ( 3.9 )

Other comprehensive loss — — — ( 8.5 ) — — — ( 8.5 )

Dividends ($ 0.12 per share)

— — 0.1 — — ( 2.7 ) — ( 2.6 )

Share-based compensation — — 1.6 — — — — 1.6

Issuance of common stock under incentive plan 27,482 — — — — — — —

Withholding tax paid upon equity award vesting — — ( 0.3 ) — — — — ( 0.3 )

Deferred compensation programs' transactions, net — — 0.1 — 0.1 — — 0.2

Balance, June 30, 2022 22,864,529 $ 4.6 $ 132.6 $ ( 36.8 ) $ ( 1.1 ) $ 544.0 $ 0.6 $ 643.9

Net income (loss) — — — — — 0.7 ( 0.2 ) 0.5

Other comprehensive loss — — — ( 9.2 ) — — — ( 9.2 )

Dividends ($ 0.12 per share)

— — — — — ( 2.8 ) — ( 2.8 )

Share-based compensation — — 2.0 — — — — 2.0

Issuance of common stock under incentive plan 6,343 — — — — — — —

Withholding tax paid upon equity award vesting — — ( 0.2 ) — — — — ( 0.2 )

Share repurchases ( 160,445 ) ( 0.1 ) — — — ( 6.0 ) — ( 6.1 )

Balance, September 30, 2022 22,710,427 $ 4.5 $ 134.4 $ ( 46.0 ) $ ( 1.1 ) $ 535.9 $ 0.4 $ 628.1

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 Noncontrolling Interest Total Equity

1 unchanged sentence

Net income — — — — — 4.1 — 4.1

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 )

Deferred compensation programs' transactions, net — — 0.1 — 0.1 — — 0.2

Balance, March 31, 2021 22,715,517 $ 4.5 $ 126.3 $ ( 34.2 ) $ ( 1.4 ) $ 549.7 $ 0.4 $ 645.3

Net income — — — — — 8.3 — 8.3

Other comprehensive income — — — 4.1 — — 0.1 4.2

4 unchanged sentences

Withholding tax paid upon equity award vesting — — ( 1.3 ) — — — — ( 1.3 )

Deferred compensation programs' transactions, net — — 0.2 — 0.1 — — 0.3

Balance, June 30, 2021 22,757,326 $ 4.6 $ 127.8 $ ( 30.2 ) $ ( 1.3 ) $ 555.5 $ 0.5 $ 656.9

Net income — — — — — 9.0 — 9.0

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 )

Deferred compensation programs' transactions, net — — — — 0.1 — — 0.1

Balance, September 30, 2021 22,762,989 $ 4.6 $ 129.2 $ ( 34.6 ) $ ( 1.2 ) $ 562.0 $ 0.4 $ 660.4

Balance, March 31, 2022 22,837,047 $ 4.6 $ 131.1 $ ( 28.3 ) $ ( 1.2 ) $ 550.6 $ 0.6 $ 657.4

The accompanying notes are an integral part of these unaudited consolidated financial statements.

31 unchanged sentences

Completion of the transaction is subject to obtaining certain judicial approval in Brazil.

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, share-based compensation and the measurement of income tax assets and liabilities.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes.

Significant items subject to such estimates and assumptions include excess and obsolete inventory, inventory net realizable value, product warranty obligations, self-insurance loss reserves, capitalization of internal use software, goodwill impairment 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 and its contributory impacts on the economy have 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 and its contributory impacts.

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.

As discussed in Note 2.

Immaterial Error Correction, the Company identified certain immaterial errors during the first quarter of 2022 for which the prior period and all relevant footnotes to the consolidated financial statements in this Form 10-Q have been revised to reflect the corrected balances.

financial position as of September 30, 2022 and December 31, 2021 and the cash flows for the nine months ended September 30, 2022 and 2021, and except as otherwise discussed herein, such adjustments consist only of those of a normal recurring nature.

Actual results could differ from those 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 months ended March 31, 2023 and 2022, the financial position as of March 31, 2023 and December 31, 2022 and the cash flows for the three months ended March 31, 2023 and 2022, 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 have been made to the prior period financial information to conform to the presentation used in the financial statements for the three months ended March 31, 2023.

• The Company elected to present research and development expenses in "Selling, general and administrative expenses".

These amounts were previously included in a separate financial statement caption in the Consolidated Statements of Operations.

• The Company reclassified certain accrued liability balances from "Other current liabilities" to "Accrued employee related liabilities" to more appropriately reflect the nature of such accrued balances.

• The Company elected to present gains and losses recognized on the change in fair value of derivative instruments and foreign currency transaction gains and losses, net in "Other income (expenses), net".

These amounts were previously included in "Cost of sales".

There was no change to previously reported "Total current liabilities" or "Net income (loss) attributable to controlling interest" related to these reclassifications.

During the first quarter of 2023, the Company identified immaterial errors associated with over-accruals of inventory-related expenses in its historical financial statements.

The cumulative effect of the errors generated in 2021 and 2022 was corrected during the first quarter of 2023, resulting in a decrease in "Cost of sales" of $ 1.9 million.

Such adjustment was not considered material to the Company's consolidated financial statements for the year ended December 31, 2022 or any of the financial statements for the previously filed annual periods.

Recently Adopted Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-10, "Government Assistance (Topic 832)", which aims to increase the transparency of government assistance including the disclosure of the types of assistance, an entity’s accounting for the assistance and the effect of the assistance on an entity’s financial statements.

The new guidance requires expanded disclosure about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.

This new standard was effective for the Company on January 1, 2022.

Availability of government assistance has typically been limited.

The Company did not receive government assistance in 2022.

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805):

In October 2021, the Financial Accounting Standards Board issued ASU 2021-08, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers", which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 2014-09, Revenue from Contracts with Customers (Topic 606).

3 unchanged sentences

The adoption of this new standard did not have a material impact on its financial position, results of operations, cash flows or disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)", which provides optional guidance for a limited period of time to ease the potential burden in accounting (or recognizing the effects of) reference rate reform on financial reporting.

This was in response to stakeholders raising certain operational challenges likely to arise in accounting for contract modifications and hedge accounting because of reference rate reform.

Some of those challenges relate to the significant volume of contracts and other arrangements, such as debt agreements, lease agreements and derivative instruments, which will be modified to replace references to discontinued rates with references to replacement rates.

For accounting purposes, such contract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts.

Stakeholders indicated that due to the significant volume of affected contracts and other arrangements, together with a compressed time frame for making contract modifications, the application of existing accounting standards on assessing modifications versus extinguishments could be costly and burdensome.

In addition, stakeholders indicated that financial reporting results should reflect the intended continuation of such contracts and arrangements during the period of the market-wide transition to alternative reference rates.

The amendments are elective and are effective upon issuance through December 31, 2022.

The Company intends to apply this guidance if modifications of its contracts that include LIBOR occur, which is not expected to have a material impact on the Company's consolidated financial statements.

Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material impact on the Company.

Immaterial Error Correction

During the first quarter of 2022, the Company identified errors in its previously issued financial statements related to an overstatement of work-in-process inventory that mainly accumulated over the periods from 2018 through 2021 thereby understating "Cost of sales" in those periods and an overstatement of "Net sales" and "Cost of sales" as well as impacts to certain consolidated balance sheet financial statement line items as a result of over-time revenue recognition calculation errors at one of the Company's sites which impacted the second, third and fourth quarters of 2021.

The Company assessed the materiality of these misstatements both quantitatively and qualitatively and determined the correction of these errors to be immaterial to the prior period consolidated financial statements taken as a whole.

To reflect the correction of the above errors, the Company is revising the previously issued consolidated financial statements for the three and nine months ended September 30, 2021 in this Form 10-Q.

The Company is also disclosing the impact of the revisions on the previously filed audited Consolidated Balance Sheet as of December 31, 2021 and the opening balance sheet equity impact for December 31, 2020.

As a result, the Company has corrected the misstatements as disclosed in the following tables for all impacted financial statement line items in prior periods.

Balance Sheet

December 31, 2021

(in millions) As Previously Reported Adjustment As Revised

Trade receivables and contract assets, net $ 144.1 $ ( 2.4 ) $ 141.7

Inventories 303.0 ( 4.3 ) 298.7

Prepaid and refundable income taxes 19.5 1.0 20.5

Total current assets 641.7 ( 5.7 ) 636.0

Deferred income tax assets 16.0 0.2 16.2

Total assets 911.3 ( 5.5 ) 905.8

Accounts payable 83.5 ( 1.3 ) 82.2

Other current liabilities 42.9 ( 0.7 ) 42.2

Total current liabilities 225.3 ( 2.0 ) 223.3

Total liabilities 256.5 ( 2.0 ) 254.5

Retained earnings 552.8 ( 3.5 ) 549.3

Shareholders' equity 654.3 ( 3.5 ) 650.8

Total equity 654.8 ( 3.5 ) 651.3

Total liabilities and equity 911.3 ( 5.5 ) 905.8

Statement of Operations

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

(in millions) As Previously Reported Adjustment As Revised As Previously Reported Adjustment As Revised

Net sales $ 267.0 $ ( 0.1 ) $ 266.9 $ 829.4 $ ( 0.5 ) $ 828.9

Cost of sales 204.7 0.3 205.0 631.6 1.1 632.7

Gross profit 62.3 ( 0.4 ) 61.9 197.8 ( 1.6 ) 196.2

Income from operations 6.7 ( 0.4 ) 6.3 27.7 ( 1.6 ) 26.1

Income from operations before income taxes 6.5 ( 0.4 ) 6.1 27.4 ( 1.6 ) 25.8

Income tax provision (benefit) ( 2.8 ) ( 0.1 ) ( 2.9 ) 0.4 ( 0.4 ) —

Net income 9.3 ( 0.3 ) 9.0 27.0 ( 1.2 ) 25.8

Net income attributable to controlling interest 9.3 ( 0.3 ) 9.0 27.0 ( 1.2 ) 25.8

Per share data:

Earnings per common share - Basic 0.41 ( 0.01 ) 0.40 1.19 ( 0.05 ) 1.14

Earnings per common share - Diluted 0.41 ( 0.02 ) 0.39 1.18 ( 0.05 ) 1.13

Statements of Comprehensive Income

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

(in millions) As Previously Reported Adjustment As Revised As Previously Reported Adjustment As Revised

Net income $ 9.3 $ ( 0.3 ) $ 9.0 $ 27.0 $ ( 1.2 ) $ 25.8

Comprehensive (loss) income 4.8 ( 0.3 ) 4.5 25.8 ( 1.2 ) 24.6

Comprehensive (loss) income attributable to controlling interest 4.9 ( 0.3 ) 4.6 25.9 ( 1.2 ) 24.7

Statement of Cash Flow

Nine Months Ended September 30, 2021

(in millions) As Previously Reported Adjustment As Revised

Net income $ 27.0 $ ( 1.2 ) $ 25.8

Receivables and other contract assets ( 31.3 ) 1.1 ( 30.2 )

Inventories ( 33.4 ) 1.1 ( 32.3 )

Other accrued liabilities 10.3 ( 0.6 ) 9.7

Income taxes payable/prepaid ( 5.7 ) ( 0.4 ) ( 6.1 )

Statement of Equity

(in millions) As Previously Reported Adjustment As Revised

Balance, December 31, 2020

Retained Earnings $ 545.2 $ ( 1.5 ) $ 543.7

Total Equity 643.0 ( 1.5 ) 641.5

Balance, March 31, 2021

Retained Earnings 551.4 ( 1.7 ) 549.7

Total Equity 647.0 ( 1.7 ) 645.3

Balance, June 30, 2021

Retained Earnings 557.9 ( 2.4 ) 555.5

Total Equity 659.3 ( 2.4 ) 656.9

Balance, September 30, 2021

Retained Earnings 564.7 ( 2.7 ) 562.0

Total Equity 663.1 ( 2.7 ) 660.4

Balance, December 31, 2021

Retained Earnings 552.8 ( 3.5 ) 549.3

Total Equity 654.8 ( 3.5 ) 651.3

MINDS Acquisition - The Company entered into a Share Purchase Agreement, dated as of March 22, 2022, by and between MINDS Automation Group, Inc., a leader in plant automation control systems and cloud-based data management in the asphalt industry in Canada.

The purchase price of $ 19.3 million was paid in cash.

The Company's preliminary allocation of the purchase price resulted in the recognition of $ 9.3 million of goodwill and $ 9.3 million of intangible assets primarily consisting of customer relationships ( 9 year life) and developed technology ( 7 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 was completed on April 1, 2022 at a purchase price of $ 19.3 million, which was paid in cash.

The Company's allocation of the purchase price resulted in the recognition of $ 9.3 million of goodwill and $ 9.3 million of intangible assets primarily consisting of customer relationships ( 9 year life) and developed technology ( 7 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 the proportion of intangible assets acquired in relation to tangible assets.

Goodwill acquired is attributable to future growth opportunities provided by the acquired intellectual capital and the ability to generate cross-selling synergies.

1 unchanged sentence

Results of operations have been consolidated from the date of acquisition.

The goodwill is not expected to be deductible for income tax purposes.

Acquisition and integration costs of $ 0.2 million and $ 1.1 million were expensed as incurred during the three and nine months ended September 30, 2022, respectively, for this acquisition.

The goodwill is not deductible for income tax purposes.

Proforma financial information is not included since not significant.

Acquisition and integration costs incurred were nominal during the three months ended March 31, 2023 for this acquisition.

Acquisition and integration costs incurred were $ 0.5 million during the three months ended March 31, 2022.

These costs are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

The following table summarizes the preliminary allocations of the total purchase price:

The following table summarizes the allocations of the total purchase price:

(in millions) Amount

15 unchanged sentences

Inventories consist of the following:

(in millions) September 30, 2022 December 31, 2021

(in millions) March 31, 2023 December 31, 2022

Raw materials and parts $ 311.9 $ 302.9

10 unchanged sentences

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.

The carrying amount of cash and cash equivalents, trade receivables and contract assets, other receivables, accounts payable and short-term 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.

8 unchanged sentences

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, 2022 and December 31, 2021 are Level 1 and Level 2 in the fair value hierarchy as defined above:

September 30, 2022

As indicated in the tables below, the Company has determined that all of its financial assets and liabilities as of March 31, 2023 and December 31, 2022 are Level 1 and Level 2 in the fair value hierarchy as defined above:

March 31, 2023

(in millions) Level 1 Level 2 Total

7 unchanged sentences

Municipal bonds — 0.4 0.4

Agency bonds — 2.2 2.2

Floating rate notes 0.1 — 0.1

5 unchanged sentences

Financial liabilities:

Derivative financial instruments $ — $ 0.1 $ 0.1

Deferred compensation programs' liabilities — 6.1 6.1

14 unchanged sentences

Other 1.3 0.7 2.0

Derivative financial instruments — 0.1 0.1

Total financial assets $ 12.6 $ 6.4 $ 19.0

7 unchanged sentences

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, 2022 and 2021 are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Changes in the Company's product warranty liability for the three month periods ended March 31, 2023 and 2022 are as follows:

Three Months Ended March 31,

(in millions) 2023 2022

2 unchanged sentences

Warranty liabilities settled ( 3.4 ) ( 2.4 )

Other ( 0.2 ) — ( 0.3 ) —

Reserve balance, end of the period $ 12.4 $ 11.3

3 unchanged sentences

Changes in assumptions, as well as changes in actual experience, could cause these estimates to change in the future.

Total accrued loss reserves were $ 6.2 million and $ 5.8 million at September 30, 2022 and December 31, 2021 respectively, of which $ 4.1 million and $ 3.9 million were included in "Other long-term liabilities" in the Consolidated Balance Sheets at September 30, 2022 and December 31, 2021, respectively.

For the three months ended September 30, 2022, the Company recorded an income tax expense of $ 0.7 million, reflecting a 58.3 % effective tax rate, compared to a $ 2.9 million income tax benefit for the three months ended September 30, 2021, reflecting a ( 47.5 )% effective tax rate.

The income tax expense for the three months ended September 30, 2022 as compared to the benefit in the same period in 2021 was primarily driven by prior year net discrete tax benefits that did not reoccur in the

current year related to the release of a valuation allowance associated with the Company's Brazilian subsidiary and a research and development ("R&D") credit partially offset by the tax effect of lower pre-tax earnings.

For the nine months ended September 30, 2022, the Company recorded an income tax provision of $ 0.8 million, reflecting a 53.3 % effective tax rate, compared to nominal expense for the nine months ended September 30, 2021.

The income tax expense for the nine months ended September 30, 2022 was higher compared to the same period of 2021 primarily driven by prior year net discrete tax benefits that did not reoccur in the current year related to the release of a valuation allowance associated with the Company's Brazilian subsidiary, a favorable net benefit from the R&D credit and the release of reserves for uncertain tax positions associated with Astec Mobile Machinery GmbH partially offset by the tax effect of lower pre-tax earnings.

The Company's recorded liability for uncertain tax positions was $ 11.3 million and $ 10.8 million as of September 30, 2022 and December 31, 2021, respectively.

The increase is the result of $ 0.5 million of incremental reserves associated with the 2022 research and development credit.

Total accrued loss reserves were $ 6.2 million and $ 5.8 million at March 31, 2023 and December 31, 2022, respectively, of which $ 3.9 million were included in "Other long-term liabilities" in the Consolidated Balance Sheets at both March 31, 2023 and December 31, 2022.

For the three months ended March 31, 2023, the Company recorded an income tax expense of $ 4.4 million, reflecting a 26.7 % effective tax rate, compared to a $ 0.9 million income tax expense for the three months ended March 31, 2022, reflecting an 18.0 % effective tax rate.

The income tax expense for the three months ended March 31, 2023 was higher compared to the same period in 2022, primarily due to higher pretax book income and valuation allowance increases related to a domestic subsidiary, partially offset by a net discrete tax benefit related to a research and development credit.

The Company's recorded liability for uncertain tax positions was $ 12.2 million and $ 12.0 million as of March 31, 2023 and December 31, 2022, respectively.

The increase is the result of $ 0.2 million of incremental reserves associated with the 2023

research and development credit.

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.

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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, 2022, 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.

As of March 31, 2023, 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.

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

The IRA levies a 1% excise tax on net stock repurchases after December 31, 2022 and imposes a 15% corporate alternative minimum tax ("CAMT") for tax years beginning after December 31, 2022.

The Company did not repurchase any shares during the three months ended March 31, 2023.

CAMT does not impact the Company's results of operations or financial position.

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 $ 2.2 million and $ 2.4 million at September 30, 2022 and December 31, 2021, respectively.

These arrangements expire at various dates through August 2025.

Certain customers have financed purchases of Company products through arrangements with third-party financing institutions.

Under these arrangements, the Company is contingently liable for customer debt of $ 1.9 million and $ 2.4 million at March 31, 2023 and December 31, 2022, respectively.

These arrangements expire at various dates running through September 2025.

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 $ 0.1 million for 2023), 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 $ 1.0 million and $ 1.1 million related to these guarantees which were included in "Other current liabilities" in the Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, respectively.

The agreements provide that the Company will receive the lender's full security interest in the financed equipment if the Company is required to fulfill its contingent liability under these arrangements.

The Company has recorded a liability of $ 0.8 million and $ 1.0 million related to these guarantees which were included in "Other current liabilities" in the Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, 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 $ 2.5 million as of September 30, 2022.

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, 2022.

As of September 30, 2022, the Company's foreign subsidiaries are contingently liable for a total of $ 1.4 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 $ 6.5 million as of September 30, 2022.

Prior history is considered with respect to the Company having to perform on any off-balance sheet guarantees, as well as future projections of individual customer credit worthiness with respect to assessing credit losses related to off-balance sheet guarantees.

In addition, the Company is contingently liable under letters of credit issued under its $ 250.0 million revolving credit facility (the "Credit Facilities"), which outstanding letters of credit totaled $ 2.6 million as of March 31, 2023.

The outstanding letters of credit expire at various dates through February 2024.

The maximum potential amount of future payments under letters of credit issued under the Credit Facilities for which the Company could be liable is $ 30.0 million as of March 31, 2023.

As of March 31, 2023, the Company's foreign subsidiaries are contingently liable for a total of $ 4.4 million in performance letters of credit, advance payments and retention guarantees, of which $ 2.9 million is secured by separate credit facilities with local financial institutions.

The maximum potential amount of future payments under these letters of credit and bank guarantees for which the Company could be liable is $ 9.7 million as of March 31, 2023.

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.

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On March 31, 2022, the United States Court of Appeals for the Sixth Circuit issued an opinion reversing the dismissal of the Company and one former executive officer, affirming the dismissal of certain other former executive officers and remanding the action to the United States District Court for the Eastern District of Tennessee for proceedings consistent with the opinion.

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.

On July 11, 2022 Defendants filed an answer to the complaint, and the action is now in discovery.

The Company's GEFCO, Inc.

("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.

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In addition to seeking a rescission of the purchase contract, the plaintiff is seeking special and consequential damages.

The original purchase price of the equipment was approximately $ 8.5 million.

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.

that generally mirrored the allegations in the GEFCO suit.

In January 2023, the court allowed Astec Industries, Inc.

to be added as a defendant to the GEFCO suit and, as a result, the separate suit against Astec Industries, Inc.

was dismissed.

The Company disputes the plaintiffs' allegations and is vigorously defending the GEFCO suit.

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 subject to various claims and legal proceedings in the ordinary course of its 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.

In addition to the two matters noted above, the Company is currently a party, and may become a party, to various other claims and legal proceedings in the ordinary course of business.

If management believes that a loss arising from any claims and legal proceedings is probable and can reasonably be estimated, the Company records the amount of the loss (excluding estimated legal fees) or, when the loss is estimated using a range and no point within the range is more probable than another, the minimum estimated liability.

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.

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.

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Revenue Recognition

The following tables disaggregate the Company's revenue by major source for the three and nine month periods ended September 30, 2022 and 2021 (excluding intercompany sales):

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021

(in millions) Infrastructure Solutions Materials Solutions Corporate and Other Total Infrastructure Solutions Materials Solutions Corporate and Other Total

Net Sales-Domestic:

Equipment sales $ 105.9 $ 60.6 $ 0.8 $ 167.3 $ 94.4 $ 37.6 $ — $ 132.0

Parts and component sales 46.3 21.8 0.1 68.2 40.3 20.0 — 60.3

Service and equipment installation revenue 5.2 0.3 — 5.5 3.2 0.1 — 3.3

Used equipment sales 3.2 — — 3.2 0.9 0.1 — 1.0

Freight revenue 5.3 2.1 — 7.4 4.8 1.4 — 6.2

Other 0.2 ( 2.5 ) 0.1 ( 2.2 ) ( 0.4 ) ( 0.6 ) — ( 1.0 )

Total domestic revenue 166.1 82.3 1.0 249.4 143.2 58.6 — 201.8

Net Sales-International:

Equipment sales 23.8 17.7 0.3 41.8 20.6 21.8 — 42.4

Parts and component sales 10.1 9.6 — 19.7 8.7 10.1 — 18.8

Service and equipment installation revenue 1.0 0.9 0.1 2.0 0.8 0.6 — 1.4

Used equipment sales 0.3 1.0 — 1.3 0.8 0.8 — 1.6

Freight revenue 0.6 0.3 — 0.9 0.4 0.4 — 0.8

Other — — 0.1 0.1 — 0.1 — 0.1

Total international revenue 35.8 29.5 0.5 65.8 31.3 33.8 — 65.1

Total net sales $ 201.9 $ 111.8 $ 1.5 $ 315.2 $ 174.5 $ 92.4 $ — $ 266.9

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

The following tables disaggregate the Company's revenue by major source for the three month periods ended March 31, 2023 and 2022 (excluding intercompany sales):

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

(in millions) Infrastructure Solutions Materials Solutions Corporate and Other Total Infrastructure Solutions Materials Solutions Corporate and Other Total

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Sales into major geographic regions were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2023 2022

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Canada 21.8 14.2

Europe 11.0 5.4

Australia 9.7 10.2

Africa 8.1 9.1

Europe 9.1 7.4 22.4 31.8

South America (Excluding Brazil) 5.6 5.2

Brazil 4.5 3.8

South America 4.5 2.5 17.1 11.5

Central America (Excluding Mexico) 2.1 2.6

Mexico 0.8 0.7

Asia 1.5 5.5 8.6 9.2

Central America 3.9 1.6 7.5 3.4

Other 2.1 1.5

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Total net sales $ 347.9 $ 291.2

As of September 30, 2022, the Company had contract assets of $ 4.5 million and contract liabilities, excluding customer deposits, of $ 4.5 million, including $ 3.0 million of deferred revenue related to extended warranties.

As of December 31, 2021, the

Company had contract assets of $ 3.2 million and contract liabilities, excluding customer deposits, of $ 5.6 million, including $ 2.7 million of deferred revenue related to extended warranties.

As of March 31, 2023, the Company had contract assets of $ 5.6 million and contract liabilities, excluding customer deposits, of $ 5.7 million, including $ 2.5 million of deferred revenue related to extended warranties.

As of December 31, 2022, the Company had contract assets of $ 3.8 million and contract liabilities, excluding customer deposits, of $ 5.5 million, including $ 2.9 million of deferred revenue related to extended warranties.

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.

Based on a review of these factors, the Company's India and Thailand sites have changed reportable segments beginning January 1, 2022.

The India site was previously incorporated into the Materials Solutions segment and has moved to the Infrastructure Solutions segment while the Thailand site, which was previously included in the Infrastructure Solutions segment, has moved to the Materials Solutions segment.

Beginning January 1, 2022, the measure of segment profit or loss used by the Company's Chief Executive Officer, whom is determined to be the chief operating decision maker ("CODM"), to evaluate performance and allocate resources to the operating segments changed to Segment Operating Adjusted EBITDA.

Segment Operating Adjusted EBITDA is the measure of segment profit or loss used by the Company's Chief Executive Officer, whom is determined to be the chief operating decision maker ("CODM"), to evaluate performance and allocate resources to the operating segments is Segment Operating Adjusted EBITDA.

Segment Operating Adjusted EBITDA, a non-GAAP financial measure, is defined as net income or loss before the impact of interest income or expense, income taxes, depreciation and amortization and certain other adjustments that are not considered by the CODM in the evaluation of ongoing operating performance.

The Company's presentation of Segment Operating Adjusted EBITDA may not be comparable to similar measures used by other companies and is not necessarily indicative of the results of operations that would have occurred had each reportable segment been an independent, stand-alone entity during the periods presented.

Prior periods have been revised to reflect both the segment composition change and the segment profit or loss metric noted above for comparability.

During the first quarter of 2022, the Company revised the allocation of certain of its functional expenses between the Corporate category and the reportable segments primarily related to the Company's annual incentive compensation.

Prior periods have not been revised for this change.

A brief description of each segment is as follows:

Infrastructure Solutions – The Infrastructure Solutions segment comprises 11 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.

Infrastructure Solutions – Sites within the Infrastructure Solutions segment design, engineer, manufacture and market a complete line of asphalt plants, concrete plants and their related components and ancillary equipment as well as supplying asphalt road construction equipment, industrial thermal systems and other heavy equipment.

The sites based in North America within the Infrastructure Solutions segment are primarily manufacturing operations while those located outside of North America, 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 nine 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 Thailand 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.

The primary purchasers of the products produced by this segment are asphalt and concrete producers, highway and heavy equipment contractors, utility contractors, forestry and environmental recycling contractors and domestic and foreign governmental agencies.

Materials Solutions – Sites within the Materials Solutions segment design and manufacture 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 site 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.

The principal purchasers of aggregate processing equipment include distributors, highway and heavy equipment contractors, sand and gravel producers, demolition, recycle and crushing contractors, open mine operators, quarry operators, port and inland terminal authorities, power stations and foreign and domestic governmental agencies.

Corporate and Other – The Corporate and Other category consists primarily of the parent company, the Company's captive insurance company, Astec Insurance, and the controls and automation business, 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 other sites.

The controls and automation business manufactures hardware and software products that are marketed independently as well as included in certain products of the Company's other segments.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.

The controls and automation business manufactures hardware and software products that are marketed independently and included in certain products of the Company's other segments.

The accounting policies of the reportable segments are the same as those described in Note 1, Basis of Presentation and Significant Accounting Policies.

Intersegment sales and transfers between foreign subsidiaries are valued at prices comparable to those for unrelated parties.

Segment Information:

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021

(in millions) Infrastructure Solutions Materials Solutions Corporate and Other Total Infrastructure Solutions Materials Solutions Corporate and Other Total

Revenues from external customers $ 201.9 $ 111.8 $ 1.5 $ 315.2 $ 174.5 $ 92.4 $ — $ 266.9

Intersegment sales 1.9 14.1 — 16.0 1.1 9.1 — 10.2

Segment Operating Adjusted EBITDA 17.6 13.1 ( 14.2 ) 16.5 18.3 10.7 ( 12.9 ) 16.1

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

(in millions) Infrastructure Solutions Materials Solutions Corporate and Other Total Infrastructure Solutions Materials Solutions Corporate and Other Total

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Segment Operating Adjusted EBITDA 27.3 15.3 ( 6.8 ) 35.8 16.4 12.2 ( 9.8 ) 18.8

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,

A reconciliation of total Segment Operating Adjusted EBITDA to the Company's "Net income attributable to controlling interest" is as follows:

Three Months Ended March 31,

(in millions) 2023 2022

Reconciliation to total consolidated net income attributable to controlling interest

Net income attributable to controlling interest

Segment Operating Adjusted EBITDA $ 35.8 $ 18.8

Transformation program ( 7.2 ) ( 5.3 )

Facility closures and reduction in force ( 0.1 ) ( 0.5 ) ( 1.5 ) ( 2.1 )

Asset impairment ( 0.4 ) — ( 3.4 ) ( 0.2 )

Restructuring and other related charges ( 7.1 ) ( 1.0 )

Gain on sale of property and equipment, net 3.4 —

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Depreciation and amortization ( 6.3 ) ( 6.7 )

Income tax (provision) benefit ( 0.7 ) 2.9 ( 0.8 ) —

Net loss attributable to noncontrolling interest 0.2 — 0.2 —

(Elimination) recapture of intercompany profit ( 0.1 ) 0.3 — 0.6

Total consolidated net income attributable to controlling interest $ 0.7 $ 9.0 $ 0.9 $ 25.8

Strategic Transformation and Restructuring, Impairment and Other Asset Charges

The Company's Simplify, Focus and Grow Strategic Transformation ("SFG") initiative, which began in 2019, generally includes facility rationalization, asset impairment, workforce reduction, the associated costs of organizational integration activities and strategic transformational initiatives.

As part of the SFG initiative several strategic decisions have been made to divest of underperforming manufacturing sites or product lines, including to close certain subsidiaries, close and sell 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, which are included in "Restructuring, impairment and other asset charges, net" on the Company's Consolidated Statements of Operations.

The Company also has a multi-year phased implementation of a standardized enterprise resource planning ("ERP") system across the global organization underway, which will replace much of the existing disparate core financial systems.

Income tax provision ( 4.4 ) ( 0.9 )

Elimination of intercompany profit ( 0.6 ) —

Net income attributable to controlling interest $ 12.1 $ 4.1

Strategic Transformation and Restructuring and Other Asset Charges

The Company is undergoing a multi-year phased implementation of a standardized enterprise resource planning ("ERP") system across the global organization, which will replace much of the existing disparate core financial systems.

The upgraded ERP will initially convert 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.

This new ERP system will provide for standardized processes and integrated technology solutions that enable the Company to better leverage automation and process efficiency.

An implementation of this scale is a major financial undertaking and requires substantial time and attention of management and key employees.

In addition, beginning in the first quarter of 2022, a lean manufacturing initiative at one of the Company's largest sites was initiated and is expected to drive improvement in gross margin at that site.

Gross margin improvements are expected to be realized in conjunction with the project completion in early to mid-2024.

This improvement is intended to serve as the optimal blueprint for the Company's other manufacturing facilities.

Costs incurred of $ 7.0 million and $ 18.7 million related to these strategic transformational initiatives in the three and nine months ended September 30, 2022, respectively, are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

Costs totaling $ 2.4 million and $ 7.7 million were incurred in the three and nine months ended September 30, 2021, respectively.

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.

Costs incurred of $ 7.2 million and $ 5.3 million related to these strategic transformational initiatives in the three months ended March 31, 2023 and 2022, respectively, are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

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 the Company 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 to the extent they are experienced.

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,

The Company reports asset impairment charges and gains or losses on the sales of property and equipment collectively, with restructuring charges in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations to the extent they are experienced.

Restructuring charges and the net gain on sale of property and equipment are presented below:

Three Months Ended March 31,

(in millions) 2023 2022

Restructuring charges:

Costs associated with leadership change and overhead restructuring $ 7.0 $ —

Costs associated with exited operations - Enid 0.1 0.2

Costs associated with closing Tacoma — 0.8

Costs associated with closing Enid 0.1 0.4 0.7 0.4

Costs associated with closing Mequon — — — 0.6

Total restructuring related charges 7.1 1.0

Asset impairment charges:

Other impairment charges 0.4 — 3.4 0.2

Total asset impairment charges 0.4 — 3.4 0.2

Gain on sale of property and equipment, net:

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Total gain on sale of property and equipment, net ( 3.4 ) —

Restructuring, impairment and other asset charges, net $ 0.1 $ 0.3 $ 4.5 $ 1.8

Restructuring and other asset charges, net $ 3.7 $ 1.0

Restructuring charges by segment are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2022 2021 2022 2021

Infrastructure Solutions $ 0.1 $ 0.5 $ 1.5 $ 1.5

Materials Solutions — — — 0.6

Total restructuring related charges $ 0.1 $ 0.5 $ 1.5 $ 2.1

Impairment charges by segment are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2023 2022

Infrastructure Solutions $ 0.3 $ 1.0

Materials Solutions — — — 0.2

Corporate and Other 6.8 —

Total impairment charges $ 0.4 $ — $ 3.4 $ 0.2

Total restructuring related charges $ 7.1 $ 1.0

Net gains on sale of property and equipment by segment are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2023 2022

Infrastructure Solutions $ ( 3.4 ) $ —

Materials Solutions — — — ( 0.1 )

Total gain on sale of property and equipment, net $ ( 3.4 ) $ —

Restructuring charges accrued, but not paid, were $ 0.2 million and $ 1.2 million as of September 30, 2022 and December 31, 2021, respectively.

Restructuring charges accrued, but not paid, were $ 2.5 million and $ 4.7 million as of March 31, 2023 and December 31, 2022, respectively.

In January 2021, the Company announced plans to close the Tacoma facility in order to simplify and consolidate operations.

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The transfer of the manufacturing and marketing of Tacoma product lines to other facilities within the Infrastructure Solutions segment was completed during the first quarter of 2022.

In conjunction with this action, the Company recorded $ 0.1 million and $ 1.1 million of restructuring related charges during the three and nine months ended September 30, 2021, respectively, in "Restructuring, impairment and other asset charges, net" in the Consolidated Statements of Operations.

Additional restructuring costs of $ 0.8 million were incurred during the three months ended March 31, 2022.

The Company recorded the Tacoma facility's land, building and certain equipment assets of $ 15.4 million, which are currently being actively marketed for sale, as held for sale in its Consolidated Balance Sheets at September 30, 2022.

In late 2019, the oil and gas drilling product lines produced at the Enid, Oklahoma location ("Enid") were impaired and discontinued.

Additional restructuring costs of $ 0.1 million and $ 0.7 million were incurred during the three and nine months ended September 30, 2022, respectively.

Enid's land and building assets totaling $ 5.1 million were included in "Assets held for sale" in the Consolidated Balance Sheets as of December 31, 2021.

An impairment charge of $ 0.4 million was incurred during the third quarter of 2022 to record these assets at fair value less estimated costs to sell, which reduced the balance recorded at September 30, 2022 to $ 4.7 million.

This property continues to be actively marketed for sale.

In October 2020, the Company closed a transaction for the sale of Enid's water well assets, 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 was settled in the first quarter of 2021.

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 totaling $ 0.6 million were incurred during the nine months ended September 30, 2021.

During the second quarter of 2022, the Company determined that certain manufacturing equipment contracted to be constructed by a third-party vendor, which had been prepaid, would not be recovered.

Impairment charges of $ 2.1 million were recorded in "Restructuring, impairment and other asset charges, net" in the Consolidated Statements of Operations during the three months ended June 30, 2022.

An additional $ 0.9 million of impairment charges were incurred related to abandoned in-process internally developed software that was determined to be impaired during the second quarter of 2022.

In conjunction with this action, the Company recorded $ 0.8 million of restructuring related charges during the three months ended March 31, 2022 in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations.

The Company recorded the Tacoma facility's land, building and certain equipment assets of $ 15.4 million as held for sale in its Consolidated Balance Sheets at December 31, 2022.

The sale of these assets was completed in the first quarter of 2023 for $ 19.9 million.

The Company recorded a gain on the sale of $ 3.4 million, which was recorded in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations.

Additional restructuring costs of $ 0.1 million and $ 0.2 million were incurred during the three months ended March 31, 2023 and 2022, respectively, for the Company's exited oil and gas drilling product lines produced at its former Enid, Oklahoma ("Enid") location.

Effective as of January 6, 2023, Mr.

Ruffalo's employment as President and Chief Executive Officer was terminated.

In connection with his separation, the Company entered into an agreement with Mr.

Ruffalo (the "Separation Agreement") pursuant

to which, Mr.

Ruffalo was entitled to certain severance payments and benefits.

During the first quarter of 2023, $ 1.8 million of restructuring costs, related to the modification of Mr.

Ruffalo's equity awards and other third-party transition support costs, were recorded in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations.

The related recovery of $ 1.6 million of incurred share-based compensation expense was recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

The Separation Agreement also included a release and waiver by Mr.

Ruffalo and other customary provisions.

Management continually reviews the Company's organizational structure and operations to ensure they are optimized and aligned with achieving near-term and long-term operational and profitability targets.

In connection with this review, in February 2023, the Company implemented a limited restructuring plan to right-size and reduce the fixed cost structure of certain overhead departments.

Charges of $ 5.3 million for employee termination costs, including equity award modifications, were incurred in the first quarter of 2023 and recorded in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations.

The related recovery of $ 0.8 million of incurred share-based compensation expense was recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

Earnings Per Common Share

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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,

2022 2021 2022 2021

Three Months Ended March 31,

Denominator for basic earnings per common share 22,655,821 22,782,476

1 unchanged sentence

Denominator for diluted earnings per common share 22,742,937 22,904,167

Antidilutive restricted stock units excluded from the calculation of diluted earnings per share 124,229 — 32,218 52,041

Antidilutive securities excluded from the calculation of diluted earnings per share 63,949 —

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements