ASTEC INDUSTRIES INC 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The financial condition, results of operations and cash flows discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations are those of Astec Industries, Inc. and its consolidated subsidiaries, collectively, the "Company," "Astec," "we," "our" or "us." The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. The financial position, results of operations, cash flows and other information included herein are not necessarily indicative of the financial position, results of operations and cash flows that may be expected in future periods. Forward-Looking Statements This Quarterly Report on Form 10-Q, particularly the following discussion and analysis of our results of operations, financial condition and liquidity in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations, operating improvements, businesses in which we operate and the United States and global economies. Statements in this Quarterly Report on Form 10-Q that are not historical are hereby identified as "forward-looking statements" and may be indicated by words or phrases such as "anticipates," "supports," "plans," "projects," "expects," "believes," "should," "would," "could," "forecast," "management is of the opinion," or use of the future tense and similar words or phrases. These forward-looking statements are based largely on management's expectations, which are subject to a number of known and unknown risks, uncertainties and other factors described under the caption "Item 1A. Risk Factors" in Part II of this Report, elsewhere herein and in other documents filed by the Company with the Securities and Exchange Commission, including "Part I, Item 1A. Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2023, which may cause actual results, financial or otherwise, to be materially different from those anticipated, expressed or implied by the forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements to reflect future events or circumstances, except as required by law. Executive Summary Highlights of our financial results for the three months ended March 31, 2024 as compared to the same period of the prior year include the following: • Net sales were $309.2 million, a decrease of 11.1% • Gross profit was $76.9 million, a decrease of 13.8% • Income from operations decreased $11.3 million to $6.3 million • Net income attributable to Astec decreased $8.7 million to $3.4 million • Diluted earnings per share were $0.15, a decrease of 71.7% • Backlog was $559.8 million, a decrease of 30.0% Business Conditions and Trends Strategic Transformation – We are undergoing a multi-year phased implementation of a standardized ERP system across our global organization, which will replace much of our existing disparate core financial systems. In addition to one manufacturing site and Corporate, which transitioned to the new ERP in 2023, we converted the operations of two additional manufacturing sites during April 2024. We anticipate incurring total costs associated with the ERP implementation in the range of $125 million to $150 million, with an estimated $25 to $30 million incurred per year, which such incurrence of expenses began in 2022 and is expected to continue through 2025. In addition, we largely completed a lean manufacturing initiative at one of our largest sites during 2023. Certain capital investments related to this initiative are continuing in early 2024, which once completed, and along with the other elements of the initiative, are expected to drive improvement in gross margin at that site in the second half of 2024. Total costs of $6.5 million were incurred related to these strategic transformation initiatives in the three months ended March 31, 2024, of which $6.4 million and $0.1 million are recorded in "Selling, general and administrative expenses" and "Cost of sales," respectively, in the Consolidated Statements of Operations. In the three months ended March 31, 2023, $7.2 million of costs 18 INDEX related to these initiatives were incurred and are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations. Additionally, as of March 31, 2024, we have capitalized $34.5 million in deferred implementation costs associated with the ERP implementation that are being amortized ratably over the remaining contract term, of which $3.9 million and $30.6 million were included in "Prepaid expenses and other assets" and "Other long-term assets" in the Consolidated Balance Sheets, respectively. Amortization of these capitalized implementation costs totaled $0.7 million and $0.1 million during the three months ended March 31, 2024 and 2023, respectively, which is included in "Selling, general and administrative expenses" in the Consolidated Statements of Operations. Segment Changes – Our two reportable segments are comprised of sites based upon the nature of the products or services produced, the type of customer for the products, the similarity of economic characteristics, the manner in which management reviews results and the nature of the production process, among other considerations. Based on a review of these factors, our Australia and LatAm sites and Astec Digital have changed reportable segments beginning January 1, 2024. The Australia and LatAm sites were previously reported in the Infrastructure Solutions segment and have moved to the Materials Solutions segment. Astec Digital was previously included in the Corporate and Other category has moved to the Infrastructure Solutions segment. Prior periods have been revised to reflect the changes for the segment composition for comparability. Economic Conditions – We monitor macroeconomic and other factors that may affect our business