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Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 153 added, 143 removed, 190 unchanged (61% of the section changed)

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Executive Summary

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%

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

• Net sales were $303.1 million, a decrease of 3.8%

• Gross profit was $69.6 million, an increase of 6.3%

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

• Income from operations decreased 373.7% to a loss of $5.2 million

• Net income attributable to Astec decreased $7.3 million to a loss of $6.6 million

• Diluted loss per share was $0.29, a decrease of $0.32

• Backlog of $614.7 million, a decrease of 36.6% as compared to September 30, 2022

Significant Items Impacting Operations in 2023

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This improvement is intended to serve as the optimal blueprint for our other manufacturing facilities.

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.

Total costs of $7.8 million and $22.8 million were incurred related to these strategic transformation initiatives in the three and nine months ended September 30, 2023, respectively, of which $7.7 million and $22.6 million, respectively, are recorded in "Selling, general and administrative expenses" and $0.2 million included in "Cost of sales" in the Consolidated Statements of Operations.

Costs totaling $7.0 million and $18.7 million were incurred in the three and nine months ended September 30, 2022, respectively, and are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

Additionally, as of September 30, 2023, we have capitalized $28.1 million in deferred implementation costs associated with the ERP implementation that are being amortized ratably over the remaining contract term, of which $3.0 million and $25.1 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.

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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.

The Tacoma facility's land, building and certain equipment assets of $15.4 million were included in "Assets held for sale" in the Consolidated Balance Sheets at December 31, 2022.

The Tacoma facility's land, building and certain equipment assets of $15.4 million were included in "Assets held for sale" in the Consolidated Balance Sheets as of December 31, 2022.

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

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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.

Total charges of $5.5 million for employee termination costs, including equity award modifications, were recorded in "Restructuring, impairment and other asset charges, net" in the Consolidated Statements of Operations, of which $5.2 million and $0.3 million were recorded in the first and second quarters of 2023, respectively.

The related recovery of $1.0 million of incurred share-based compensation expense was recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations, of which $0.8 million and $0.2 million were recorded during the first and second quarters of 2023, respectively.

37 BP Litigation – On October 5, 2023, a jury rendered a verdict against our Telsmith, Inc.

subsidiary in the matter styled 37 Building Products, Ltd.

Telsmith, Inc.

("Telsmith"), et al.

originally filed on January 28, 2019.

37 BP alleged breaches of warranty and negligent misrepresentation regarding equipment manufactured by Telsmith and purchased by 37 BP in 2017 through one of our dealers.

Based on the jury verdict, a loss for this matter has been determined to be probable in a range between $6.4 million and $18.1 million, inclusive of attorneys' fees and prejudgment interest.

A loss contingency of $6.4 million was recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations and "Other current liabilities" in the Consolidated Balance Sheets during the third quarter of 2023 representing our best estimate of the loss.

See Note 8, Commitments and Contingencies of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion of this matter.

Industry and Business Condition

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GAAP, and our methodology for determining backlog may vary from the methodology used by other companies in determining their backlog amounts.

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

In addition, our backlog should not necessarily be viewed as an accurate indicator of revenue for any particular period and there is no guarantee that our backlog will be converted to 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 $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.

Our $614.7 million backlog of orders as of September 30, 2023 continues to remain strong.

The backlog of orders decreased $354.3 million, or 36.6%, compared to $969.0 million as of September 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.

We expect backlog levels to continue 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.

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

We believe that federal highway funding influences the purchasing decisions of our customers, who are typically more amenable to making capital equipment purchases with long-term federal legislation in place.

government enacted the Infrastructure Investment and Jobs Act ("IIJA") in November 2021.

As federal highway funding programs have consistently been in place for several decades, we believe that these funding programs provide stability in the purchasing decisions of our customers by allowing them to plan and execute longer-term projects with federal legislation in place over a multi-year period.

government enacted the Infrastructure Investment and Jobs Act ("IIJA") in November 2021 as a replacement for the prior program.

The IIJA allocates $548 billion in government spending to new infrastructure over the five-year period concluding in 2026, with certain amounts specifically allocated to fund highway and bridge projects.

We believe that multi-year highway programs (such as the IIJA) will have the greatest positive impact on the road construction industry and allow our customers to plan and execute longer-term projects.

