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, 2024. 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 (the "Exchange Act"), 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, 2024, 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 June 30, 2025 as compared to the same period of the prior year include the following: • Net sales were $330.3 million, a decrease of 4.4% • Gross profit was $88.3 million, an increase of 8.6% • Income from operations was $21.4 million, an increase of 300.0% • Net income attributable to Astec was $16.7 million, an increase of 219.3% • Diluted earnings per share was $0.72, an increase of 218.0% • Backlog was $380.9 million, a decrease of 28.3% Business Conditions and Trends Strategic Transformation Program – Our strategic transformation program includes the ongoing multi-year phased implementation of a standardized ERP system, which is replacing much of our existing disparate core financial systems. To date, we have launched the human capital resources module in our U.S. locations and converted the operations of three manufacturing sites along with Corporate. We expect the project to conclude in 2028 or 2029 with total approximate implementation costs anticipated to range from $180 to $200 million. Through the second quarter of 2025, we have incurred total implementation costs of approximately $143 million. See Note 11, Strategic Transformation, Restructuring and Other Asset Gains, net of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional discussion of the costs related to these strategic initiatives. Economic Conditions – We monitor macroeconomic and other factors that may affect our business such as steel and oil prices and geopolitical conflicts, among others. 22 INDEX Steel is a major component of our equipment. In reaction to new or increased tariffs imposed by the Trump Administration and reciprocal actions by foreign governments, steel prices remained elevated during the second quarter 2025. We anticipate that steel prices will remain at elevated levels in conjunction with ongoing tariff actions, stagnant demand growth, domestic reshoring activities and a global focus on construction projects. 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. Oil prices have routinely fluctuated in recent years, and based on the current macroeconomic environment, we anticipate that oil prices will experience moderate fluctuation throughout 2025. New or ongoing geopolitical conflicts may cause a downturn in the 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. 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. Results of Operations Net Sales Net sales for the second quarter of 2025 were $330.3 million compared to $345.5 million for the second quarter of 2024, a decrease of $15.2 million, or 4.4%. The decrease in net sales was primarily driven by net unfavorable volume and mix partially offset by favorable pricing that generated decreased equipment sales of $19.5 million, partially offset by increases in parts and component sales $2.6 million and service and equipment installation revenue of $0.8 million. Sales reported by our foreign subsidiaries in U.S. dollars for the second quarter of 2025 would have been $0.7 million higher had second quarter 2025 foreign exchange rates been the same as second quarter 2024 rates. Net sales for the first six months of 2025 were $659.7 million compared to $654.7 million for the first six months of 2024, an increase of $5.0 million, or 0.8%. The increase in net sales was primarily driven by favorable pricing partially offset by net unfavorable volume and mix that generated increases in (i) used equipment sales of $2.2 million, (ii) service and equipment installation revenue of $2.0 million, (iii) freight revenue of $1.5 million and (iv) equipment sales of $0.9 million. These increases were partially offset by a decrease in parts and component sales of $1.9 million. Sales reported by our foreign subsidiaries in U.S. dollars for the first six months of 2025 would have been $2.3 million higher had the first six months of 2025 foreign exchange rates been the same as the first six months of 2024 rates. Domestic sales for the second quarter of 2025 were $262.0 million, or 79.3% of consolidated net sales, compared to $272.1 million, or 78.8% of consolidated net sales, for the second quarter of 2024, a decrease of $10.1 million, or 3.7%. Domestic sales decreased primarily due to lower equipment sales of $16.9 million partially offset by higher parts and component sales of $4.6 million and service and equipment installation revenue of $1.2 million. Domestic sales for the first six months of 2025 were $535.8 million, or 81.2% of consolidated net sales, compared to $515.3 million, or 78.7% of consolidated net sales, for the first six months of 2024, an increase of $20.5 million, or 4.0%. Domestic sales increased