What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 171 added, 112 removed, 162 unchanged (64% of the section changed)

33 unchanged sentences

Executive Summary

Highlights of our financial results for the three months ended March 31, 2023 as compared to the same period of the prior year include the following:

Highlights of our financial results for the three months ended June 30, 2023 as compared to the same period of the prior year include the following:

• Net sales were $350.0 million, an increase of 10.0%

• Gross profit was $82.9 million, an increase of 31.8%

• Income from operations increased $13.6 million to $17.6 million

• Net income attributable to Astec increased 195.1% to $12.1 million

• Income from operations was $17.3 million, an increase of $19.0 million

• Net income attributable to Astec increased 435.9% to $13.1 million from a loss of $3.9 million

• Diluted earnings per share were $0.58, an increase of 441.2%

• Backlog of $800.2 million, a decrease of 4.1% as compared to March 31, 2022

• Backlog of $688.8 million, a decrease of 17.7% as compared to June 30, 2022

Significant Items Impacting Operations in 2023

3 unchanged sentences

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

We materially completed the ERP global design in 2022, launched the human capital resources module in our locations in the United States in January 2023 and expect to convert the operations of one manufacturing site along with Corporate in 2023 to set the foundation before accelerating the implementation at additional manufacturing sites.

We anticipate incurring total costs associated with the ERP implementation in the range of $125 to $150 million, with an estimated $25 to $30 million incurred per year beginning in 2022.

We materially completed the ERP global design in 2022, launched the human capital resources module in our locations in the United States in January 2023 and converted the operations of one manufacturing site along with Corporate during the second quarter of 2023 to set the foundation before accelerating the implementation at additional sites in 2024 and 2025.

We anticipate incurring total costs associated with the ERP implementation in the range of $125 to $150 million, with an estimated $25 to $30 million incurred per year which began in 2022.

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

1 unchanged sentence

We also began executing investments to acquire and install manufacturing equipment intended to drive increased efficiencies in our production processes.

We plan to continue these capital investments during 2023, which are anticipated to be completed by the end of the year.

We plan to continue these capital investments during 2023, which are anticipated to be largely completed by the end of 2023.

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 our other manufacturing facilities.

We incurred $7.2 million of non-capitalizable costs directly associated with these strategic transformation initiatives during the three months ended March 31, 2023.

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

Additionally, at March 31, 2023, we have capitalized $23.1 million in deferred implementation costs associated with the ERP implementation that will be amortized ratably over the remaining contract term once the ERP is ready for use, of which $2.3 million and $20.8 million were included in "Prepaid expenses and other assets" and "Other long-term assets" in the Consolidated Balance Sheets, respectively.

Total costs of $7.8 million and $15.0 million were incurred related to these strategic transformation initiatives in the three and six months ended June 30, 2023, respectively, of which $7.7 million and $14.9 million, respectively, are recorded in "Selling, general and administrative expenses" and $0.1 million in each period is included in "Cost of sales" in the Consolidated Statements of Operations.

Costs totaling $6.4 million and $11.7 million were incurred in the three and six months ended June 30, 2022, respectively, and are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

Additionally, at June 30, 2023, we have capitalized $26.5 million in deferred implementation costs associated with the ERP implementation that are being amortized ratably over the remaining contract term, of which $2.8 million and $23.7 million were included in "Prepaid expenses and other assets" and "Other long-term assets" in the Consolidated Balance Sheets, respectively.

Tacoma Site Closure – In January 2021, we announced plans to close the Tacoma facility in order to simplify and consolidate operations.

3 unchanged sentences

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

We recorded a $3.4 million gain for the sale of these assets in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations.

We recorded a $3.4 million gain for the sale of these assets in "Restructuring, impairment and other asset charges, net" in the Consolidated Statements of Operations.

Leadership Change and Overhead Restructuring – As previously announced on January 6, 2023, Mr.

2 unchanged sentences

In accordance with the terms of Mr.

Ruffalo's separation agreement, we recorded $1.8 million of restructuring costs related to the modification of Mr.

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

Ruffalo's separation agreement, we recorded $1.8 million of restructuring costs during the first quarter of 2023 related to the modification of Mr.

Ruffalo's equity awards as well as third-party transition support costs in "Restructuring, impairment 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.

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

In connection with this review, in February 2023, we 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 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.

In connection with this review, in February 2023, we

implemented a limited restructuring plan to right-size and reduce the fixed cost structure of certain overhead departments.

Charges of $0.3 million and $5.5 million for employee termination costs, including equity award modifications, were incurred in the three and six months ended June 30, 2023, respectively, and recorded in "Restructuring, impairment and other asset charges, net" in the Consolidated Statements of Operations.

The related recovery of $0.2 million and $1.0 million of incurred share-based compensation expense was recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations during the three and six months ended June 30, 2023, respectively.

Industry and Business Condition

8 unchanged sentences

In addition, our backlog should not necessarily be viewed as an accurate indicator of revenue for any particular period.

Backlog levels provide management and investors additional details surrounding the expectation of committed orders that are expected to convert to future net sales.

Backlog levels provide management and investors additional details of committed orders that are expected to convert to future net sales.

Management uses backlog information for capacity and resource planning as well as to monitor inventory levels in our facilities relative to expected future net sales.

Our $800.2 million backlog of orders at March 31, 2023 continues to remain strong.

The backlog of orders decreased $34.5 million, or 4.1%, compared to $834.7 million as of March 31, 2022 and decreased 12.3% from $912.7 million at December 31, 2022.

The decrease in backlog was driven by strong first quarter 2023 sales volumes outpacing new orders compared to a build of backlog throughout 2022 largely due to strong customer demand and logistics and manufacturing throughput disruptions.

We expect backlog levels to normalize from the historically high levels we have experienced in recent years based on macroeconomic factors such as high inflation and rising interest rates influencing customer spending.

Additionally, we are focused on prudent expansion of our production capacity that we anticipate will allow us to more effectively convert backlog to sales in the future.

Our $688.8 million backlog of orders at June 30, 2023 continues to remain strong.

The backlog of orders decreased $148.6 million, or 17.7%, compared to $837.4 million as of June 30, 2022.

The decrease in backlog was driven by 2023 sales delivery outpacing new orders compared to a build of backlog throughout 2022, which was largely due to strong customer demand and logistics and manufacturing throughput disruptions.

We expect backlog levels to normalize from the historically high levels we have experienced in recent years largely based on supply chain stabilization.

Macroeconomic factors such as higher inflation and increased interest rates, among other factors, may also influence future customer spending.

Additionally, we are focused on prudent expansion of our production capacity that we anticipate will allow us to more effectively convert backlog to sales in the future with greater efficiency and shorter lead times.

Federal funding provides a significant portion of all highway, street, roadway and parking construction in the United States.

8 unchanged sentences

We continue to develop products and initiatives to reduce the amount of oil and related products required to produce asphalt.

Oil prices stabilized at relatively high levels during the fourth quarter of 2022 and have continued to remain consistent through the first quarter of 2023.

While oil prices had declined during the first half of 2023, they remain at relatively high levels.

Price volatility continues to make it difficult to predict the costs of oil-based products used in road construction such as liquid asphalt and gasoline.

2 unchanged sentences

Steel is a major component of our equipment.

Driven by supply constraints, steel prices increased throughout the prior year, stabilizing at historically high levels at the end of 2022, which we expect to carry through into the second quarter of 2023.

Driven by supply constraints, steel prices increased throughout the prior year, stabilizing at historically high levels at the end of 2022.

Steel prices have softened slightly in 2023 and are expected to be maintained at these regulated levels through the remainder of 2023.

During 2022, we observed a slowing in market demand and reduced lead times as buyers were responding to recessionary pressures and restricted their purchases to near-term needs.

However, lead times have increased during the first quarter of 2023 and we anticipate that steel demand will remain relatively strong during 2023, driven by the IIJA domestically and impacted by international production capacity restrictions.

Lead times increased during the first quarter of 2023 but have settled at a rate consistent with the prior year.

We anticipate that steel demand will remain relatively strong during 2023, driven by the IIJA domestically and impacted by international production capacity.

We continue to employ flexible strategies to ensure supply and minimize the impact of price volatility.

2 unchanged sentences

We actively manage our global supply chain for any identified constraints and volatility.

Supply chain constraints have eased recently;

however, we continue to experience challenges related to vendor capacity, albeit at a decreasing number of suppliers.

As a result, we have elevated lead times in certain components used in our manufacturing processes.

We are continuing to focus on identifying and qualifying alternative suppliers wherever possible, which has helped alleviate the challenges in our supply chain.

Supply chain constraints experienced in prior periods have eased recently, however, lead times for certain key supplies remain elongated.

We continue to focus on identifying and qualifying alternative suppliers wherever possible to help alleviate any lagging or potential future challenges in our supply chain.

We also continually monitor potential future supply costs and availability in an effort to proactively address challenges that might occur.

We cannot estimate the full impact that any future disruptions might have on our operations.

In addition, while we have continued to experience shortages of necessary production personnel in certain markets, we have seen a slight easing in the tight labor market.

1 unchanged sentence

Higher labor costs to attract staff in our manufacturing operations are normalizing at elevated levels.

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.

We continue to adjust our production schedules and manufacturing workload distribution, provide comprehensive training, 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.

Whenever possible, we attempt to cover increased costs of production by adjusting the prices of our products.

Backlog fulfillment times from the initial order to completing the contracted sale vary and can extend past twelve months with the growth we have experienced in the backlog.

Backlog fulfillment times from the initial order to completing the contracted sale vary and can extend past twelve months.

For this reason, we have limitations on our ability to pass on cost increases to our customers on a short-term basis.

2 unchanged sentences

Results of Operations

Net sales for the first quarter of 2023 were $347.9 million compared to $291.2 million for the first quarter of 2022, an increase of $56.7 million or 19.5%.

The increase in net sales was primarily driven by changes in the volume, pricing and mix of sales that generated increases in (i) equipment sales of $43.4 million, (ii) service and equipment installation revenue of $10.0 million, (iii) parts and component sales of $4.4 million and (iv) freight revenue of $1.1 million.

These increases were partially offset by a decrease in other revenue of $1.5 million, primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers and decreased used equipment sales of $0.7 million.

Included in these net increases is $3.9 million of incremental net sales from an acquired business.

Net sales for the second quarter of 2023 were $350.0 million compared to $318.2 million for the second quarter of 2022, an increase of $31.8 million, or 10.0%.

The increase in net sales was primarily driven by net favorable changes in the volume, pricing and mix of sales that generated increases in (i) service and equipment installation revenue of $13.7 million, (ii) equipment sales of $12.6 million, (iii) parts and component sales of $6.1 million and (iv) used equipment sales of $1.9 million.

These increases were partially offset by a decrease in other revenue of $2.0 million, which was primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers and decreased freight revenue of $0.5 million.

Sales reported by our foreign subsidiaries in U.S.

dollars for the first quarter of 2023 would have been $3.3 million higher had foreign exchange rates been the same as 2022 rates.

Domestic sales for the first quarter of 2023 were $281.3 million, or 80.9% of consolidated net sales, compared to $234.5 million, or 80.5% of consolidated net sales, for the first quarter of 2022, an increase of $46.8 million, or 20.0%.

Domestic sales increased primarily due to (i) $35.1 million higher equipment sales, (ii) $9.8 million higher service and equipment installation revenue, (iii) $3.5 million higher parts and component sales and (iv) $0.8 million higher freight revenue.

These increases were partially offset by decreased other revenue of $1.6 million, primarily driven by higher utilization of our interest subsidy programs offered to certain of our dealer customers and decreased used equipment sales of $0.8 million.

Included in these increases is $1.5 million of incremental net sales from an acquired business.

International sales for the first quarter of 2023 were $66.6 million, or 19.1% of consolidated net sales, compared to $56.7 million, or 19.5% of consolidated net sales, for the first quarter of 2022, an increase of $9.9 million, or 17.5%.

International sales increased primarily due to (i) $8.3 million higher new equipment sales, (ii) $0.9 million higher parts and components sales and (iii) $0.3 million higher freight revenue.

Included in these increases is $2.4 million of incremental net sales from an acquired business.

Consolidated gross profit for the first quarter of 2023 was $89.2 million, or 25.6% of net sales, as compared to $64.7 million, or 22.2% of net sales, for the first quarter of 2022, an increase of $24.5 million or 37.9%.

The increase was primarily driven by the impact of net favorable volume, pricing and mix that generated $39.3 million higher gross profit and $2.3 million of gross profit generated by an acquired business.

These increases were partially offset by the impact of inflation on materials, labor and overhead of $13.8 million and manufacturing inefficiencies due in part to the effects of lower tenured production staff associated with the turnover experienced in the prior year of $3.5 million.

Manufacturing inefficiencies are inclusive of the impact of an out-of-period benefit of $1.9 million associated with the correction of over-accruals of inventory-related expenses recorded in the first quarter of 2023.

dollars for the second quarter of 2023 would have been $3.5 million higher had second quarter 2023 foreign exchange rates been the same as second quarter 2022 rates.

Net sales for the first six months of 2023 were $697.9 million compared to $609.4 million for the first six months of 2022, an increase of $88.5 million, or 14.5%.

The increase in net sales was primarily driven by net favorable changes in the volume, pricing and mix of sales that generated increases in (i) equipment sales of $56.0 million, (ii) service and equipment installation revenue of $23.7 million and (iii) parts and component sales of $10.5 million.

These increases were partially offset by a decrease in other revenue of $3.5 million, which was primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers.

Sales reported by our foreign subsidiaries in U.S.

dollars for the first six months of 2023 would have been $6.8 million higher had the first six months of 2023 foreign exchange rates been the same as the first six months of 2022 rates.

Domestic sales for the second quarter of 2023 were $286.4 million, or 81.8% of consolidated net sales, compared to $248.4 million, or 78.1% of consolidated net sales, for the second quarter of 2022, an increase of $38.0 million, or 15.3%.

Domestic sales increased primarily due to (i) $19.1 million higher equipment sales, (ii) $12.2 million higher service and equipment installation revenue, (iii) $7.8 million higher parts and component sales and (iv) $1.4 million higher used equipment sales.

These increases were partially offset by decreased other revenue of $1.8 million, which was primarily driven by higher utilization of our interest subsidy programs offered to certain of our dealer customers and decreased freight revenue of $0.7 million.

Domestic sales for the first six months of 2023 were $567.7 million, or 81.3% of consolidated net sales, compared to $482.9 million, or 79.2% of consolidated net sales, for the first six months of 2022, an increase of $84.8 million, or 17.6%.

Domestic sales increased primarily due to (i) $54.2 million higher equipment sales, (ii) $22.0 million higher service and equipment installation revenue and (iii) $11.3 million higher parts and component sales.

These increases were partially offset by a decrease in other revenue of $3.4 million, which was primarily driven by higher utilization of our interest subsidy programs offered to certain of our dealer customers.

International sales for the second quarter of 2023 were $63.6 million, or 18.2% of consolidated net sales, compared to $69.8 million, or 21.9% of consolidated net sales, for the second quarter of 2022, a decrease of $6.2 million, or 8.9%.

International sales decreased primarily due to lower new equipment sales of $6.5 million and lower parts and components sales of $1.7 million.

These decreases were partially offset by $1.5 million higher service and equipment installation revenue.

International sales for the first six months of 2023 were $130.2 million, or 18.7% of consolidated net sales, compared to $126.5 million, or 20.8% of consolidated net sales, for the first six months of 2022, an increase of $3.7 million, or 2.9%.

International

sales increased primarily due to higher new equipment sales of $1.8 million and higher service and equipment installation sales of $1.7 million.

Gross profit for the second quarter of 2023 was $82.9 million, or 23.7% of net sales, as compared to $62.9 million, or 19.8% of net sales, for the second quarter of 2022, an increase of $20.0 million, or 31.8%.

The increase was primarily driven by net favorable volume, pricing and mix that generated $33.6 million higher gross profit.

These increases were partially offset by the impact of inflation on materials, labor and overhead of $10.7 million and manufacturing inefficiencies of $2.9 million primarily related to increased warranty program costs and unfavorable inventory adjustments partially offset by production efficiencies.

Gross profit for the first six months of 2023 was $172.1 million, or 24.7% of net sales, as compared to $127.6 million, or 20.9% of net sales, for the first six months of 2022, an increase of $44.5 million, or 34.9%.

The increase was primarily driven by the net favorable volume, pricing and mix of $72.9 million and $2.3 million of gross profit generated by an acquired business.

These increases were partially offset by inflation on materials, labor and overhead of $24.5 million and manufacturing inefficiencies of $6.2 million due in part to the effects of lower tenured production staff associated with the turnover experienced in the prior year and increased warranty program costs partially offset by the impact of an out-of-period benefit of $1.9 million associated with the correction of over-accruals of inventory-related expenses recorded in the first quarter of 2023.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the first quarter of 2023 were $67.9 million, or 19.5% of net sales, compared to $59.7 million or 20.5% of net sales, for the first quarter of 2022, an increase of $8.2 million, or 13.7%, primarily due to (i) $2.9 million of higher exhibit and promotional costs primarily due to the ConExpo industry trade show held once every three years, (ii) increased net payroll and employee benefit costs of $2.3 million, comprised of increased headcount throughout our organization, increased health insurance claims experience of $1.5 million, increased deferred compensation program costs associated with our stock price changes of $0.8 million, partially offset by lower share-based compensation expense of $2.9 million related to the

recovery of share-based compensation expense for awards that were forfeited or modified in conjunction with the termination of our previous CEO and the limited overhead restructuring action implemented in February 2023, (iii) $1.9 million increased costs related to our strategic transformation program and (iv) incremental expenses associated with the acquisition of MINDS that was completed in April 2022 of $1.1 million.

These increases were partially offset by lower amortization expense of $1.0 million and reduced acquisition costs of $0.6 million primarily associated with the acquisition of MINDS.

Restructuring and Other Asset Charges, Net

Restructuring and the net gain on sale of property and equipment for the three month periods ended March 31, 2023 and 2022 are presented below:

Three Months Ended March 31,

Selling, general and administrative expenses increased $3.3 million, or 5.4%, to $64.5 million, or 18.4% of net sales, for the second quarter of 2023, compared to $61.2 million, or 19.2% of net sales, for the second quarter of 2022 primarily due to (i) increased net payroll and employee benefit costs of $2.0 million, which was largely driven by general employee cost increases and higher annual incentive compensation costs of $1.7 million, partially offset by reduced health insurance costs of $1.8 million, (ii) $1.3 million increased consulting and project costs and (iii) $1.3 million increased costs related to our strategic transformation program.

These increases were partially offset by lower amortization expense of $1.0 million and reduced acquisition and integration related costs of $0.8 million primarily associated with the acquisition of MINDS, which was completed in April 2022.

Selling, general and administrative expenses increased $11.5 million, or 9.5%, to $132.4 million, or 19.0% of net sales, for the first six months of 2023, compared to $120.9 million, or 19.8% of net sales, for the first six months of 2022 primarily due to (i) increased net payroll and employee benefit costs of $4.3 million, which was largely driven by general employee cost increases and higher annual incentive compensation costs of $1.2 million, partially offset by lower share-based compensation expense of $3.5 million related to the recovery of share-based compensation expense for awards that were forfeited or modified in conjunction with the termination of our previous CEO and the limited overhead restructuring action implemented in February 2023, (ii) $3.2 million of increased costs related to our strategic transformation program, (iii) $2.9 million of higher exhibit and promotional costs primarily due to the ConExpo industry trade show held once every three years, (iv) $2.4 million increased consulting, prototype and project costs and (v) incremental expenses associated with the acquisition of MINDS of $1.1 million.

These increases were partially offset by lower amortization expense of $2.0 million and reduced acquisition and integration related costs of $1.4 million primarily associated with the acquisition of MINDS.

Restructuring, Impairment and Other Asset Charges, Net

Restructuring, asset impairment charges and the net gain on sale of property and equipment for the three and six month periods ended June 30, 2023 and 2022 are presented below:

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2023 2022 2023 2022

4 unchanged sentences

Total restructuring related charges 0.4 0.4 7.5 1.4

Asset impairment charges:

Other impairment charges 0.8 3.0 0.8 3.0

Total asset impairment charges 0.8 3.0 0.8 3.0

Gain on sale of property and equipment, net:

1 unchanged sentence

Total gain on sale of property and equipment, net (0.1) — (3.5) —

Restructuring and other asset charges, net $ 3.7 $ 1.0

See Note 11, Strategic Transformation and Restructuring and Other Asset Charges of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for discussion of the individual restructuring actions taken.

Restructuring, impairment and other asset charges, net $ 1.1 $ 3.4 $ 4.8 $ 4.4

See Note 11, Strategic Transformation and Restructuring, Impairment and Other Asset Charges, net of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for discussion of the individual restructuring actions taken.

Interest Expense

Interest expense for the first quarter of 2023 increased $1.6 million to $2.0 million from $0.4 million in the first quarter of 2022, primarily related to outstanding borrowings on our revolving credit facility in the first quarter of 2023.

No borrowings were outstanding on our prior revolving credit facility during the first quarter of 2022.

Other Income, Net

Other income was $0.4 million for the first quarter of 2023 compared to $1.2 million in the first quarter of 2022, primarily related to higher net foreign currency transaction gains in 2022 that did not recur in 2023.

Our income tax expense for the first quarter of 2023 was $4.4 million compared to $0.9 million for the first quarter of 2022.

Our effective income tax rate was 26.7% for the first quarter of 2023 compared to 18.0% for the first quarter of 2022.

The income tax expense for 2023 was higher compared to 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 backlog of orders as of March 31, 2023 was $800.2 million compared to $834.7 million as of March 31, 2022, a decrease of $34.5 million, or 4.1%.

Interest expense of $2.0 million and $4.0 million was incurred in the three and six months ended June 30, 2023, respectively, as compared to $0.6 million and $1.0 million in the three and six months ended June 30, 2022, respectively, primarily related to outstanding borrowings on our revolving credit facility.

No borrowings were outstanding on our prior revolving credit facility during the first six months of 2022.

Other income (expenses), net

Other income, net was $0.1 million for the second quarter of 2023 compared to an expense of $2.6 million for the second quarter of 2022, primarily due to net foreign currency transaction losses of $2.3 million in 2022 that did not recur in 2023.

Other income, net was $0.5 million for the first six months of 2023 compared to an expense of $1.4 million for the first six months of 2022, an increase of $1.9 million primarily due to the change in net foreign currency transaction gains and losses.

Our income tax expense for the second quarter of 2023 was $2.7 million compared to an income tax benefit of $0.8 million for the second quarter of 2022.

Our effective income tax rate was 17.0% for the second quarter of 2023 compared to 17.0% for the second quarter of 2022.

The income tax expense for the three months ended June 30, 2023 as compared to benefit in the same period in 2022 was primarily due to higher pretax book income and changes in the relative weighting of jurisdictional income and loss, partially offset by a net discrete tax benefit related to a research and development credit.

Our income tax expense for the first six months of 2023 was $7.1 million, reflecting a 21.9% effective tax rate, compared to $0.1 million expense for the first six months of 2022.