Significant portions of our revenues from the Infrastructure Solutions segment relate to the sale of equipment involved in the production, handling, recycling or application of asphalt mix.

We believe that multi-year highway programs (such as the IIJA) have a positive impact on the domestic road construction industry.

Significant portions of our revenues from the Infrastructure Solutions segment relate to the sale of equipment involved in the production, handling, recycling or application of asphalt mix and, to a lesser extent, concrete as surface choices for roads and highways.

Liquid asphalt is a by-product of oil refining.

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

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

While oil prices had declined from the peak prices in 2022, throughout 2023 they have remained 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.

Oil prices have routinely fluctuated in recent years and are expected to continue to fluctuate in the future.

Based on the current macroeconomic environment, we anticipate that oil prices will remain at relatively high levels throughout 2023.

prices have routinely fluctuated in recent years and are expected to continue to fluctuate in the future.

Based on the current macroeconomic environment, including current international conflicts, we anticipate that oil prices will remain at relatively high levels throughout the remainder of 2023 and into 2024.

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.

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

Steel prices have softened slightly in 2023 and are expected to be maintained at these regulated levels through the remainder of 2023 and into 2024.

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.

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.

Lead times increased during the first quarter of 2023 driven by stronger demand, however, have moderated to a consistent rate as the prior year.

We anticipate that steel demand will remain relatively strong through the balance of 2023 and into 2024, 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.

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Results of Operations

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.

Net sales for the third quarter of 2023 were $303.1 million compared to $315.2 million for the third quarter of 2022, a decrease of $12.1 million, or 3.8%.

The decrease in net sales was primarily driven by net unfavorable changes in the volume, pricing and mix of sales that generated decreases in (i) equipment sales of $9.4 million, (ii) used equipment sales of $4.1 million and (iii) service and equipment installation revenue of $0.8 million.

These decreases were partially offset by an increase in parts and component sales of $2.1 million.

Sales reported by our foreign subsidiaries in U.S.

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%.

dollars for the third quarter of 2023 would have been $1.1 million higher had third quarter 2023 foreign exchange rates been the same as third quarter 2022 rates.

Net sales for the first nine months of 2023 were $1,001.0 million compared to $924.6 million for the first nine months of 2022, an increase of $76.4 million, or 8.3%.

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 $46.6 million, (ii) service and equipment installation revenue of $22.9 million and (iii) parts and component sales of $12.6 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.

These increases were partially offset by a decrease in other revenue of $3.1 million, which was primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers and used equipment of $2.9 million.

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%.

dollars for the first nine months of 2023 would have been $7.9 million higher had the first nine months of 2023 foreign exchange rates been the same as the first nine months of 2022 rates.

Domestic sales for the third quarter of 2023 were $229.6 million, or 75.8% of consolidated net sales, compared to $249.4 million, or 79.1% of consolidated net sales, for the third quarter of 2022, a decrease of $19.8 million, or 7.9%.

Domestic sales decreased primarily due to (i) $17.7 million lower equipment sales, (ii) $3.2 million lower used equipment sales and (iii) $1.7 million lower service and equipment installation revenue.

These decreases were partially offset by an increase in parts and components sales of $2.7 million.

Domestic sales for the first nine months of 2023 were $797.3 million, or 79.7% of consolidated net sales, compared to $732.3 million, or 79.2% of consolidated net sales, for the first nine months of 2022, an increase of $65.0 million, or 8.9%.

Domestic sales increased primarily due to (i) $36.5 million higher equipment sales, (ii) $20.3 million higher service and equipment

installation revenue and (iii) $14.0 million higher parts and component sales.

These increases were partially offset by a decrease in other revenue of $3.0 million, which was primarily driven by higher utilization of our interest subsidy programs offered to certain of our dealer customers, and lower used equipment sales of $2.6 million.

International sales for the third quarter of 2023 were $73.5 million, or 24.2% of consolidated net sales, compared to $65.8 million, or 20.9% of consolidated net sales, for the third quarter of 2022, an increase of $7.7 million, or 11.7%.

International sales increased primarily due to higher equipment sales of $8.3 million and service and equipment installation revenue of $0.9 million partially offset by lower used equipment sales of $0.9 million.