primarily due to higher (i) equipment sales of $11.5 million, (ii) parts and component sales of $2.8 million, (iii) service and equipment installation revenue of $2.2 million, (iv) used equipment sales of $2.2 million and (v) freight revenue of $1.5 million. International sales for the second quarter of 2025 were $68.3 million, or 20.7% of consolidated net sales, compared to $73.4 million, or 21.2% of consolidated net sales, for the second quarter of 2024, a decrease of $5.1 million, or 6.9%. International sales decreased primarily due to lower equipment sales of $2.6 million and parts and component sales of $2.0 million. International sales for the first six months of 2025 were $123.9 million, or 18.8% of consolidated net sales, compared to $139.4 million, or 21.3% of consolidated net sales, for the first six months of 2024, a decrease of $15.5 million, or 11.1%. International sales decreased primarily due to lower equipment sales of $10.6 million and parts and component sales of $4.7 million. Gross Profit Gross profit for the second quarter of 2025 was $88.3 million, or 26.7% of net sales, as compared to $81.3 million, or 23.5% of net sales, for the second quarter of 2024, an increase of $7.0 million, or 8.6%. The increase in gross profit was primarily driven by (i) the impact of net favorable pricing partially offset by net unfavorable volume and mix of $5.9 million, (ii) the favorable impact of changes in manufacturing input costs related to materials, labor and overhead of $3.0 million and (iii) net favorable 23 INDEX inventory adjustments of $1.6 million. These increases were partially offset by manufacturing inefficiencies of $1.9 million and higher warranty program costs of $1.7 million. Gross profit for the first six months of 2025 was $180.7 million, or 27.4% of net sales, as compared to $158.2 million, or 24.2% of net sales, for the first six months of 2024, an increase of $22.5 million, or 14.2%. The increase in gross profit was primarily driven by (i) the impact of net favorable pricing partially offset by net unfavorable volume and mix of $21.9 million, (ii) the favorable impact of changes in manufacturing input costs related to materials, labor and overhead of $3.1 million and (iii) manufacturing efficiencies of $1.7 million. These increases were partially offset by higher warranty program costs of $3.7 million. Selling, General and Administrative Expenses Selling, general and administrative expenses were $67.0 million or 20.3% of net sales, for the second quarter of 2025, compared to $71.1 million, or 20.6% of net sales, for the second quarter of 2024, a decrease of $4.1 million, or 5.8%, primarily due to (i) decreased costs related to our strategic transformation program of $7.6 million, (ii) decreased professional service costs of $1.5 million, (iii) lower technology support costs of $1.1 million, (iv) lower bad debt expense of $1.0 million and (v) lower depreciation and amortization expense of $0.6 million. These decreases were partially offset by higher personnel-related costs of $7.2 million, largely driven by $4.1 million of employee incentive compensation costs, and transaction costs of $1.4 million attributable to the TerraSource acquisition completed in 2025. Selling, general and administrative expenses were $138.9 million, or 21.1% of net sales, for the first six months of 2025, compared to $142.5 million, or 21.8% of net sales, for the first six months of 2024, a decrease of $3.6 million, or 2.5%, primarily due to (i) decreased costs related to our strategic transformation program of $7.0 million, (ii) decreased professional service costs of $2.4 million, (ii) decreased bad debt expense of $1.2 million and (iv) decreased depreciation and amortization expense of $1.1 million. These decreases were partially offset by increased personnel-related costs of $9.6 million, largely driven by $5.3 million of employee incentive compensation costs, and transaction costs of $2.2 million attributable to the TerraSource acquisition completed in 2025. Restructuring Charges and Other Asset Gains, net Restructuring charges and the gain on sale of property and equipment, net for the three and six months ended June 30, 2025 and 2024 are presented below: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2025 2024 2025 2024 Restructuring charges: Costs associated with exited operations – Enid $ — $ — $ — $ 0.1 Workforce reductions — 0.9 — 0.9 Total restructuring related charges — 0.9 — 1.0 Gain on sale of property and equipment, net: Gain on sale of property and equipment, net (0.1) (0.2) (0.1) (1.1) Total gain on sale of property and equipment, net (0.1) (0.2) (0.1) (1.1) Restructuring and other asset gains, net $ (0.1) $ 0.7 $ (0.1) $ (0.1) See Note 11, Strategic Transformation, Restructuring and Other Asset Gains, net of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for discussion of the individual restructuring actions taken. Interest Expense Interest expense of $2.1 million and $4.1 million was incurred in the three and six months ended June 30, 2025, respectively, as compared to $3.1 million and $5.8 million in the three and six months ended June 30, 2024, respectively, primarily related to lower average outstanding borrowings on the 2022 Credit Facility combined with lower interest rates in the second quarter of 2025 as compared to the same period in 2024. Income Tax Our income tax expense for the second quarter of 2025 was $5.8 million compared to $0.3 million for the second quarter of 2024. Our effective income tax rate was 25.7% for the second quarter of 2025 compared to (2.2)% for the second quarter of 2024. The income tax expense for the three months ended June 30, 2025 was higher compared to the same period in 2024 primarily due to 24 INDEX higher pretax book income and changes in the relative weighting of jurisdictional income and loss, partially offset by a net nondeductible goodwill impairment incurred in 2024. Our income tax expense for the first six months of 2025 was $11.2 million compared to $1.7 million for the first six months of 2024. Our effective tax rate was 26.5% for the first six months of 2025 compared to (18.9)% for the first six months of 2024. The income tax expense for the six months ended June 30, 2025 was higher compared to the same period in 2024 primarily due to higher pretax book income and changes in the relative weighting of jurisdictional income and loss, partially offset by a net nondeductible goodwill impairment incurred in 2024. Backlog June 30, (in millions, except percentage data) 2025 2024 $ Change % Change Infrastructure Solutions $ 256.1 $ 368.6 $ (112.5) (30.5) % Materials Solutions 124.7 162.5 (37.8) (23.3) % Domestic Backlog 308.1 417.2 (109.1) (26.2) % International Backlog 72.7 113.9 (41.2) (36.2) % The backlog of orders as of June 30, 2025 was $380.8 million compared to $531.1 million as of June 30, 2024, a decrease of $150.3 million, or 28.3%. Our shorter production lead times and parts fill rates have allowed for customers to place orders closer to the desired delivery date. Additionally, we have experienced variability in the ordering patterns from our customers as a result of macroeconomic factors. Segment Net Sales – Three Months Ended : Three Months Ended June 30, $ Change % Change (in millions, except percentage data) 2025 2024 Infrastructure Solutions $ 204.6 $ 221.4 $ (16.8) (7.6) % Materials Solutions 125.7 124.1 1.6 1.3 % Infrastructure Solutions Sales in this segment were $204.6 million for the second quarter of 2025 compared to $221.4 million for the same period in 2024, a decrease of $16.8 million, or 7.6%. The decrease was primarily driven by net unfavorable volume and mix partially offset by favorable pricing that generated decreased equipment sales of $23.6 million partially offset by increases in parts and component sales of $4.8 million and service and equipment installation revenue of $1.4 million. Domestic sales for the Infrastructure Solutions segment decreased $20.7 million, or 10.0%, for the second quarter of 2025 compared to the same period in 2024 primarily due to lower equipment sales of $28.0 million partially offset by higher parts and component sales of $5.5 million and service and equipment installation revenue of $1.2 million. International sales for the Infrastructure Solutions segment increased $3.9 million, or 27.5%, for the second quarter of 2025 compared to the same period in 2024 primarily due to higher equipment sales of $4.4 million partially offset by lower parts and components sales of $0.7 million. Materials Solutions Sales in this segment were $125.7 million for the second quarter of 2025 compared to $124.1 million for the same period in 2024, an increase of $1.6 million, or 1.3%. The increase was primarily driven by favorable pricing partially offset by net unfavorable volume and mix that generated increased equipment sales of $4.1 million partially offset by decreases in parts and component sales of $2.2 million and service and equipment installation revenue of $0.6 million. Domestic sales for the Materials Solutions segment increased by $10.6 million, or 16.3%, for the second quarter of 2025 compared to the same period in 2024, primarily due to higher equipment sales of $11.1 million partially offset by lower parts and component sales of $0.9 million. 25 INDEX International sales for the Materials Solutions segment decreased $9.0 million, or 15.2%, for the second quarter of 2025 compared to the same period in 2024 primarily due to lower (i) equipment sales of $7.0 million, (ii) parts and component sales $1.3 million and (iii) service and equipment installation revenue of $0.6 million. Segment Net Sales – Six Months Ended : Six Months Ended June 30, $ Change % Change (in millions, except percentage data) 2025 2024 Infrastructure Solutions $ 440.6 $ 423.6 $ 17.0 4.0 % Materials Solutions 219.1 231.1 (12.0) (5.2) % Infrastructure Solutions Sales in this segment were $440.6 million for the first six months of 2025 compared to $423.6 million for the same period in 2024, an increase of $17.0 million, or 4.0%. The increase was primarily driven by favorable pricing that generated increases in (i) equipment sales of $8.5 million, (ii) service and equipment installation revenue of $2.4 million, (iii) freight revenue of $2.4 million, (iv) used equipment sales of $2.0 million and (v) parts and component sales of $1.5 million. Domestic sales for the Infrastructure Solutions segment increased $15.1 million, or 3.8%, for the first six months of 2025 compared to the same period in 2024 primarily due to higher (i) equipment sales of $4.9 million, (ii) parts and component sales of $3.6 million, (iii) freight revenue of $2.4 million, (iv) service and equipment installation revenue of $2.1 million and (v) used equipment sales of $2.0 million. International sales for the Infrastructure Solutions segment increased $1.9 million, or 6.2%, for the first six months of 2025 compared to the same period in 2024 primarily due to higher equipment sales of $3.6 million partially offset by lower parts and component sales of $2.1 million. Materials Solutions Sales in this segment were $219.1 million for the first six months of 2025 compared to $231.1 million for the same period in 2024, a decrease of $12.0 million, or 5.2%. The decrease was primarily driven by net unfavorable volume and mix partially offset by favorable pricing that generated decreases in equipment sales of $7.6 million and parts and component sales of $3.4 million. Domestic sales for the Materials Solutions segment increased by $5.4 million, or 4.4%, for the first six months of 2025 compared to the same period in 2024, primarily due to higher equipment sales of $6.6 million. International sales for the Materials Solutions segment decreased $17.4 million, or 16.0%, for the first six months of 2025 compared to the same period in 2024 primarily due to lower equipment sales of $14.2 million and parts and component sales of $2.6 million. Segment Operating Adjusted EBITDA Segment Operating Adjusted EBITDA is the measure of segment profit or loss used by our CEO, who is the CODM, to evaluate performance and allocate resources to the reportable segments. Segment Operating Adjusted EBITDA 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. See Note 10, Operations by Industry Segment and Geographic Area, 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 income before taxes. Segment Operating Adjusted EBITDA – Three Months Ended: Three Months Ended June 30, $ Change % Change (in millions, except percentage data) 2025 2024 Infrastructure Solutions $ 32.2 $ 27.2 $ 5.0 18.4 % Materials Solutions 14.2 10.2 4.0 39.2 % Infrastructure Solutions Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $32.2 million for the second quarter of 2025 compared to $27.2 million for the same period in 2024, an increase of $5.0 million, or 18.4%. The increase in Segment Operating Adjusted EBITDA was primarily driven by (i) the sales impact of favorable pricing partially offset by net unfavorable volume and 26 INDEX mix that generated higher gross profit of $4.9 million, (ii) the favorable impact of changes in manufacturing input costs related to materials, labor and overhead of $2.0 million, (iii) lower technology support costs of $1.7 million, (iv) the impact of net favorable inventory adjustments of $1.6 million and (v) lower professional service costs of $1.2 million. These increases were partially offset by (i) higher quality-related costs of $3.3 million, (ii) higher personnel-related costs of $3.2 million, largely driven by $1.5 million of employee incentive compensation costs, and (iii) manufacturing inefficiencies of $0.8 million. Materials Solutions Segment Operating Adjusted EBITDA for the Materials Solutions segment was $14.2 million for the second quarter of 2025 compared to $10.2 million for the same period in 2024, an increase of $4.0 million, or 39.2%. The increase in Segment Operating Adjusted EBITDA was primarily driven by (i) net foreign currency transaction gains of $2.1 million, (ii) lower quality-related costs of $1.2 million, (iii) the favorable impact of changes in manufacturing input costs related to materials, labor and overhead of $1.0 million and (iv) net favorable pricing partially offset by net unfavorable volume and mix that generated higher gross profit of $1.0 million. These increases were partially offset by higher personnel-related costs of $1.5 million, largely driven by $0.8 million of employee incentive compensation costs, and manufacturing inefficiencies of $1.2 million. Segment Operating Adjusted EBITDA – Six Months Ended : Six Months Ended June 30, $ Change % Change (in millions, except percentage data) 2025 2024 Infrastructure Solutions $ 75.1 $ 52.8 $ 22.3 42.2 % Materials Solutions 19.4 15.5 3.9 25.2 % Infrastructure Solutions Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $75.1 million for the first six months of 2025 compared to $52.8 million for the same period in 2024, an increase of $22.3 million, or 42.2%. The increase in Segment Operating Adjusted EBITDA resulted primarily from (i) the sales impact of favorable pricing coupled with net favorable volume and mix that generated higher gross profit of $23.9 million, (ii) manufacturing efficiencies of $4.0 million, (iii) favorable changes in manufacturing input costs related to materials, labor and overhead of $1.7 million and (iv) lower professional service costs of $1.4 million. These increases were partially offset by (i) higher quality-related costs of $6.1 million, (ii) higher personnel-related costs of $4.5 million, partially driven by $1.8 million of employee incentive compensation costs, and (iii) net unfavorable inventory adjustments of $1.8 million. Materials Solutions Segment Operating Adjusted EBITDA for the Materials Solutions segment was $19.4 million for the first six months of 2025 compared to $15.5 million for the same period in 2024, an increase of $3.9 million, or 25.2%. The increase in Segment Operating Adjusted EBITDA resulted primarily from (i) net favorable inventory adjustments of $1.9 million, (ii) net foreign currency transaction gains of $1.9 million, (iii) lower quality-related costs of $1.5 million and (iv) the favorable impact of changes in manufacturing input costs related to materials, labor and overhead of $1.4 million. These increases were partially offset by (i) manufacturing inefficiencies of $2.2 million, (ii) the net unfavorable impact of volume and mix partially offset by favorable pricing that generated lower gross profit of $2.0 million and (iii) higher personnel-related costs of $1.8 million, largely driven by $1.1 million of employee incentive compensation costs. Corporate and Other Operations Corporate and Other operations, which are not an operating segment or included in one of the other reportable segments, had net expenses of $12.7 million for the second quarter of 2025 compared to $9.8 million for the same period in 2024, an increase of $2.9 million, or 29.6%. The increase was primarily driven by higher personnel related costs of $2.4 million, largely driven by higher annual incentive compensation costs of $1.8 million, and transaction costs of $1.4 million attributable to the TerraSource acquisition completed in 2025. Corporate and Other operations had net expenses of $25.6 million for the first six months of 2025 compared to $21.8 million for the first six months of 2024, an increase of $3.8 million, or 17.4%. The increase in expenses were primarily due to higher personnel related costs of $3.4 million, driven by higher annual incentive compensation costs of $2.5 million, and transaction costs of $2.2 million attributable to the TerraSource acquisition completed in 2025. Liquidity and Capital Resources Our primary sources of liquidity and capital resources are cash and cash equivalents on hand, borrowing capacity under our credit facilities and cash flows from operations. As of June 30, 2025, our total liquidity was $247.6 million, consisting of $87.8 million of cash and cash equivalents available for operating purposes and $159.8 million available for additional borrowings 27 INDEX under the 2022 Credit Facility, to the extent our compliance with financial covenants permits such borrowings. Our foreign subsidiaries held $29.2 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 transformation initiatives, strategic acquisitions, dividend payments and share repurchases under our share repurchase authorization. We believe that our current working capital, cash flows generated from future operations and available capacity under the 2025 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 with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (the "2022 Credit Agreement"). The 2022 Credit Agreement provided 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 and (iii) a maturity date of December 19, 2027. The 2022 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 2022 Credit Facility as of June 30, 2025. We had $85.0 million in outstanding borrowings under the 2022 Credit Facility as of June 30, 2025. Our outstanding letters of credit totaling $5.2 million decreased borrowing availability to $159.8 million under the revolving credit facility as of June 30, 2025. On July 1, 2025, concurrently with the closing of the acquisition of TerraSource, we entered into the 2025 Credit Agreement that provides for (i) a revolving credit facility, a term loan facility, a swingline facility and a letter of credit facility, in an initial aggregate amount of up to $600.0 million and (ii) an incremental facilities limit in an aggregate amount not to exceed $150.0 million (collectively, the "2025 Credit Facilities"). In connection with the closing of the acquisition, we borrowed $350.0 million under the 2025 Credit Agreement to fund the acquisition, pay related fees and expenses as well as repay outstanding borrowings under our 2022 Credit Facility. Immediately after giving effect to such borrowings, we had $244.8 million of remaining available borrowings under the revolving credit facility portion of our 2025 Credit Agreement, to the extent our compliance with financial covenants permits such borrowings. We believe the 2025 Credit Agreement enhances our overall liquidity profile and positions us to support our long-term growth objectives. 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, as well as to cover foreign exchange contracts, performance letters of credit, advance payment and retention guarantees. In addition, the Brazilian subsidiary also enters into order anticipation agreements on a periodic basis. 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 June 30, 2025, open purchase obligations totaled $124.2 million, of which $117.1 million are expected to be fulfilled within the remainder of 2025. We estimate that our capital expenditures will be between $25.0 million and $35.0 million for the year ending December 31, 2025, which may be impacted by general economic, financial or operational changes and competitive, legislative and regulatory factors, among other considerations. 28 INDEX Cash Flows The following table summarizes cash flows during the six months ended June 30, 2025 and 2024, respectively: Six Months Ended June 30, (in millions) 2025 2024 Net cash provided by (used in) operating activities $ 33.4 $ (36.1) Net cash used in investing activities (7.7) (12.6) Net cash (used in) provided by financing activities (29.2) 49.5 Effect of exchange rates on cash 1.4 (0.8) Decrease in cash, cash equivalents and restricted cash (2.1) — Cash, cash equivalents and restricted cash, end of period $ 88.7 $ 63.2 Net cash provided by (used in) operating activities Our operating activities provided net cash of $33.4 million for the six months ended June 30, 2025 as compared to a net use of $36.1 million for the six months ended June 30, 2024. This increase is primarily due to lower net cash usages for our operating assets and liabilities of $39.8 million coupled with increased cash inflows from net income reduced by non-cash charges of $29.8 million. The decreased net cash usage for our operating assets and liabilities were mainly driven the timing impacts of (i) collections on trade and other receivables of $78.7 million, (ii) payments of trade accounts payables of $21.9 million and (iii) lower employee-related payments of $11.5 million. The decreased net cash usage was partially offset by (i) decreased customer deposits of $26.7 million associated with lower backlog, (ii) the timing impacts for accrued liabilities of $22.3 million and (iii) the timing of inventory purchases of $20.4 million. Net cash used in investing activities Net cash used in investing activities was $7.7 million during the six months ended June 30, 2025 as compared to $12.6 million during the six months ended June 30, 2024, primarily due to decreased capital expenditures of $5.6 million. Net cash (used in) provided by financing activities Our financing activities used net cash of $29.2 million during the six months ended June 30, 2025 as compared to providing net cash of $49.5 million during the six months ended June 30, 2024, primarily due to net debt repayments in 2025 as compared to net borrowings in 2024. Dividends We paid quarterly dividends of $0.13 per common share to shareholders in the second quarter of both 2025 and 2024. Financial Condition Our total current assets increased to $746.0 million as of June 30, 2025 from $722.8 million as of December 31, 2024, an increase of $23.2 million, or 3.2%, due primarily to increases in inventories of $26.1 million and prepaid and refundable income taxes of $6.4 million. These increases were partially offset by decreases in trade and other receivables of $7.3 million and cash, cash equivalents and restricted cash of $2.1 million. Our total current liabilities increased to $274.8 million as of June 30, 2025 from $271.7 million as of December 31, 2024, an increase of 1.1%, due primarily to increases in accounts payables of $9.9 million and accrued product warranty of $2.8 million. These increases were partially offset by decreases in customer deposits of $7.1 million and short term debt of $1.5 million. Critical Accounting Estimates Our critical accounting estimates are described in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended December 31, 2024 was filed.