The income tax expense for the six months ended June 30, 2023 was higher compared to the same period in 2022 primarily due to higher pretax book income and changes in the relative weighting of jurisdictional income and loss, partially offset by a net discrete tax benefit related to a research and development credit.

The backlog of orders as of June 30, 2023 was $688.8 million compared to $837.4 million as of June 30, 2022, a decrease of $148.6 million, or 17.7%.

Domestic backlog decreased $116.9 million, or 16.6%, and international backlog decreased $31.7 million, or 24.0%, respectively.

The backlog decreased $96.2 million to $472.1 million in the Infrastructure Solutions segment and decreased $52.7 million to $214.8 million in the Materials Solutions segment.

The Corporate and Other backlog represents our controls and automation business and totaled $2.3 million as of March 31, 2023.

Additionally, we are focused on prudent expansion of our production capacity that we anticipate will allow us to more effectively convert backlog to sales in the future.

Segment Net Sales :

Three Months Ended March 31,

(in millions) 2023 2022 $ Change % Change

The Corporate and Other backlog represents our controls and automation business and increased $0.3 million to $1.9 million.

We expect backlog levels to normalize from the historically high levels we have experienced in recent years largely based on supply chain stabilization.

Macroeconomic factors such as higher inflation and increased interest rates, among other factors, may also influence future customer spending.

Segment Net Sales - Three Months Ended :

Three Months Ended June 30, $ Change % Change

(in millions) 2023 2022

Infrastructure Solutions $ 218.1 $ 209.6 $ 8.5 4.1 %

2 unchanged sentences

Infrastructure Solutions

Sales in this segment were $229.9 million for the first quarter of 2023 compared to $197.5 million for the same period in 2022, an increase of $32.4 million, or 16.4%.

The increase was primarily driven by favorable net volume, pricing and the mix of sales that generated increased (i) new equipment sales of $19.3 million, (ii) service and equipment installation revenue of $9.6 million, (iii) parts and component sales of $3.6 million and (iv) freight revenue of $0.6 million.

These increases were partially offset by lower used equipment sales of $0.6 million.

Domestic sales for the Infrastructure Solutions segment increased $23.8 million, or 14.3%, for the first quarter of 2023 compared to the same period in 2022 primarily due to (i) increased new equipment sales of $11.7 million, (ii) increased service and equipment installation sales of $9.8 million and (iii) increased parts and component sales of $2.9 million.

These increases were partially offset by lower used equipment sales of $0.8 million.

International sales for the Infrastructure Solutions segment increased $8.6 million, or 27.9%, for the first quarter of 2023 compared to the same period in 2022 primarily due to increased new equipment sales and parts and component sales of $7.6 million and $0.7 million, respectively.

Sales in this segment were $218.1 million for the second quarter of 2023 compared to $209.6 million for the same period in 2022, an increase of $8.5 million, or 4.1%.

The increase was primarily driven by net favorable changes in the volume, pricing and mix of sales that generated increased (i) service and equipment installation revenue of $12.7 million, (ii) parts and component sales of $4.8 million and (iii) used equipment sales of $1.6 million.

These increases were offset by lower new equipment sales of $10.0 million and lower freight revenue of $0.6 million.

Domestic sales for the Infrastructure Solutions segment increased $18.3 million, or 10.7%, for the second quarter of 2023 compared to the same period in 2022 primarily due to (i) increased service and equipment installation sales of $12.0 million, (ii) increased parts and component sales of $6.6 million and (iii) increased used equipment sales of $1.4 million.

These increases were partially offset by decreases in freight revenue and new equipment sales of $0.9 million and $0.8 million, respectively.

International sales for the Infrastructure Solutions segment decreased $9.8 million, or 24.9%, for the second quarter of 2023 compared to the same period in 2022 primarily due to decreased new equipment sales and parts and component sales of $9.2 million and $1.8 million, respectively.

These decreases were partially offset by higher service and equipment installation sales of $0.7 million.

Materials Solutions

Sales in this segment were $113.9 million for the first quarter of 2023 compared to $93.7 million for the same period in 2022, an increase of $20.2 million, or 21.6%.

The increase was primarily driven by favorable net volume, pricing and the mix of sales that generated increased (i) new equipment sales of $20.8 million, (ii) parts and component sales of $0.6 million and (iii) freight revenue of $0.5 million.

These increases were partially offset by decreased other revenue of $1.8 million primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers.

Domestic sales for the Materials Solutions segment increased by $21.3 million or 31.4% for the first quarter of 2023 compared to the same period in 2022 driven by increased (i) equipment sales of $22.1 million, (ii) parts and component sales of $0.5 million and (iii) freight revenue of $0.5 million.

These increases were partially offset by decreased other revenue of $1.8 million, primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers.

International sales for the Materials Solutions segment decreased $1.1 million or 4.2% for the first quarter of 2023 compared to the same period in 2022, primarily due to decreased new equipment sales of $1.3 million.

Sales in this segment were $130.2 million for the second quarter of 2023 compared to $107.4 million for the same period in 2022, an increase of $22.8 million, or 21.2%.

The increase was primarily driven by net favorable changes in the volume, pricing and mix of sales that generated increased (i) new equipment sales of $21.9 million, (ii) parts and component sales of $1.4 million and (iii) service and equipment installation revenue of $1.0 million.

These increases were partially offset by a decrease in other revenue of $1.9 million, which was primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers.

Domestic sales for the Materials Solutions segment increased by $19.4 million, or 24.9%, for the second quarter of 2023 compared to the same period in 2022, primarily driven by increased equipment and increased parts and component sales of $19.6 million and $1.2 million, respectively.

These increases were partially offset by decreased other revenue of $1.7 million, which was primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers.

International sales for the Materials Solutions segment increased $3.4 million, or 11.6%, for the second quarter of 2023 compared to the same period in 2022 primarily due to increases in new equipment and service and equipment installation sales of $2.3 million and $0.9 million, respectively.

Segment Net Sales - Six Months Ended :

Six Months Ended June 30, $ Change % Change

(in millions) 2023 2022

Infrastructure Solutions $ 448.0 $ 407.1 $ 40.9 10.0 %

Materials Solutions 244.1 201.1 43.0 21.4 %

Corporate and Other 5.8 1.2 4.6 383.3 %

Infrastructure Solutions

Sales in this segment were $448.0 million for the first six months of 2023 compared to $407.1 million for the same period in 2022, an increase of $40.9 million or 10.0%.

The increase was primarily driven by net favorable changes in the volume, pricing and mix of sales that generated increased (i) service and equipment installation revenue of $22.3 million, (ii) new equipment sales of $9.3 million and (iii) parts and component sales of $8.4 million.

Domestic sales for the Infrastructure Solutions segment increased $42.1 million or 12.5% for the first six months of 2023 compared to the same period in 2022 primarily due to (i) increased service and equipment installation sales of $21.8 million, (ii) increased new equipment sales of $10.9 million and (iii) increased parts and component sales of $9.5 million.

International sales for the Infrastructure Solutions segment decreased $1.2 million or 1.7% for the first six months of 2023 compared to the same period in 2022 primarily due to lower equipment sales of $1.6 million.

Materials Solutions

Sales in this segment were $244.1 million for the first six months of 2023 compared to $201.1 million for the same period in 2022, an increase of $43.0 million, or 21.4%.

The increase was primarily driven by net favorable changes in the volume, pricing and mix of sales that generated increased new equipment and parts and component sales of $42.7 million and $2.0 million, respectively.

These increases were partially offset by decreased other revenue of $3.7 million, which was primarily driven by increased utilization of our interest subsidy programs offered to some of our dealer customers.

Domestic sales for the Materials Solutions segment increased by $40.7 million, or 27.9%, for the first six months of 2023 compared to the same period in 2022, driven by increased new equipment and parts and component sales of $41.7 million and $1.7 million, respectively.

These increases were partially offset by decreased other revenue of $3.5 million, which was primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers.

International sales for the Materials Solutions segment increased $2.3 million, or 4.2%, for the first six months of 2023 compared to the same period in 2022 primarily due to increased service and equipment installation and new equipment sales.

Corporate and Other

Corporate and Other sales are generated from our controls and automation business.

Sales were $5.8 million for the first six months of 2023 compared to $1.2 million for the same period in 2022, an increase of $4.6 million, or 383.3%.

The increase was primarily related to net incremental sales from MINDS during the first quarter of 2023.

The MINDS acquisition was completed on April 1, 2022 and results of operations have been consolidated from that date.

Segment Operating Adjusted EBITDA

Segment Operating Adjusted EBITDA is the measure of segment profit or loss used by our Chief Executive Officer, whom is determined to be the CODM, to evaluate performance and allocate resources to the operating segments.

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

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.

2 unchanged sentences

See Note 10, Segment Information, of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of Segment Operating Adjusted EBITDA to total consolidated net income attributable to controlling interest.

Three Months Ended March 31, $ Change % Change

Segment Operating Adjusted EBITDA-Three Months Ended:

Three Months Ended June 30, $ Change % Change

(in millions) 2023 2022

3 unchanged sentences

Infrastructure Solutions segment:

Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $27.3 million for the first quarter of 2023 compared to $16.4 million for the same period in 2022, an increase of $10.9 million or 66.5%.

Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $26.7 million for the second quarter of 2023 compared to $15.9 million for the same period in 2022, an increase of $10.8 million, or 67.9%.

The increase in Segment Operating Adjusted EBITDA resulted primarily from the impact of favorable net volume, pricing and mix that generated $21.3 million higher gross profit.

These increases were partially offset by (i) the impact of higher inflation on materials, labor and overhead costs of $8.8 million, (ii) increased selling, general and administrative costs of $6.3 million, primarily due to $3.9 million higher personnel related costs, $1.5 million of increased exhibit and promotional costs related to the ConExpo industry trade show and $1.5 million increased consulting, prototype and project costs and (iii) manufacturing inefficiencies of $1.6 million, inclusive of the impact of an out-of-period benefit of $1.9 million associated with the correction of over-accruals of inventory-related expenses recorded in the first quarter of 2023.

These increases were partially offset by (i) the impact of higher inflation on materials, labor and overhead costs of $6.6 million, (ii) increased selling, general and administrative costs of $3.1 million, primarily due to higher personnel related costs and (iii) manufacturing inefficiencies of $1.5 million due in part to the effects of unfavorable inventory adjustments, partially offset by production efficiencies.

Materials Solutions segment:

Segment Operating Adjusted EBITDA for the Materials Solutions segment was $15.3 million for the first quarter of 2023 compared to $12.2 million for the same period in 2022, an increase of $3.1 million or 25.4%.

The increase in Segment Operating Adjusted EBITDA between periods resulted primarily from the impact of favorable net volume, pricing and mix that generated $12.5 million higher gross profit.

These increases were partially offset by (i) the impact of higher inflation on materials, labor and overhead costs of $5.0 million, (ii) higher general, administrative and other costs of $2.6 million and (iii) manufacturing inefficiencies of $1.7 million.

The general, administrative and other cost increases are primarily driven by $1.4 million net foreign currency transaction gains in 2022 that did not recur in 2023 and $1.3 million of increased exhibit and promotional costs related to the ConExpo industry trade show, partially offset by $0.7 million lower personnel related costs.

Segment Operating Adjusted EBITDA for the Materials Solutions segment was $18.3 million for the second quarter of 2023 compared to $9.5 million for the same period in 2022, an increase of $8.8 million, or 92.6%.

The increase in Segment Operating Adjusted EBITDA between periods resulted primarily from the impact of favorable net volume, pricing and mix that generated $12.7 million higher gross profit and lower selling, general, administrative and other net costs of $1.4 million, primarily driven by $1.7 million net foreign currency transaction losses in 2022 that did not recur in 2023.

