What changed in this filing

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Item 1A. Risk Factors

2025-02-26 compared with 2024-02-28 · 59 added, 46 removed, 245 unchanged (30% of the section changed)

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We, except as required by law, undertake no obligation to update or revise this risk factors discussion, whether as a result of new developments or otherwise.

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Economic and Industry Risks

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• rising gas and oil prices;

• rising steel prices and steel surcharges;

• rising steel prices and steel surcharges, including as a result of tariffs or other trade policies;

• rising interest rates;

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Congress could pass legislation in future sessions that would allow for the diversion of previously appropriated highway funds for other national purposes, or it could restrict funding of infrastructure projects unless states comply with certain federal policies.

Furthermore, the presidential and congressional elections in November 2024 could alter legislative priorities and have a material impact on government funding of infrastructure projects.

Furthermore, the 2024 U.S.

presidential and congressional election results could alter legislative priorities and have a material impact on government funding of infrastructure projects.

The cyclical nature of our industry and the product mix of the equipment we sell may cause adverse fluctuations to our revenues and operating results.

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Changes in interest rates and the lack of credit and third-party financing arrangements for our customers could reduce demand for our products.

Throughout 2022 and 2023, global interest rates increased substantially from historically low levels, which had facilitated low financing costs for construction projects.

Periods of rising interest rates could have a dampening effect on overall economic activity and/or the financial condition of our customers, either or both of which could negatively affect customer demand for our products, make it more difficult for customers to cost-effectively secure financing to fund the purchase of new equipment or our customers' ability to repay obligations to us.

Continued periods of higher interest rates, compared to historic low levels, could have a dampening effect on overall economic activity and/or the financial condition of our customers, either or both of which could negatively affect customer demand for our products, make it more difficult for customers to cost-effectively secure financing to fund the purchase of new equipment or our customers' ability to repay obligations to us.

Our customers’ inability to secure financing for projects on attractive terms could result in the delay, cancellation or downsizing of new purchases which could adversely affect our sales.

Market Conditions

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Market Condition Risks

Competition could reduce revenue from our products and services and cause us to lose market share, and our ability to compete in international jurisdictions is dependent upon trade policies, which are subject to change.

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In addition to the general competitive challenges we face, international trade policies could negatively affect the demand for our products and services and reduce our competitive position in such markets.

In addition, unfavorable currency fluctuations could result in our products and services being more expensive than local competitors.

The 2024 U.S.

presidential and congressional election results may have a significant impact on U.S.

domestic and global trade policies.

The implementation of more restrictive trade policies, such as higher tariffs, duties or charges, in countries where we operate could negatively impact our business, results of operations and financial condition.

In addition, unfavorable currency fluctuations could result in our products and services being more expensive than local competitors.

Our operations in foreign countries, and continued expansion into additional international markets, could expose us to risks inherent in doing business outside of the United States.

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As a result, our international sales and profit margins could decline.

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Manufacturing and Operations Risks

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The availability and price of such items are affected by factors like demand, changes to international trade policies that may result in additional tariffs, duties or other charges, freight costs, global pandemics, shipping and container constraints and labor shortages and costs, each of which can significantly increase the costs of production.

Increased production costs could become particularly significant if the U.S.

or foreign governments impose additional tariffs, including on steel.

The Trump administration recently imposed a 25% tariff on all steel and aluminum imports, which may result in meaningfully higher steel costs and, as a result, increased production costs that we may not be able to pass onto our customers.

Due to price competition in the market for construction equipment and certain infrastructure products which have longer contract to completion cycles, we may not be able to recoup increases in these costs through price increases for our products, which would result in reduced profitability.

Whether increased operating costs can be passed through to the customer depends on a number of factors, including the price of competing products and the nature of our customers' orders.

Whether increased operating costs can be passed through to the customer depends on a number of factors, including the price of competing products, the nature of our customers' orders and overall demand for our products.