International sales for the first nine months of 2023 were $203.7 million, or 20.3% of consolidated net sales, compared to $192.3 million, or 20.8% of consolidated net sales, for the first nine months of 2022, an increase of $11.4 million, or 5.9%.

International sales increased primarily due to higher (i) equipment sales of $10.1 million and (ii) service and equipment installation sales of $2.6 million.

Gross profit for the third quarter of 2023 was $69.6 million, or 23.0% of net sales, as compared to $65.5 million, or 20.8% of net sales, for the third quarter of 2022, an increase of $4.1 million, or 6.3%.

The increase was primarily driven by favorable pricing partially offset by net unfavorable volume and mix that generated $17.2 million higher gross profit.

These increases were also partially offset by the impact of inflation on materials, labor and overhead of $10.5 million and manufacturing inefficiencies of $2.6 million due in part to increased warranty program costs.

Gross profit for the first nine months of 2023 was $241.7 million, or 24.1% of net sales, as compared to $193.1 million, or 20.9% of net sales, for the first nine months of 2022, an increase of $48.6 million, or 25.2%.

The increase was primarily driven by the net favorable volume, pricing and mix of $90.1 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.

These increases were partially offset by the impact of inflation on materials, labor and overhead of $35.0 million and manufacturing inefficiencies of $8.8 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 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.

Selling, general and administrative expenses increased $10.8 million, or 17.0%, to $74.3 million, or 24.5% of net sales, for the third quarter of 2023, compared to $63.5 million, or 20.1% of net sales, for the third quarter of 2022 primarily due to (i) a $6.4 million loss contingency recorded related to the 37 BP litigation, (ii) increased net payroll and employee benefit costs of $4.1 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, (iii) $1.3 million increased consulting and project costs and (iv) $0.7 million increased costs related to our strategic transformation program.

These increases were partially offset by lower amortization and research and development expenses of $0.9 million, respectively.

Selling, general and administrative expenses increased $22.3 million, or 12.1%, to $206.7 million, or 20.6% of net sales, for the first nine months of 2023, compared to $184.4 million, or 19.9% of net sales, for the first nine months of 2022 primarily due to (i) increased net payroll and employee benefit costs of $8.4 million, which was largely driven by general employee cost increases and higher annual incentive compensation costs of $2.9 million, partially offset by lower share-based compensation expense of $3.4 million mainly 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 and reduced health insurance costs of $2.1 million, (ii) a $6.4 million loss contingency recorded related to the 37 BP litigation, (iii) $3.9 million of increased costs related to our strategic transformation program, (iv) $2.9 million of higher exhibit and promotional costs primarily due to the ConExpo industry trade show held once every three years, (v) $2.8 million increased consulting, prototype and project costs and (vi) incremental expenses associated with the acquisition of MINDS of $1.1 million.

These increases were partially offset by lower amortization expense of $2.9 million and reduced acquisition and integration related costs of $1.9 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,

Restructuring, asset impairment charges and the net losses and gains on sale of property and equipment for the three and nine month periods ended September 30, 2023 and 2022 are presented below:

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

(in millions) 2023 2022 2023 2022

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Total asset impairment charges — 0.4 0.8 3.4

Gain on sale of property and equipment, net:

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

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

Loss (gain) on sale of property and equipment, net

Loss (gain) on sale of property and equipment, net 0.4 (0.4) (3.1) (0.4)

Total loss (gain) on sale of property and equipment, net 0.4 (0.4) (3.1) (0.4)

Restructuring, impairment and other asset charges, net $ 0.5 $ 0.1 $ 5.3 $ 4.5

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Interest Expense

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.

Interest expense of $2.4 million and $6.4 million was incurred in the three and nine months ended September 30, 2023, respectively, as compared to $0.6 million and $1.6 million in the three and nine months ended September 30, 2022, respectively, primarily related to higher outstanding borrowings on our revolving credit facility.

Other (Expenses) Income, net

Other (expenses) income, net was $0.5 million for the first nine months of 2023 compared to an expense of $1.8 million for the first nine months of 2022, an increase of $2.3 million primarily due to the change in net foreign currency transaction gains and losses.

Our income tax benefit for the third quarter of 2023 was $0.6 million compared to an income tax expense of $0.7 million for the third quarter of 2022.

Our effective income tax rate was 8.5% for the third quarter of 2023 compared to 58.3% for the third quarter of 2022.