These increases were partially offset by the impact of higher inflation on materials, labor and overhead costs of $4.0 million and manufacturing inefficiencies of $1.4 million.

Segment Operating Adjusted EBITDA-Six Months Ended :

Six Months Ended June 30, $ Change % Change

(in millions) 2023 2022

Infrastructure Solutions $ 54.0 $ 32.3 $ 21.7 67.2 %

Materials Solutions 33.6 21.7 11.9 54.8 %

Corporate and Other (19.1) (22.1) 3.0 13.6 %

Corporate and Other operations had net expenses of $6.8 million for the first quarter of 2023 compared to $9.8 million for the first quarter of 2022, a decrease of $3.0 million, or 30.6%.

The decrease in net expenses was primarily driven by $1.5 million of profit contributed by MINDS and $1.5 million of lower general and administrative expenses, primarily associated with employee related costs including the recovery of share-based compensation expense related to awards forfeited or modified in conjunction with the termination of our previous CEO and the limited overhead restructuring action implemented in February 2023, which was partially offset by increased health insurance claims experience.

Infrastructure Solutions segment:

Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $54.0 million for the first six months of 2023 compared to $32.3 million for the same period in 2022, an increase of $21.7 million, or 67.2%.

The increase in Segment Operating Adjusted EBITDA resulted primarily from the impact of favorable net volume, pricing and mix that generated $48.6 million higher gross profit.

These increases were partially offset by (i) the impact of higher inflation on materials, labor and overhead costs of $15.4 million, (ii) increased selling, general and administrative costs of $8.7 million, primarily due to $6.5 million higher personnel related costs, $2.3 million increased consulting, prototype and project costs and $1.3 million of increased exhibit and promotional costs related to the ConExpo industry trade show and (iii) manufacturing inefficiencies of $3.1 million in part as a result of unfavorable inventory adjustments, partially offset by the impact of an out-of-period benefit of $1.9 million associated with the correction of over-accruals of inventory-related expenses recorded in the first quarter of 2023.

Materials Solutions segment:

Segment Operating Adjusted EBITDA for the Materials Solutions segment was $33.6 million for the first six months of 2023 compared to $21.7 million for the same period in 2022, an increase of $11.9 million, or 54.8%.

The increase in Segment Operating Adjusted EBITDA resulted primarily from the impact of favorable net volume, pricing and mix that generated $25.2 million higher gross profit.

These increases were partially offset by (i) the impact of higher inflation on materials, labor and overhead costs of $9.0 million, (ii) manufacturing inefficiencies of $3.1 million and (iii) increased general and administrative costs of $1.2 million, primarily due to $1.6 million of increased exhibit and promotional costs related to the ConExpo industry trade show.

Corporate and Other:

Corporate and Other operations had net expenses of $19.1 million for the first six months of 2023 compared to $22.1 million for the first six months of 2022, a decrease of $3.0 million, or 13.6%.

The decrease in expenses was primarily driven by an incremental $1.5 million of profit contributed by MINDS during the first quarter of 2023 and $1.3 million of lower general and administrative expenses, primarily associated with employee related costs including the recovery of share-based compensation expense related to awards forfeited or modified in conjunction with the termination of our previous CEO and the limited overhead restructuring action implemented in February 2023, which was partially offset by increased health insurance costs.

The MINDS acquisition was completed on April 1, 2022 and results of operations have been consolidated from that date.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash and cash equivalents on hand, borrowing capacity under a $250.0 million revolving credit facility and cash flows from operations.

As of March 31, 2023, our total liquidity was $222.0 million, consisting of $39.6 million of cash and cash equivalents available for operating purposes and $182.4 million available for additional borrowings under our revolving credit facility, to the extent our compliance with financial covenants permits such borrowings.

As of June 30, 2023, our total liquidity was $226.8 million, consisting of $41.4 million of cash and cash equivalents available for operating purposes and $185.4 million available for additional borrowings under our revolving credit facility, to the extent our compliance with financial covenants permits such borrowings.

Our foreign subsidiaries held $28.5 million of cash and cash equivalents available for operating purposes, which is considered to be indefinitely invested in those jurisdictions.

4 unchanged sentences

The Credit Agreement provides for (i) a revolving credit facility (consisting of revolving credit loans and swingline loans) and a letter of credit facility, in an aggregate amount of up to $250.0 million, (ii) an incremental credit facility in an aggregate amount not to exceed $125.0 million (the "Credit Facilities") and (iii) a maturity date of December 19, 2027.

We had $65.0 million in outstanding borrowings under the Credit Facilities at March 31, 2023.

Our outstanding letters of credit totaling $2.6 million decreased borrowing availability to $182.4 million under the revolving credit facility as of March 31, 2023.

We had $62.0 million in outstanding borrowings under the Credit Facilities at June 30, 2023.

Our outstanding letters of credit totaling $2.6 million decreased borrowing availability to $185.4 million under the revolving credit facility as of June 30, 2023.

We anticipate continuing to utilize the Credit Facilities with more frequency in the near-term to support our domestic working capital needs.

1 unchanged sentence

Failure to satisfy these covenants could result in the accelerated repayment of our indebtedness.

We were in compliance with the financial covenants of the Credit Facilities at March 31, 2023.

We were in compliance with the financial covenants of the Credit Facilities at June 30, 2023.

Due to the increased borrowings under our Credit Facilities and higher interest rates, we expect our interest expense in 2023 to be significantly higher than in prior years.

1 unchanged sentence

Certain of our international subsidiaries in South Africa, Australia, Brazil, Canada and the United Kingdom each have separate credit facilities with local financial institutions, primarily to finance short-term working capital needs, as well as to cover foreign exchange contracts, performance letters of credit, advance payment and retention guarantees.

In addition, the Brazilian

subsidiary also enters into order anticipation agreements on a periodic basis.