such as steel and oil prices, interest rates and geopolitical conflicts, among others. Steel is a major component of our equipment. We anticipate that steel prices will remain at relatively high levels and that steel demand will remain relatively stable throughout 2024. Whenever possible, we attempt to cover increased costs of production by adjusting the prices of our products. The markets we serve are competitive in nature, and competition limits our ability to pass through cost increases in many cases. Additionally, 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. Liquid asphalt is a by-product of oil refining, and changes in the price of oil impact the cost of asphalt, which is in turn likely to alter demand for asphalt and therefore affect demand for certain of our products. Based on the current macroeconomic environment, including ongoing international conflicts, we anticipate that oil prices will remain at relatively high levels throughout 2024. Elevated interest rates influence our customers' spending patterns, most notably impacting our dealer customers in the Materials Solutions segment. Interest rates have, in part, driven the decrease in our order backlog. Additionally, our revolving credit loans bear interest on a variable basis and are subject to market volatility. We anticipate continuing to utilize the revolving credit loans with greater frequency in the near term to support our working capital needs. As such, we expect our interest expense in the near term to remain at elevated levels. In addition, other factors, including but not limited to industry and competitive environment conditions, overall financial performance, business specific events and market conditions, circumstances or events may affect the fair value of our goodwill reporting units. If these or other factors result in changes that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value, we will test goodwill for impairment. New or ongoing geopolitical conflicts may cause a downturn in the commercial and residential construction industries in which we operate, cause an increase in oil prices, damage a significant portion of our inventory or materially impair our ability to distribute our products to customers. We monitor, adjust and potentially cease our operations in affected jurisdictions to ensure compliance with any governmental actions made in response to such conflicts. Results of Operations Net Sales Net sales for the first quarter of 2024 were $309.2 million compared to $347.9 million for the first quarter of 2023, a decrease of $38.7 million, or 11.1%. The decrease in net sales was primarily driven by net unfavorable volume and mix partially offset by favorable pricing that generated decreases in (i) equipment sales of $40.0 million, (ii) service and equipment installation revenue of $7.7 million, (iii) freight revenue of $1.8 million and (iv) used equipment sales of $1.7 million. These decreases were partially offset by increases in parts and component sales and other revenue of $10.7 million and $1.8 million, respectively. Sales reported by our foreign subsidiaries in U.S. dollars for the first quarter of 2024 would have been $0.7 million higher had foreign exchange rates been the same as 2023 rates. Domestic sales for the first quarter of 2024 were $243.2 million, or 78.7% of consolidated net sales, compared to $281.3 million, or 80.9% of consolidated net sales, for the first quarter of 2023, a decrease of $38.1 million, or 13.5%. Domestic sales decreased primarily due to decreases in (i) equipment sales of $38.9 million, (ii) service and equipment installation revenue of $8.4 million, (iii) freight revenue of $1.4 million and (iv) used equipment sales $0.9 million. These decreases were partially offset by increased parts and component sales and other revenue of $9.6 million and $1.9 million, respectively. 19 INDEX International sales for the first quarter of 2024 were $66.0 million, or 21.3% of consolidated net sales, compared to $66.6 million, or 19.1% of consolidated net sales, for the first quarter of 2023, a decrease of $0.6 million, or 0.9%. International sales decreased primarily due to decreases in new and used equipment sales of $1.1 million and $0.8 million, respectively. These decreases were partially offset by increases in parts and component sale and service and equipment installation revenue of $1.1 million and $0.7 million, respectively. Gross Profit Gross profit for the first quarter of 2024 was $76.9 million, or 24.9% of net sales, as compared to $89.2 million, or 25.6% of net sales, for the first quarter of 2023, a decrease of $12.3 million or 13.8%. The impact of net unfavorable volume and mix was offset by favorable pricing with the decrease in gross profit primarily driven by (i) manufacturing inefficiencies of $5.2 million, (ii) $4.1 million of higher unfavorable inventory adjustments inclusive 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 that did not recur, (iii) higher inflation on materials, labor and overhead of $1.8 million and (iv) $1.0 million of increased net scrap expenses. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $3.5 million, or 5.2%, to $71.4 million, or 23.1% of net sales, for the first quarter of 2024, compared to $67.9 million, or 19.5% of net sales, for the first quarter of 2023. The increases in selling general and administrative expenses are primarily due to increased personnel-related costs of $4.1 million, which was largely driven by the recovery of share-based compensation expense in the prior year that did not recur 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 of $2.4 million, and $3.0 million higher consulting and technology support costs. These increases were partially offset by lower exhibit and promotional costs of $2.1 million, primarily due to the triennial ConExpo industry trade show held in 2023 and reduced costs related to our strategic transformation program of $0.8 million. Restructuring and Other Asset Gains and Charges, net Restructuring and the net gain on sale of property and equipment for the three-month periods ended March 31, 2024 and 2023 are presented below: Three Months Ended March 31, (in millions) 2024 2023 Restructuring charges: Costs associated with leadership change and overhead restructuring $ — $ 7.0 Costs associated with exited operations - Enid 0.1 0.1 Total restructuring related charges 0.1 7.1 Gain on sale of property and equipment, net: Gain on sale of property and equipment, net (0.9) (3.4) Total gain on sale of property and equipment, net (0.9) (3.4) Restructuring and other asset (gains) charges, net $ (0.8) $ 3.7 See Note 10, Strategic Transformation, Restructuring and Other Asset Gains and 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. Interest Expense Interest expense of $2.7 million was incurred in the three months ended March 31, 2024, as compared to $2.0 million in the three months ended March 31, 2023, primarily related to higher average outstanding borrowings on the Credit Facility in the first quarter of 2024 as compared to the same period in 2023 combined with higher interest rates. Income Tax Our income tax expense for the first quarter of 2024 was $1.4 million compared to $4.4 million for the first quarter of 2023. Our effective income tax rate was 29.8% for the first quarter of 2024 compared to 26.7% for the first quarter of 2023. The income tax 20 INDEX expense for three months ended March 31, 2024 was lower compared to the same period in 2023, primarily due to lower pretax book income and changes in the relative weighting of jurisdictional income and loss. Backlog The backlog of orders as of March 31, 2024 was $559.8 million compared to $800.2 million as of March 31, 2023, a decrease of $240.4 million, or 30.0%. Domestic backlog decreased $247.9 million, or 36.2%, partially offset by an increase in international backlog of $7.5 million, or 6.6%. The backlog decreased $99.8 million to $372.7 million in the Infrastructure Solutions segment and decreased $140.6 million to $187.1 million in the Materials Solutions segment. Strong customer demand and logistics and manufacturing throughput disruptions in 2021 and 2022 resulted in a build of backlog, which peaked in late 2022. The order backlog began to decrease throughout 2023 driven by sales delivery outpacing new orders and is approaching a historical range. Macroeconomic factors such as higher inflation and increased interest rates, among other factors, have influenced customer ordering patterns and are expected to continue. We have experienced variability in the ordering patterns from our dealer customers, most notably in the Materials Solutions segment, as a result of these factors. In addition, our shorter production lead times allow for customers to place orders closer to when the equipment delivery is desired. In order to support sales delivery and maintain optimal backlog levels, we have completed prudent expansions of our production capacity at certain manufacturing sites that we anticipate will allow us to more effectively convert backlog to sales in the future with greater efficiency and shorter lead times. Net Sales by Segment Three Months Ended March 31, (in millions) 2024 2023 $ Change % Change Infrastructure Solutions $ 202.2 $ 215.5 $ (13.3) (6.2) % Materials Solutions 107.0 132.2 (25.2) (19.1) % Corporate and Other — 0.2 (0.2) (100.0) % Infrastructure Solutions Sales in this segment were $202.2 million for the first quarter of 2024 compared to $215.5 million for the same period in 2023, a decrease of $13.3 million, or 6.2%. The decrease was primarily driven by net unfavorable volume and mix, partially offset by favorable pricing that generated decreased (i) equipment sales of $14.8 million, (ii) service and equipment installation revenue of $8.6 million, (iii) freight revenue of $1.4 million and (iv) used equipment sales of $0.9 million. These decreases were partially offset by higher parts and component sales of $11.8 million. Domestic sales for the Infrastructure Solutions segment decreased $6.1 million, or 3.2%, for the first quarter of 2024 compared to the same period in 2023, primarily due to decreases in (i) service and equipment installation revenue of $8.3 million, (ii) equipment sales of $7.8 million, (iii) freight revenue of $1.2 million and (iv) used equipment sales of $0.9 million. These decreases were partially offset by higher parts and component sales of $11.4 million. International sales for the Infrastructure Solutions segment decreased $7.2 million, or 30.6%, for the first quarter of 2024 compared to the same period in 2023, primarily due to decreased equipment sales of $7.0 million. Materials Solutions Sales in this segment were $107.0 million for the first quarter of 2024 compared to $132.2 million for the same period in 2023, a decrease of $25.2 million, or 19.1%. The decrease was primarily driven by net unfavorable volume and mix, partially offset by favorable pricing that generated decreased (i) equipment sales of $25.2 million, (ii) parts and component sales of $1.1 million and (iii) used equipment sales of $0.8 million. These decreases were partially offset by increased other revenue and service and equipment installation revenue of $1.4 million and $0.9 million, respectively. Domestic sales for the Materials Solutions segment decreased by $31.8 million, or 35.7%, for the first quarter of 2024 compared to the same period in 2023, primarily driven by decreased equipment sales and parts and component sales of $31.1 million and $1.8 million, respectively. These decreases were partially offset by increased other revenue of $1.4 million. International sales for the Materials Solutions segment increased $6.6 million, or 15.3%, for the first quarter of 2024 compared to the same period in 2023, primarily due to increases in (i) new equipment sales of $5.9 million, (ii) service and equipment installation revenue of $1.0 million and (iii) parts and component sales of $0.7 million. These increases were partially offset by decreased used equipment sales of $0.8 million. 21 INDEX Segment Operating Adjusted EBITDA Segment Operating Adjusted EBITDA is the measure of segment profit or loss used by our CEO, who is considered to be the 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. This non-GAAP financial measure can be useful to investors in understanding operating results and the performance of our core business from management's perspective. Our presentation of Segment Operating Adjusted EBITDA may not be comparable to similar measures used by other companies and is not necessarily indicative of the results of operations that would have occurred had each reportable segment been an independent, stand-alone entity during the periods presented. See Note 9, 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 (in millions) 2024 2023 Infrastructure Solutions $ 25.6 $ 28.5 $ (2.9) (10.2) % Materials Solutions 5.3 14.6 (9.3) (63.7) % Corporate and Other (12.0) (7.9) (4.1) (51.9) % Infrastructure Solutions Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $25.6 million for the first quarter of 2024 compared to $28.5 million for the same period in 2023, a decrease of $2.9 million or 10.2%. The decrease in Segment Operating Adjusted EBITDA was primarily driven by (i) manufacturing inefficiencies of $3.8 million, (ii) 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 that did not recur, (iii) higher consulting and technology support costs of $1.4 million (iv) higher inflation on materials, labor and overhead of $1.0 million and (v) $1.0 million of increased net scrap expenses. These decreases were offset in part by higher gross profit of $4.8 million generated from favorable pricing partially offset by net unfavorable volume and mix and $1.5 million of lower exhibit and promotional costs primarily due to the triennial ConExpo industry trade show held in 2023. Materials Solutions Segment Operating Adjusted EBITDA for the Materials Solutions segment was $5.3 million for the first quarter of 2024 compared to $14.6 million for the same period in 2023, a decrease of $9.3 million, or 63.7%. The decrease in Segment Operating Adjusted EBITDA was primarily driven by (i) the impact of net unfavorable volume and mix, partially offset by favorable pricing that resulted in $3.6 million lower gross profit, (ii) higher unfavorable inventory adjustments of $2.2 million, (iii) manufacturing inefficiencies of $1.5 million, (iv) increased selling, general and administrative costs of $1.3 million and (v) the impact of higher inflation on materials, labor and overhead costs of $0.8 million. Corporate and Other Corporate and Other operations had net expenses of $12.0 million for the first quarter of 2024 compared to $7.9 million for the first quarter of 2023, an increase of $4.1 million, or 51.9%. The increase in net expenses was primarily driven by $3.6 million of higher general and administrative expenses, primarily due to the prior year recovery of share-based compensation expense that did not recur 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 of $2.4 million as well as $1.4 million of higher consulting and technology support costs. Liquidity and Capital Resources Our primary sources of liquidity and capital resources are cash and cash equivalents on hand, borrowing capacity under the Credit Facility and cash flows from operations. As of March 31, 2024, our total liquidity was $170.5 million, consisting of $55.3 million of cash and cash equivalents available for operating purposes and $115.2 million available for additional borrowings under the Credit Facility, to the extent our compliance with financial covenants permits such borrowings. Our foreign subsidiaries held $27.9 million of cash and cash equivalents available for operating purposes, which is considered to be indefinitely invested in those jurisdictions. Our future cash requirements primarily include working capital needs, debt service obligations, capital expenditures, vendor-hosted software arrangements including the related implementation costs, unrecognized tax benefits and operating lease payments. In addition, our variable cash uses may include the payment of our quarterly cash dividend, financing other strategic initiatives of our business, including, but not limited to, transformation initiatives, strategic acquisitions and share repurchases under our share repurchase authorization. We believe that our current working capital, cash flows generated from future 22 INDEX operations and available capacity under the Credit Facility will be sufficient to meet working capital and capital expenditure requirements for our existing business for at least the next 12 months. On December 19, 2022, we entered into a credit agreement (the "Credit Agreement") with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto. 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. The Credit Agreement contains certain financial covenants, including requirements related to our Consolidated Total Net Leverage Ratio and Consolidated Interest Coverage Ratio, each as defined in the agreement. Failure to satisfy these covenants could result in the accelerated repayment of our indebtedness. We were in compliance with all covenants of the Credit Facilities as of March 31, 2024. We had $125.0 million in outstanding borrowings under the Credit Facilities as of March 31, 2024. Our outstanding letters of credit totaling $9.8 million decreased borrowing availability to $115.2 million under the revolving credit facility as of March 31, 2024. We anticipate continuing to utilize the Credit Facilities with more frequency in the near term to support our working capital needs. Due to the increased borrowings under our Credit Facilities and higher interest rates, we expect our interest expense in the near term to remain at elevated levels. Certain of our international subsidiaries in Australia, Brazil, Canada, South Africa and the United Kingdom each have separate credit facilities with local financial institutions primarily to finance short-term working capital needs and 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. 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. Each of the credit facilities are generally guaranteed by Astec Industries, Inc. and/or secured with certain assets of the local subsidiary. We regularly enter into agreements, primarily to purchase inventory, in the ordinary course of business. As of March 31, 2024, open purchase obligations totaled $147.6 million, of which $142.8 million are expected to be fulfilled within the remainder of 2024. We estimate that our capital expenditures will be between $25.0 million and $35.0 million for the year ending December 31, 2024, which may be impacted by general economic, financial or operational changes and competitive, legislative and regulatory factors, among other considerations. Cash Flows The following table summarizes cash flows during the three months ended March 31, 2024 and 2023, respectively: Three Months Ended March 31, (in millions) 2024 2023 Net cash used in operating activities $ (47.0) $ (19.2) Net cash (used in) provided by investing activities (5.9) 11.8 Net cash provided by (used in) financing activities 48.4 (16.2) Effect of exchange rates on cash (0.6) 0.1 Decrease in cash, cash equivalents and restricted cash (5.1) (23.5) Cash, cash equivalents and restricted cash, end of period $ 58.1 $ 42.5 Net cash used in operating activities Net cash used in operating activities increased by $27.8 million during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to higher net cash usages for our operating assets and liabilities of $23.1 million and lower net income reduced by non-cash charges of $4.8 million. The increased net cash usage for our operating assets and liabilities were mainly driven by (i) the timing of collections on trade and other receivables of $34.6 million, which includes a $13.7 million receivable from our insurance carriers recorded in the first quarter of 2024 related to a pending litigation settlement, (ii) decreased employee-related liabilities of $7.0 million, (iii) decreased income tax liabilities of $3.5 million and (iv) the timing of inventory purchases of $3.4 million. The net usage was partially offset by timing impacts for accrued liabilities of $18.1 million, which includes $13.7 million related to a pending litigation settlement corresponding to the related receivable from our insurance carriers and customer deposits of $12.0 million, resulting in cash inflows. Net cash (used in) provided by investing activities Our investing activities used net cash of $5.9 million during the three months ended March 31, 2024 as compared to providing net cash of $11.8 million during the three months ended March 31, 2023, primarily due to the cash inflows from the sale of the 23 INDEX Tacoma facility's land, building and certain equipment assets for $19.9 million in the first quarter of 2023. Additionally, capital expenditures decreased $2.2 million during the three months ended March 31, 2024 as compared to the same period of 2023. Net cash provided by (used in) financing activities Our financing activities provided net cash of $48.4 million during the three months ended March 31, 2024 as compared to a net cash use of $16.2 million during the three months ended March 31, 2023, primarily due to increased borrowings, net of repayments, of $63.6 million. Dividends We paid quarterly dividends of $0.13 per common share to shareholders in the first quarter of both 2024 and 2023. Share Repurchases As announced 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, 2024, $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, 2024; 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 increased to $778.8 million as of March 31, 2024 from $719.5 million as of December 31, 2023, an increase of $59.3 million, or 8.2%, due primarily to increases of $39.3 million in trade and other receivables, which includes a $13.7 million receivable from our insurance carriers recorded in the first quarter of 2024 related to a pending litigation settlement, and $28.4 million in inventory, partially offset by decreases of $5.1 million in cash, cash equivalents and restricted cash and $3.1 million in prepaid and refundable income taxes. Our total current liabilities increased to $310.4 million as of March 31, 2024 from $299.0 million as of December 31, 2023, an increase of $11.4 million, or 3.8%, due primarily to net increases of $11.3 million in other current liabilities, which includes $13.7 million related to a pending litigation settlement corresponding to the related receivable from our insurance carriers, and $9.8 million in customer deposits, partially offset by decreases of $8.0 million in accrued employee related liabilities and $1.4 million in short-term debt.