The income tax benefit for the three months ended September 30, 2023 as compared to expense in the same period in 2022 was primarily due to lower pretax book income and changes in the relative weighting of jurisdictional income and loss.

Our income tax expense for the first nine months of 2023 was $6.5 million, reflecting a 25.7% effective tax rate, compared to $0.8 million expense, reflecting a 53.3% effective tax rate, for the first nine months of 2022.

The income tax expense for the nine months ended September 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 September 30, 2023 was $614.7 million compared to $969.0 million as of September 30, 2022, a decrease of $354.3 million, or 36.6%.

Domestic backlog decreased $302.1 million, or 37.2%, and international backlog

decreased $52.2 million, or 33.4%, respectively.

The backlog decreased $165.0 million to $435.2 million in the Infrastructure Solutions segment and decreased $189.4 million to $176.9 million in the Materials Solutions segment.

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

We expect backlog levels to continue 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.

Furthermore, as a result of such macroeconomic factors, we are actively monitoring orders from our high-volume dealers for potential modifications, push-outs or cancellations.

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.

Segment Net Sales - Three Months Ended :

Three Months Ended June 30, $ Change % Change

(in millions) 2023 2022

Three Months Ended September 30, $ Change % Change

(in millions, except percentage data) 2023 2022

Infrastructure Solutions $ 190.8 $ 201.9 $ (11.1) (5.5) %

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Infrastructure Solutions

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.

Sales in this segment were $190.8 million for the third quarter of 2023 compared to $201.9 million for the same period in 2022, a decrease of $11.1 million, or 5.5%.

The decrease was primarily driven by net unfavorable changes in the volume, pricing and mix of sales that generated decreased (i) equipment sales of $9.0 million, (ii) used equipment sales of $3.5 million and (iii) service and equipment installation revenue of $1.6 million.

These decreases were offset by higher parts and component sales of $3.1 million.

Domestic sales for the Infrastructure Solutions segment decreased $12.3 million, or 7.4%, for the third quarter of 2023 compared to the same period in 2022 primarily due to decreased (i) equipment sales of $11.5 million, (ii) used equipment sales of $3.2 million and (iii) service and equipment installation sales of $1.6 million.

These decreases were partially offset by an increase in parts and component sales of $4.0 million.

International sales for the Infrastructure Solutions segment increased $1.2 million, or 3.4%, for the third quarter of 2023 compared to the same period in 2022 primarily due to increased equipment sales of $2.5 million partially offset by decreased parts and component sales of $0.9 million.

Materials Solutions

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

Sales in this segment were $110.5 million for the third quarter of 2023 compared to $111.8 million for the same period in 2022, a decrease of $1.3 million, or 1.2%.

The decrease was primarily driven by net unfavorable changes in the volume, pricing and mix of sales that generated decreased parts and component sales and used equipment sales of $1.0 million and $0.6 million, respectively.

These decreases were partially offset by an increase in service and equipment installation revenue of $0.8 million.

Domestic sales for the Materials Solutions segment decreased by $7.4 million, or 9.0%, for the third quarter of 2023 compared to the same period in 2022, primarily driven by decreased equipment sales and parts and component sales of $5.9 million and $1.3 million, respectively.

International sales for the Materials Solutions segment increased $6.1 million, or 20.7%, for the third quarter of 2023 compared to the same period in 2022 primarily due to increased equipment sales and service and equipment installation sales of $5.4 million and $0.9 million, respectively.

Segment Net Sales - Nine Months Ended :

Nine Months Ended September 30, $ Change % Change

(in millions, except percentage data) 2023 2022

Infrastructure Solutions $ 638.8 $ 609.0 $ 29.8 4.9 %

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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.

Sales in this segment were $638.8 million for the first nine months of 2023 compared to $609.0 million for the same period in 2022, an increase of $29.8 million or 4.9%.

The increase was primarily driven by net favorable changes in the volume, pricing and mix of sales that generated increased service and equipment installation revenue of $20.7 million and parts and component sales of $11.5 million.

These increases were partially offset by decreased used equipment sales of $2.5 million.

Domestic sales for the Infrastructure Solutions segment increased $29.8 million or 5.9% for the first nine months of 2023 compared to the same period in 2022 primarily due to increased service and equipment installation sales of $20.2 million and increased parts and component sales of $13.5 million.

These increases were partially offset by a decrease in used equipment sales of $2.6 million.

International sales for the Infrastructure Solutions segment were consistent for the first nine months of 2023 compared to the same period in 2022.

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.

Sales in this segment were $354.6 million for the first nine months of 2023 compared to $312.9 million for the same period in 2022, an increase of $41.7 million, or 13.3%.

The increase was primarily driven by net favorable changes in the volume, pricing and mix of sales that generated increased new equipment sales and service and equipment installation revenue of $42.2 million and $2.0 million, respectively.

These increases were partially offset by decreased other revenue of $3.6 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.

Domestic sales for the Materials Solutions segment increased by $33.3 million, or 14.6%, for the first nine months of 2023 compared to the same period in 2022, driven by increased new equipment sales of $35.8 million.

This increase was partially offset by decreased other revenue of $3.4 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 $8.4 million, or 9.9%, for the first nine months of 2023 compared to the same period in 2022 primarily due to increased new equipment sales of $6.4 million and service and equipment installation revenue of $2.0 million.

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%.

Sales were $7.6 million for the first nine months of 2023 compared to $2.7 million for the same period in 2022, an increase of $4.9 million, or 181.5%.

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

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Segment Operating Adjusted EBITDA - Three Months Ended:

Three Months Ended June 30, $ Change % Change

(in millions) 2023 2022

Three Months Ended September 30, $ Change % Change

(in millions, except percentage data) 2023 2022

Infrastructure Solutions $ 16.5 $ 17.6 $ (1.1) (6.3) %

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Corporate and Other (14.4) (14.2) (0.2) (1.4) %

Infrastructure Solutions segment:

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 $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 $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

Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $16.5 million for the third quarter of 2023 compared to $17.6 million for the same period in 2022, a decrease of $1.1 million, or 6.3%.

The decrease in Segment Operating Adjusted EBITDA resulted primarily from the impact of higher inflation on materials, labor and overhead costs of $6.8 million and increased selling, general, administrative and other net costs of $4.8 million, primarily due to higher personnel related costs.

These decreases were partially offset by the impact of favorable pricing net of unfavorable volume/mix that generated $10.5 million higher gross profit.

Materials Solutions

Segment Operating Adjusted EBITDA for the Materials Solutions segment was $8.3 million for the third quarter of 2023 compared to $13.1 million for the same period in 2022, a decrease of $4.8 million, or 36.6%.

The decrease in Segment Operating Adjusted EBITDA between periods resulted primarily from increased selling, general, administrative and other net costs of $7.8 million, primarily driven by a $6.4 million loss contingency recorded related to the 37 BP litigation and higher personnel related costs, and the impact of higher inflation on materials, labor and overhead costs of $3.7 million.

These decreases were partially offset by the impact of favorable pricing net of unfavorable volume/mix that generated $7.2 million higher gross profit.

Segment Operating Adjusted EBITDA - Nine Months Ended :

Nine Months Ended September 30, $ Change % Change

(in millions, except percentage data) 2023 2022

Infrastructure Solutions $ 70.5 $ 49.9 $ 20.6 41.3 %

Materials Solutions 41.9 34.8 7.1 20.4 %

Corporate and Other (33.5) (36.3) 2.8 7.7 %

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%.

Infrastructure Solutions

Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $70.5 million for the first nine months of 2023 compared to $49.9 million for the same period in 2022, an increase of $20.6 million, or 41.3%.

The increase in Segment Operating Adjusted EBITDA resulted primarily from the impact of favorable net volume, pricing and mix that generated $59.1 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%.

These increases were partially offset by (i) the impact of higher inflation on materials, labor and overhead costs of $22.2 million, (ii) increased selling, general and administrative costs of $13.5 million, primarily due to $10.3 million higher personnel related costs, $2.6 million increased consulting, prototype and project costs and $1.1 million of increased exhibit and promotional costs related to the ConExpo industry trade show and (iii) manufacturing inefficiencies of $3.1 million, 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 Operating Adjusted EBITDA for the Materials Solutions segment was $41.9 million for the first nine months of 2023 compared to $34.8 million for the same period in 2022, an increase of $7.1 million, or 20.4%.

The increase in Segment Operating Adjusted EBITDA resulted primarily from the impact of favorable net volume, pricing and mix that generated $32.5 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.

These increases were partially offset by (i) the impact of higher inflation on materials, labor and overhead costs of $12.8 million, (ii) increased general and administrative costs of $8.9 million, primarily due to a $6.4 million loss contingency recorded related to the 37 BP litigation and $1.2 million higher personnel related costs and (iii) manufacturing inefficiencies of $3.7 million due in part to increased warranty program costs.

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.

C orporate and Other operations had net expenses of $33.5 million for the first nine months of 2023 compared to $36.3 million for the first nine months of 2022, a decrease of $2.8 million, or 7.7%.

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 $2.4 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 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.

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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 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.

As of September 30, 2023, our total liquidity was $196.9 million, consisting of $71.3 million of cash and cash equivalents available for operating purposes and $125.6 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 $34.0 million of cash and cash equivalents available for operating purposes, which is considered to be indefinitely invested in those jurisdictions.

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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 $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 had $122.0 million in outstanding borrowings under the Credit Facilities as of September 30, 2023.

Our outstanding letters of credit totaling $2.4 million decreased borrowing availability to $125.6 million under the revolving credit facility as of September 30, 2023.

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

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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 June 30, 2023.

We were in compliance with the financial covenants of the Credit Facilities as of September 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.

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

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 six months ended June 30, 2023 and 2022, respectively:

Six Months Ended June 30,

As of September 30, 2023, open purchase obligations totaled $222.5 million, of which $145.5 million are expected to be fulfilled within the remainder of 2023.

We estimate that our capital expenditures will not exceed $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 nine months ended September 30, 2023 and 2022, respectively:

Nine Months Ended September 30,

(in millions) 2023 2022

Net cash used in operating activities $ (18.8) $ (56.8)

Net cash provided by (used in) investing activities 2.6 (36.9)

Net cash used in financing activities (22.0) (3.7)

Net cash used in investing activities (3.9) (45.0)

Net cash provided by (used in) financing activities 30.8 (8.4)

Effect of exchange rates on cash (0.3) (3.4)

Decrease in cash, cash equivalents and restricted cash (21.5) (83.8)

Increase (decrease) in cash, cash equivalents and restricted cash 7.8 (113.6)

Cash, cash equivalents and restricted cash, end of period $ 73.8 $ 20.8

Net cash used in operating activities

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 $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 $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.

Net cash used in operating activities decreased by $38.0 million during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 primarily due to higher net income of $18.1 million and reduced net cash usages for our operating assets and liabilities of $12.2 million.

The net cash usages for our operating assets and liabilities were mainly driven by decreased inventory purchases in 2023 of $39.2 million and the timing of payments on trade accounts payables of $18.2 million, partially offset by decreased customer deposits of $29.3 million associated with lower backlog and the timing of collections on trade accounts receivables $19.2 million.

Net cash used in investing activities

Net cash used in investing activities decreased by $41.1 million during the nine months ended September 30, 2023 as compared to the nine months ended September 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 provided by (used in) financing activities

Our financing activities provided net cash of $30.8 million during the nine months ended September 30, 2023 as opposed to a net cash use of $8.4 million during the nine months ended September 30, 2022, primarily due to increased borrowings net of repayments of $33.6 million and share repurchases of $6.1 million in the third quarter of 2022.

We paid quarterly dividends of $0.13 and $0.12 per common share to shareholders in the third 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 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;

As of September 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 September 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.

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Financial Condition

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.

Our total current assets increased to $746.3 million as of September 30, 2023 from $696.4 million as of December 31, 2022, an increase of $49.9 million, or 7.2%, due primarily to increases of $56.7 million in inventory, $7.8 million in cash, cash equivalents and restricted cash and $7.6 million in trade receivables and contract assets.

These increases were partially offset by the sale of our Tacoma site previously recorded as "Assets held for sale" for $15.4 million and a decrease in prepaid assets of $5.5 million.

Our total current liabilities increased to $282.2 million as of September 30, 2023 from $274.0 million as of December 31, 2022, an increase of $8.2 million, or 3.0%, due primarily to increases of $9.1 million in accrued employee related liabilities, $7.1 million in accounts payable and $4.8 million in accrued product warranty.

These increases were partially offset by an $8.9 million decrease in customer deposits, a $2.5 million decrease in short-term debt and a $2.3 million decrease in other current 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