Further, we rely on a limited number of suppliers for steel and certain other raw materials, parts and components in the manufacturing process.

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The OneASTEC business model was designed to better set strategic direction, define priorities and improve overall operating performance.

Coupled with our strategic pillars that are aligned to focus on our employees, our customers and our innovation,

the OneASTEC business model is centered around continuous improvement.

Coupled with our strategic pillars that are aligned to focus on our employees, our customers and our innovation, the OneASTEC business model is centered around continuous improvement.

Our future success is partly dependent upon successfully executing and realizing performance improvements, revenue gains, cost savings and other benefits from our initiatives.

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The design and development phase requires meaningful lead time before a product is ready for market, which often requires a significant investment in potentially new technologies and manufacturing techniques to evolve our existing products and introduce new products prior to realizing any revenues associated with such improved or new products.

This also requires us to anticipate changing customer demands.

This also requires us to

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anticipate changing customer demands.

Our success depends on our ability to invest in new technologies and manufacturing techniques to continue to meet those changing demands.

If we are unable to accurately anticipate such customer demands, we will likely incur losses associated with such product development.

Furthermore, many of our competitors are larger than us and have more financial resources to invest in new technologies and manufacturing techniques.

If we are unable to keep pace with these competitors in terms of new technology and innovation we may lose market share and our results of operations may be adversely affected.

In addition, any number of unforeseen circumstances can impact actual project costs.

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As part of our growth strategy, we may pursue acquisitions in the future and may not be successful in completing such acquisitions on favorable terms or be able to realize the anticipated benefits from such acquisitions.

We have historically grown, in large part, through strategic acquisitions, and our strategy is to continue to pursue attractive acquisition opportunities if and when they become available.

As part of our growth strategy, we may pursue attractive acquisition opportunities if and when they become available.

Failure to identify and acquire suitable acquisition candidates on appropriate terms could adversely impact our growth strategy.

In addition, although we have been successful in the past with the integration of numerous acquisitions, we may not be able to fully integrate the operations of any future acquired businesses with our own operations in an efficient and cost-effective manner or without significant disruption to our or the acquired companies’ existing operations.

In addition, we may not be able to fully integrate the operations of any future acquired businesses with our own operations in an efficient and cost-effective manner or without significant disruption to our or the acquired companies’ existing operations.

Moreover, acquisitions involve significant risks and uncertainties, including uncertainties as to the future financial performance of the acquired business, the achievement of expected synergies, difficulties integrating acquired personnel and corporate cultures into our business, the potential loss of key employees, customers or suppliers, difficulties in integrating different computer and accounting systems, exposure to unforeseen liabilities of acquired companies and the diversion of management attention and resources from existing operations.

We may be unable to successfully complete potential acquisitions due to multiple factors, such as issues related to regulatory review of the proposed transactions or obtaining favorable financing.

We may be unable to successfully complete potential acquisitions due to multiple factors, such as issues related to regulatory review of the proposed transactions or obtaining favorable financing or losing out on attractive acquisition opportunities to competing bidders that may have greater financial resources than us.

We may also be required to incur additional debt or issue additional shares of our common stock in order to consummate acquisitions in the future.

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Certain of our international subsidiaries in Australia, Brazil, Canada, South Africa and the United Kingdom have entered into their own independent loan agreements with the same lenders to our credit agreement as well as with other lending institutions.

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We are subject to income taxes in the United States and certain foreign jurisdictions, and changes to the tax codes, effective tax rates and accounting principles related thereto could negatively impact our results of operations.

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and foreign jurisdictions, a change in the mix of earnings between U.S.

jurisdictions or among jurisdictions with differing tax rates, changes in tax laws or treaties, including the global implementation of a minimum tax under Pillar 2 of the Organization for Economic Co-Operation and Development's Base Erosion and Profit Shifting Pillar 2 rules and related changes in generally accepted accounting principles.

jurisdictions or among jurisdictions with differing tax rates, changes in tax laws or treaties and related changes in generally accepted accounting principles.

Additionally, we typically incur substantial research and development costs each year and have historically received significant research and development tax credits due to these expenditures.

Congress could reduce or eliminate such tax credits in future years, which could have a material adverse effect on our operating results.

We may not be able to adequately manage the risks associated with our products and systems, including increased warranty costs.

The success of our products depends on our ability to manage the risks that our products may have quality or other defects or deficiencies that result in their failure to satisfy performance or reliability requirements, including costs associated with design, manufacturing and warranties.

Managing these risks can be costly and technologically challenging and we cannot determine the ultimate effect they may have.

Warranty liabilities and the related reserve estimation process is highly judgmental as a result of the complex nature of these exposures and the unique circumstances of each claim.

Furthermore, once claims are asserted for an alleged product defect by customers, it can be difficult to determine the level of potential exposure or liability related to such allegation or the extent to which the assertion of these claims may expand geographically.

Although we maintain insurance for certain product related claims, such policies may not be available to us or adequately cover the liability for damages, the cost of repairs or the expense of litigation.

Current and future claims may arise out of events or circumstances not covered by insurance and not subject to effective indemnification agreements with our subcontractors.

Failure to successfully manage these challenges could have a material adverse effect on our results of operations and harm our reputation.

Goodwill and other intangible assets comprise a material portion of our total assets.

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Other intangible assets are subject to impairment assessments if conditions exist that indicate the carrying value may not be recoverable.

At October 1, 2023, we performed a qualitative assessment of goodwill impairment, and our testing indicated no impairment had occurred at any of our four reporting units.

During the second quarter of 2024, we identified that indicators of goodwill impairment were present due to macroeconomic conditions, including declines in our publicly quoted share price and increased interest rates, as well as lower than expected operating results.

These factors indicated that one or more of our reporting units may have fallen below their carrying amounts.

We performed a qualitative assessment on all reporting units and concluded that a further quantitative analysis was required for the Materials Solutions reporting unit.

Based on the quantitative impairment test, we determined that the carrying value of the Materials Solutions reporting unit exceeded its fair value as of June 30, 2024.

As a result, we recognized a pretax non-cash goodwill impairment charge of $20.2 million in "Goodwill impairment" in the Consolidated Statements of Operations to fully impair the goodwill allocated to the Materials Solutions reporting unit.

At October 1, 2024, we performed a subsequent qualitative assessment of goodwill impairment, and our testing indicated no additional impairment had occurred at any of our reporting units.

A decrease in our market capitalization, profitability or negative or declining cash flows increases the risk of goodwill or other intangible asset impairments.

Future impairment charges could have a material adverse impact on our results of operations and shareholders' equity.

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Human Capital Risks

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The shrinking availability of qualified talent in these areas is a significant challenge in retaining and attracting sufficiently qualified personnel to enable us to meet customer demand efficiently, resulting in longer lead times to convert backlog to revenue and materially and adversely impacting our margins.

If we are unable to attract the most talented candidates, and cannot retain and engage

additional highly qualified managerial, technical, manufacturing, and sales and marketing personnel by investing in their talent and personal development, our operational and financial performances could continue to suffer.

If we are unable to attract the most talented candidates, and cannot retain and engage additional highly qualified managerial, technical, manufacturing and sales and marketing personnel by investing in their talent and personal development, our operational and financial performances could continue to suffer.

In addition, disputes with labor unions could potentially affect our ability to operate our facilities as well as our financial results.

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We depend to a large extent on the abilities and continued participation of our executive officers and other key employees.

We believe that as our activities increase and change in character, additional experienced personnel will be required to implement our OneASTEC business model.

Competition for such personnel is intense, and we cannot assure that they will be available when required, or that we will have the ability to attract and retain them.

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There is no assurance that we will be able to retain our existing management personnel or to attract additional qualified personnel when needed.

Furthermore, we have had recent leadership changes and transitions involving our senior leadership team, including our Chief Executive Officer, Group Presidents of both of our Infrastructure Solutions and Materials Solutions segments and General Counsel, as previously announced.

Such leadership changes can be inherently difficult to manage, and an inadequate transition may cause disruption to our business, including to our relationships with our customers, suppliers, vendors and employees.

Furthermore, changes in leadership that occur from time to time can be inherently difficult to manage, and an inadequate transition may cause disruption to our business, including to our relationships with our customers, suppliers, vendors and employees.

It may also make it more difficult for us to hire and retain key employees.

In addition, any failure to ensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning, execution and future performance.

Our business operations are dependent upon the ability of our new employees to learn their new roles.

In connection with the recent leadership changes noted above and our strategic initiatives, we have replaced, redirected or hired many employees in key functions, including in important management roles.

Any significant management change involves inherent risk and any failure to ensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning, execution and future performance.

As new employees gain experience in their roles, we could experience inefficiencies or a lack of business continuity due to loss of historical knowledge and a lack of familiarity of new employees with business processes, operating requirements, policies and procedures, some of which are new, and key information technologies and related infrastructure used in our day-to-day operations and financial reporting.

We may also experience additional costs as these new employees learn their roles and gain necessary experience.

It is important to our success that these new employees quickly adapt to and excel in their new roles.

If they are unable to do so, our business and financial results could be materially adversely affected.

In addition, if we were to lose the services of any one or more key employees, whether due to death, disability or termination of employment, our ability to successfully operate our business segments, financial plans, marketing and other objectives could be significantly impaired.

Legal, Regulatory and Compliance Risks

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We manufacture heavy machinery, which is used by our customers at excavation and construction sites, ports and inland terminals and on high-traffic roads.

Any defect in or improper operation of our equipment can result in personal injury and death, and damage to or destruction of property, any of which could cause product liability claims to be filed against us.

Any defect in or improper operation of our equipment can result in personal injury, death or damage to or destruction of property, any of which could cause product liability claims to be filed against us.

The amount and scope of our insurance coverage may not be adequate to cover all losses or liabilities we may incur in the event of a product liability claim.

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government entities, including applicable import and export control regulations and customs requirements, imposition by the U.S.

and foreign governments of additional taxes, tariffs, economic sanctions on countries, entities or persons, embargoes, or other restrictions on trade, currency exchange

regulations and transfer pricing regulations.

and foreign governments of additional taxes, tariffs, economic sanctions on countries, entities or persons, embargoes or other restrictions on trade, currency exchange regulations and transfer pricing regulations.

We are also subject to potential adverse changes or increased uncertainty relating to the political, social, religious and economic stability of the countries in which we do business or transact with and their diplomatic relations with the U.S.

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While we maintain compliance programs to help ensure compliance with such regulations, there is no assurance that we will be effective in complying with all such regulations.

Failure to comply with such regulations could subject us to criminal and civil penalties, disgorgement and other sanctions, remedial measures, legal expenses and reputational damage, all of which could have an adverse impact on our business, financial condition, results of operations and liquidity.

Failure to comply with such regulations could subject us to criminal and civil penalties, disgorgement and other

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sanctions, remedial measures, legal expenses and reputational damage, all of which could have an adverse impact on our business, financial condition, results of operations and liquidity.

In addition, certain of our equipment is subject to rules limiting emissions and other climate related rules and regulation.

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In addition, we may incur material costs or liabilities in connection with other regulatory requirements applicable to our business, including, for example, state regulation of our component equipment, the accuracy of weights and measures and the maximum weight transportable on highways and roads.

Environmental, Social and Governance risks could adversely affect our reputation and shareholder, employee, customer and third party relationships and may negatively affect our stock price.

As a public company, we face increased public and investor scrutiny related to Environmental, Social and Governance (“ESG”) activities.

We risk damage to our brand and reputation if we fail to act responsibly or meet any commitments that we may set in a number of areas, such as diversity, equity and inclusion, environmental stewardship, including with respect to climate change, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations.

Additionally, investors and shareholder advocates are placing ever increasing emphasis on how corporations address ESG issues in their business strategy when making investment decisions and when developing their investment theses and proxy recommendations.

In 2023, we published our first Corporate Sustainability Report, which includes information about our ESG activities and may result in increased investor, media and employee attention to such initiatives.

If our ESG efforts are negatively perceived, our reputation and stock price may suffer.

Moreover, compliance with applicable laws and regulations and the pursuit of other ESG-related objectives may require us to make additional capital and operational expenditures that may have a material adverse effect on its earnings, liquidity, financial condition or competitive position.

We are subject to a variety of legal proceedings, the outcome of which may be unfavorable to us.

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These matters could also significantly divert the attention of our management.

Environmental, Social and Governance risks could adversely affect our reputation and shareholder, employee, customer and third party relationships and may negatively affect our stock price.

As a public company, we face public and investor scrutiny related to Environmental, Social and Governance ('ESG") activities.

Moreover, compliance with applicable laws and regulations and the pursuit of other ESG-related objectives may require us to make additional capital and operational expenditures that may have a material adverse effect on our earnings, liquidity, financial condition or competitive position.

If we are unable to protect our proprietary technology from infringement or if our technology infringes technology owned by others, then the demand for our products may decrease or we may be forced to modify our products, which could increase our costs.

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If we seek to enforce our intellectual property rights, we may be subject to claims that those rights are invalid or unenforceable, and others may seek counterclaims against us, which could have a negative impact on our business.

In addition, changes in intellectual property laws or their interpretation may

impact our ability to protect and assert our intellectual property rights, increase costs and uncertainties in the prosecution of patent applications and enforcement or defense of issued patents, and diminish the value of our intellectual property.

In addition, changes in intellectual property laws or their interpretation may impact our ability to protect and assert our intellectual property rights, increase costs and uncertainties in the prosecution of patent applications and enforcement or defense of issued patents and diminish the value of our intellectual property.

If we do not protect and enforce our intellectual property rights successfully, or if they are circumvented, invalidated or rendered obsolete by the rapid pace of technological change, it could have an adverse impact on our competitive position and our operating results.

Additionally, if our products are deemed to infringe upon the patents or proprietary rights of others, we could be required to modify the design of our products, change the name of our products or obtain a license for the use of some of the technologies used in our products.

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Information Technology and Cybersecurity Risks

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While we maintain cyber risk insurance, in the event of a significant security or data breach, this insurance may not cover all of the losses that we may suffer and may result in increased cost or impact the future availability of coverage.

We may not be able to successfully implement our strategic transformation initiatives, including our new enterprise resource planning system.

We have launched a multi-year phased implementation of a standardized ERP system across our global organization, which will replace our existing disparate core financial systems.

We may not be able to successfully implement our new enterprise resource planning system.

We are undergoing a multi-year phased implementation of a standardized ERP system, which is replacing much of our existing disparate core financial systems.

The upgraded ERP will convert our internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms.

This new ERP system will provide for standardized processes and integrated technology solutions that enable us to better leverage automation and process efficiency, transforming how we connect people, products and processes to operate as OneASTEC.

An implementation of this scale is a major financial undertaking and has, and will continue to, require substantial time and attention of management and key employees.

We may not be able to successfully implement our ERP system without delays related to resource constraints or challenges with the critical design phases of the implementation.

Inefficiencies in our financial reporting processes due to the conversion to our new ERP could adversely affect our ability to produce accurate financial statements on a

timely basis until the new ERP and processes have matured.

Inefficiencies in our financial reporting processes due to the conversion to our new ERP could adversely affect our ability to produce accurate financial statements on a timely basis until the new ERP and processes have matured.

Furthermore, we may incur higher than anticipated costs in connection with our ERP implementation, which could adversely impact our results of operations and financial condition.

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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-K

Item 1A. Risk Factors