In addition, the Brazilian subsidiary also enters into order anticipation agreements on a periodic basis.

Both the outstanding borrowings under the credit facilities of the international subsidiaries and the order anticipation agreements are recorded in "Short-term debt" in our Consolidated Balance Sheets.

2 unchanged sentences

We regularly enter into agreements, primarily to purchase inventory, in the ordinary course of business.

As of March 31, 2023, open purchase obligations totaled $298.4 million, of which $286.7 million are expected to be fulfilled within one year.

As of June 30, 2023, open purchase obligations totaled $255.5 million, of which $217.9 million are expected to be fulfilled within the remainder of 2023.

We estimate that our capital expenditures will be between $25 million and $35 million for the year ending December 31, 2023, which may be impacted by general economic, financial or operational changes and competitive, legislative and regulatory factors, among other considerations.

The following table summarizes cash flows during the three months ended March 31, 2023 and 2022, respectively:

Three Months Ended March 31,

The following table summarizes cash flows during the six months ended June 30, 2023 and 2022, respectively:

Six Months Ended June 30,

(in millions) 2023 2022

6 unchanged sentences

Net cash used in operating activities

Net cash used in operating activities increased by $9.6 million during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to higher net cash usages in our operating assets and liabilities of $15.4 million mainly driven by the increase of inventories on hand of $26.5 million due to higher backlog and supply chain disruptions experienced in 2022 partially offset by higher net income adjusted for non-cash items of $5.7 million.

Net cash used in operating activities decreased by $39.4 million during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 primarily due to higher net income of $25.1 million and reduced net cash usages for our operating assets and liabilities of $13.6 million.

The net cash usages for our operating assets and liabilities were mainly driven by decreased inventory purchases in 2023 of $34.3 million and timing of collections and payments on trade accounts receivables and trade accounts payables of $9.8 million, partially offset by decreased customer deposits of $25.6 million associated with lower backlog.

Net cash provided by (used in) investing activities

Our investing activities provided net cash of $11.8 million during the three months ended March 31, 2023 as opposed to a net cash use of $11.7 million during the three months ended March 31, 2022 primarily due to the sale of the Tacoma facility's land, building and certain equipment assets for $19.9 million and $3.6 million less purchases of purchase of property and equipment.

Our investing activities provided net cash of $2.6 million during the six months ended June 30, 2023 as opposed to a net cash use of $36.9 million during the six months ended June 30, 2022, primarily due to the cash inflows from the sale of the Tacoma facility's land, building and certain equipment assets for $19.9 million in the first quarter of 2023 and the net cash used to acquire MINDS in the second quarter of 2022 for $17.8 million.

Net cash used in financing activities

Net cash used in financing activities increased by $13.9 million during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to increased repayments net of borrowings of $13.7 million.

We paid quarterly dividends of $0.13 and $0.12 per common share to shareholders in the first quarter of 2023 and 2022, respectively.

Net cash used in financing activities increased by $18.3 million during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to increased repayments net of borrowings of $17.7 million.

We paid quarterly dividends of $0.13 and $0.12 per common share to shareholders in the second quarter of 2023 and 2022, respectively.

Share Repurchases

As announced in a Form 8-K filing on July 30, 2018, we approved a share repurchase program, which authorizes us to repurchase up to $150.0 million of our common stock.

As of March 31, 2023, $115.7 million remains available for repurchase under the approved share repurchase program.

No shares were repurchased under the plan during the three months ended March 31, 2023, however, we may conduct opportunistic share repurchases under this authorization in future periods utilizing cash on hand or borrowings under our Credit Facilities.

As of June 30, 2023, $115.7 million remains available for repurchase under the approved share repurchase program.

No shares were repurchased under the plan during the three months ended June 30, 2023;

however, we may conduct opportunistic share repurchases under this authorization in future periods utilizing cash on hand or borrowings under our Credit Facilities.

The timing, manner and number of shares repurchased will depend on a variety of factors, including, but not limited to, the level of cash balances, credit availability, financial performance, general business conditions, regulatory requirements, the market price of our stock and the availability of alternative investment opportunities.

Financial Condition

Our total current assets decreased to $680.4 million as of March 31, 2023 from $696.4 million as of December 31, 2022, a decrease of $16.0 million or 2.3%, due primarily to a decrease in cash, cash equivalents and restricted cash of $23.5 million, the

sale of our Tacoma site previously recorded as "Assets held for sale" for $15.4 million and a decrease in prepaid assets of $7.9 million partially offset by an increase in inventory of $26.7 million, to address the continued elevated backlog and a $5.1 million increase in trade receivables and contract assets, net during the first three months of 2023.

Our total current liabilities decreased to $272.0 million as of March 31, 2023 from $274.0 million as of December 31, 2022, a decrease of $2.0 million, or 0.7%, due primarily to a $6.4 million decrease in other current liabilities and a $2.0 million decrease in customer deposits, partially offset by increases of $4.8 million in accounts payable and $1.4 million of short-term debt during the first three months of 2023.

Our total current assets decreased to $675.9 million as of June 30, 2023 from $696.4 million as of December 31, 2022, a decrease of $20.5 million, or 2.9%, due primarily to a decrease in cash, cash equivalents and restricted cash of $21.5 million, the sale of our Tacoma site previously recorded as "Assets held for sale" for $15.4 million, a decrease in prepaid assets of $10.7 million and a decrease in trade receivables and contract assets, net of $9.5 million.

These decreases were partially offset by an increase in inventory of $36.1 million.

Our total current liabilities decreased to $264.1 million as of June 30, 2023 from $274.0 million as of December 31, 2022, a decrease of $9.9 million, or 3.6%, due primarily to an $11.8 million decrease in customer deposits and an $8.7 million decrease in other current liabilities, partially offset by increases of $4.6 million in accrued product warranty, $2.0 million in accounts payable, $2.2 million of short-term debt and $1.7 million in accrued employee related liabilities.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis