UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended March 31, 2025
or
For the transition period from _____ to _____
Commission File Number: 001-11595
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(423 ) 899-5898
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated Filer | ☐ | |||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | |||||||||
| Emerging Growth Company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 25, 2025, there were 22,866,970 shares of Common Stock outstanding.
ASTEC INDUSTRIES, INC.
Index to Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2025
| Page | ||||||||
PART I ‑ FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
ASTEC INDUSTRIES, INC.
Consolidated Balance Sheets
(In millions, except share and per share data, unaudited)
| March 31, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash, cash equivalents and restricted cash | $ | $ | |||||||||
| Investments | |||||||||||
Trade receivables, contract assets and other receivables, net of allowance for credit losses of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid and refundable income taxes | |||||||||||
| Prepaid expenses and other assets | |||||||||||
| Total current assets | |||||||||||
Property and equipment, net of accumulated depreciation of $ | |||||||||||
| Investments | |||||||||||
| Goodwill | |||||||||||
Intangible assets, net of accumulated amortization of $ | |||||||||||
| Deferred income tax assets | |||||||||||
| Other long-term assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Short-term debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Customer deposits | |||||||||||
| Accrued product warranty | |||||||||||
| Accrued employee related liabilities | |||||||||||
| Accrued loss reserves | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred income tax liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 7) | |||||||||||
| Shareholders' equity: | |||||||||||
Preferred stock – authorized | |||||||||||
Common stock – authorized | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Company stock held by deferred compensation programs, at cost | ( | ( | |||||||||
| Retained earnings | |||||||||||
| Shareholders' equity | |||||||||||
| Noncontrolling interest | ( | ( | |||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
ASTEC INDUSTRIES, INC.
Consolidated Statements of Operations
(In millions, except share and per share data, unaudited)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net sales | $ | $ | |||||||||
| Cost of sales | |||||||||||
| Gross profit | |||||||||||
| Selling, general and administrative expenses | |||||||||||
| Restructuring and other asset gains, net | ( | ||||||||||
| Income from operations | |||||||||||
| Other expenses, net: | |||||||||||
| Interest expense | ( | ( | |||||||||
| Interest income | |||||||||||
| Other income, net | |||||||||||
| Income before income taxes | |||||||||||
| Income tax provision | |||||||||||
| Net income | |||||||||||
| Net loss attributable to noncontrolling interest | |||||||||||
| Net income attributable to controlling interest | $ | $ | |||||||||
| Per share data: | |||||||||||
| Earnings per common share - Basic | $ | $ | |||||||||
| Earnings per common share - Diluted | $ | $ | |||||||||
| Weighted average shares outstanding - Basic | |||||||||||
| Weighted average shares outstanding - Diluted | |||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
ASTEC INDUSTRIES, INC.
Consolidated Statements of Comprehensive Income (Loss)
(In millions, unaudited)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
| Other comprehensive income (loss) | ( | ||||||||||
| Comprehensive income (loss) | ( | ||||||||||
| Comprehensive (income) loss attributable to noncontrolling interest | ( | ||||||||||
| Comprehensive income (loss) attributable to controlling interest | $ | $ | ( | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
ASTEC INDUSTRIES, INC.
Consolidated Statements of Cash Flows
(In millions, unaudited)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Provision for credit losses | ( | ||||||||||
| Provision for warranties | |||||||||||
| Deferred compensation expense | |||||||||||
| Share-based compensation | |||||||||||
| Deferred tax benefit | ( | ( | |||||||||
| Gain on sale of property and equipment, net | ( | ||||||||||
| Amortization of debt issuance costs | |||||||||||
| Change in operating assets and liabilities: | |||||||||||
| Sale (purchase) of trading securities, net | ( | ||||||||||
| Receivables and other contract assets | ( | ( | |||||||||
| Inventories | ( | ( | |||||||||
| Prepaid expenses | |||||||||||
| Other assets | ( | ||||||||||
| Accounts payable | |||||||||||
| Accrued loss reserves | ( | ||||||||||
| Accrued employee related liabilities | ( | ||||||||||
| Other accrued liabilities | ( | ||||||||||
| Accrued product warranty | ( | ( | |||||||||
| Customer deposits | ( | ||||||||||
| Income taxes payable/prepaid | |||||||||||
| Net cash provided by (used in) operating activities | ( | ||||||||||
| Cash flows from investing activities: | |||||||||||
| Expenditures for property and equipment | ( | ( | |||||||||
| Proceeds from sale of property and equipment | |||||||||||
| Purchase of investments | ( | ( | |||||||||
| Sale of investments | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
(Continued)
4
ASTEC INDUSTRIES, INC.
Consolidated Statements of Cash Flows (Continued)
(In millions, unaudited)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Payment of dividends | ( | ( | |||||||||
| Proceeds from borrowings on credit facilities and bank loans | |||||||||||
| Repayments of borrowings on credit facilities and bank loans | ( | ( | |||||||||
| Withholding tax paid upon vesting of share-based compensation awards | ( | ( | |||||||||
| Net cash (used in) provided by financing activities | ( | ||||||||||
| Effect of exchange rates on cash | ( | ||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Cash paid during the year for: | |||||||||||
| Interest | $ | $ | |||||||||
| Income taxes paid, net | $ | $ | |||||||||
| Supplemental disclosures of non-cash items: | |||||||||||
| Non-cash investing activities: | |||||||||||
| Capital expenditures in accounts payable | $ | $ | |||||||||
| Non-cash financing activities: | |||||||||||
| Additions to right-of-use assets and lease liabilities | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
ASTEC INDUSTRIES, INC.
Consolidated Statements of Equity
(In millions except share and per share data, unaudited)
| Common Stock | Common Stock Amount | Additional Paid-in-Capital | Accumulated Other Comprehensive Loss | Company Shares Held by DCP | Retained Earnings | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Dividends ($ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under incentive plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Withholding tax paid upon equity award vesting | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Common Stock | Common Stock Amount | Additional Paid-in-Capital | Accumulated Other Comprehensive Loss | Company Shares Held by DCP | Retained Earnings | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Dividends ($ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under incentive plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Withholding tax paid upon equity award vesting | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
ASTEC INDUSTRIES, INC.
Notes to Unaudited Consolidated Financial Statements
Note 1. Basis of Presentation and Significant Accounting Policies
Description of Business
Astec Industries, Inc. ("Astec" or the "Company") is a Tennessee corporation which was incorporated in 1972. The Company designs, engineers, manufactures, markets and services equipment and components used primarily in asphalt and concrete road building and related construction activities, as well as other products discussed below. The Company's products are used in each phase of road building, from quarrying and crushing the aggregate to application of the road surface. The Company's product portfolio includes both asphalt and concrete equipment. The Company also manufactures certain equipment and components unrelated to road construction, including equipment for the mining, quarrying, construction, demolition, land clearing and recycling industries and port and rail yard operators; industrial heat transfer equipment; commercial whole-tree pulpwood chippers; horizontal grinders; blower trucks; commercial and industrial burners; and combustion control systems.
The Company operates in two two
The Corporate and Other category consists primarily of the parent company and Astec Insurance Company ("Astec Insurance" or the "captive"), a captive insurance company, which do not meet the requirements as an operating segment or inclusion in one of the other reporting segments.
Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Astec and its subsidiaries and have been prepared by the Company, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the SEC rules and regulations governing interim financial statements. However, the Company believes that the disclosures made in the unaudited consolidated financial statements and related notes are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. All intercompany balances and transactions between the Company and its affiliates have been eliminated in consolidation.
Noncontrolling interest in the Company's consolidated financial statements represents the 7 % interest in a consolidated subsidiary which is not owned by the Company. Since the Company controls this subsidiary, the subsidiary's financial statements are consolidated with those of the Company, and the noncontrolling owner's 7 % share of the subsidiary's net assets and results of operations is deducted and reported as "Noncontrolling interest" in the Consolidated Balance Sheets and as "Net loss attributable to noncontrolling interest" in the Consolidated Statements of Operations. The Company executed an agreement in February 2022 with the noncontrolling interest holder to acquire their outstanding interest in full for R$10.0 M (approximately $2.0 million, subject to the effect of exchange rates). Completion of the transaction is subject to resolution of certain disputes between the parties.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include excess and obsolete inventory, inventory net realizable value, product warranty obligations, capitalized implementation costs, goodwill and other intangible assets impairment and the measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On an ongoing basis, the Company evaluates these assumptions, judgments and estimates. Actual results could differ from those estimates.
In the opinion of management, the consolidated financial statements contain all adjustments necessary for a fair statement of the results of operations and comprehensive income (loss) for the three months ended March 31, 2025 and 2024, the financial position as of March 31, 2025 and December 31, 2024 and the cash flows for the three months ended March 31, 2025 and 2024, and, except as otherwise discussed herein, such adjustments consist only of those of a normal recurring nature. The interim results are not necessarily indicative of results that may be achieved in a full reporting year.
All dollar amounts, except per share amounts, are in millions of dollars unless otherwise indicated.
7
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvement to Reportable Segment Disclosures", which requires entities to disclose significant segment expenses, other segment items, the title and position of the chief operating decision maker ("CODM") and information related to how the CODM assesses segment performance and allocates resources, among certain other required disclosures. Additionally, current annual disclosures will be required in interim periods. The new standard is effective, on a retrospective basis, for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted this guidance beginning with the form 10-K filing for the year ended December 31, 2024. See Note 9, Operations by Industry Segment and Geographic Area for additional information on the Company's reportable segments.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which requires entities to disclose specific categories in the income tax rate reconciliation and provide additional information for reconciling items that meet a specified quantitative threshold. In addition, the new standard requires disclosure of the amount of income taxes paid disaggregated by federal, state and foreign taxes and by jurisdiction for exceeding a specified quantitative threshold. Additionally, income or loss from continuing operations before income tax will be required to be disaggregated between domestic and foreign classifications and income tax expense will be required to be disaggregated between federal, state and foreign classifications. The new standard is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with retrospective application permitted. The Company is currently evaluating the impact this ASU will have on its financial statement disclosures, but this standard will not impact the Company's results of operations, financial position or cash flows.
In November 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses", which requires entities to disclose specific types of expenses included in the expense captions presented on the face of the income statement, among other disclosures. The new guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027 on a prospective basis, with retrospective application permitted. The Company is currently evaluating the impact this ASU will have on its financial statement disclosures, but this standard will not impact the Company's results of operations, financial position or cash flows.
Recent accounting guidance not discussed above is not applicable, did not have or is not expected to have a material impact on the Company.
Note 2. Inventories
Inventories are valued at the lower of cost (first-in, first-out) or net realizable value, which requires the Company to make specific estimates, assumptions and judgments in determining the amount, if any, of reductions in the valuation of inventories to their net realizable values.
Inventories consist of the following:
| (in millions) | March 31, 2025 | December 31, 2024 | |||||||||
| Raw materials and parts | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Used equipment | |||||||||||
| Total | $ | $ | |||||||||
Note 3. Fair Value Measurements
The Company has various financial instruments that must be measured at fair value on a recurring basis, including marketable debt and equity securities held by Astec Insurance and marketable equity securities held in the Company's deferred compensation programs. The Company's deferred compensation programs ("DCP") include a non-qualified Supplemental Executive Retirement Plan ("SERP") and a separate non-qualified Deferred Compensation Plan. Although the DCP investments are allocated to individual participants, and investment decisions are made solely by those participants, they are non-qualified plans. Consequently, the Company owns the assets and the related offsetting liability for disbursement until such time as a participant makes a qualifying withdrawal. The DCP assets and related offsetting liabilities are recorded in non-current "Investments" and "Other long-term liabilities," respectively, in the Consolidated Balance Sheets. The Company's subsidiaries also occasionally enter into foreign currency exchange contracts to mitigate exposure to fluctuations in currency exchange rates.
8
The carrying amount of cash, cash equivalents and restricted cash, trade receivables and contract assets, other receivables, accounts payable, short-term debt and long-term debt approximates their fair value because of their short-term nature and/or interest rates associated with the instruments. Investments are carried at their fair value based on quoted market prices for identical or similar assets or, where no quoted prices exist, other observable inputs for the asset.
Financial assets and liabilities are categorized based on the level of judgment associated with the inputs used to measure their fair value. The inputs used to measure the fair value are identified in the following hierarchy:
| Level 1 - | Unadjusted quoted prices in active markets for identical assets or liabilities. | |||||||
| Level 2 - | Unadjusted quoted prices in active markets for similar assets or liabilities; or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable for the asset or liability. | |||||||
| Level 3 - | Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. | |||||||
As indicated in the tables below, the Company has determined that all of its financial assets and liabilities as of March 31, 2025 and December 31, 2024 are Level 1 and Level 2 in the fair value hierarchy defined above:
| March 31, 2025 | |||||||||||||||||
| (in millions) | Level 1 | Level 2 | Total | ||||||||||||||
| Financial assets: | |||||||||||||||||
| Trading equity securities: | |||||||||||||||||
| Deferred compensation programs' mutual funds | $ | $ | $ | ||||||||||||||
| Preferred stocks | |||||||||||||||||
| Equity funds | |||||||||||||||||
| Trading debt securities: | |||||||||||||||||
| Corporate bonds | |||||||||||||||||
| Agency bonds | |||||||||||||||||
| U.S. government securities | |||||||||||||||||
| Asset-backed securities | |||||||||||||||||
| Exchange traded funds | |||||||||||||||||
| Mortgage backed securities | |||||||||||||||||
| Other | |||||||||||||||||
| Total financial assets | $ | $ | $ | ||||||||||||||
| Financial liabilities: | |||||||||||||||||
| Deferred compensation programs' liabilities | $ | $ | $ | ||||||||||||||
| Total financial liabilities | $ | $ | $ | ||||||||||||||
9
| December 31, 2024 | |||||||||||||||||
| (in millions) | Level 1 | Level 2 | Total | ||||||||||||||
| Financial assets: | |||||||||||||||||
| Trading equity securities: | |||||||||||||||||
| Deferred compensation programs' mutual funds | $ | $ | $ | ||||||||||||||
| Preferred stocks | |||||||||||||||||
| Equity funds | |||||||||||||||||
| Trading debt securities: | |||||||||||||||||
| Corporate bonds | |||||||||||||||||
| Agency bonds | |||||||||||||||||
| U.S. government securities | |||||||||||||||||
| Asset-backed securities | |||||||||||||||||
| Exchange traded funds | |||||||||||||||||
| Mortgage backed securities | |||||||||||||||||
| Other | |||||||||||||||||
| Total financial assets | $ | $ | $ | ||||||||||||||
| Financial liabilities: | |||||||||||||||||
| Deferred compensation programs' liabilities | |||||||||||||||||
| Total financial liabilities | $ | $ | $ | ||||||||||||||
Note 4. Product Warranty Reserves
The Company warrants its products against manufacturing defects and performance to specified standards. The warranty period and performance standards vary by market and uses of its products, but generally range from three months to two years or up to a specified number of hours of operation. The Company estimates the costs that may be incurred under its warranties and records a liability at the time product sales are recorded. The product warranty liability is primarily based on historical claim rates, nature of claims and the associated costs.
Changes in the Company's product warranty liability for the three month periods ended March 31, 2025 and 2024 are as follows:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Reserve balance, beginning of the period | $ | $ | |||||||||
| Warranty liabilities accrued | |||||||||||
| Warranty liabilities settled | ( | ( | |||||||||
| Other | |||||||||||
| Reserve balance, end of the period | $ | $ | |||||||||
Note 5. Accrued Loss Reserves
The Company accrues reserves for losses related to known workers' compensation and general liability claims that have been incurred but not yet paid or are estimated to have been incurred but not yet reported to the Company. The undiscounted reserves are actuarially determined based on the Company's evaluation of the type and severity of individual claims and historical information, primarily its own claims experience, along with assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause these estimates to change in the future. Total accrued loss reserves were $6.3 5.0 million and $4.6 million were included in "Other long-term liabilities" in the Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024, respectively.
Note 6. Income Taxes
For the three months ended March 31, 2025, the Company recorded an income tax expense of $5.4 million, reflecting a 27.4 % effective tax rate, compared to a $1.4 million income tax expense for the three months ended March 31, 2024, reflecting a 29.8 % effective tax rate. The income tax expense for three months ended March 31, 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.
10
The Company's recorded liability for uncertain tax positions was $17.0 million and $16.8 million as of March 31, 2025 and December 31, 2024, respectively. The increase is the result of $0.2 million of incremental reserves associated with a research and development credit generated during 2025. The Company does not anticipate a significant change in unrecognized tax benefits due to the expiration of relevant statutes of limitations and federal, state, and foreign tax audit resolutions over the next twelve months.
The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. The Company is currently under audit by the U.S. Internal Revenue Service for the federal income tax return from the 2018 tax year as well as various other state income tax and jurisdictional audits. As of March 31, 2025, the Company believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits, resulting in no material impact on its consolidated financial position, results of operations and cash flows. However, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company's estimates and/or from its historical income tax provisions and accruals and could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties and/or interest assessments.
Note 7. Commitments and Contingencies
Certain customers have financed purchases of Company products through arrangements with third-party financing institutions in which the Company is contingently liable for customer debt of $1.6 million and $1.4 million as of March 31, 2025 and December 31, 2024, respectively. These arrangements expire at various dates through March 2030. The agreements provide that the Company will receive the lender's full security interest in the financed equipment if the Company is required to fulfill its contingent liability under these arrangements. The Company has recorded a liability of $0.3 million related to these guarantees as of both March 31, 2025 and December 31, 2024, which were included in "Other current liabilities" in the Consolidated Balance Sheets.
The Company reviews off-balance sheet guarantees individually. Prior history is considered with respect to the Company having to perform on any off-balance sheet guarantees, as well as future projections of individual customer creditworthiness with respect to assessing credit losses related to off-balance sheet guarantees.
In addition, the Company is contingently liable for letters of credit issued under its $250.0 million revolving credit facility (the "Credit Facility"), which outstanding letters of credit totaled $5.2 million as of March 31, 2025. The outstanding letters of credit expire at various dates through April 2026. Unused letters of credit under the Credit Facility were $24.8 million as of March 31, 2025. The Company is additionally contingently liable for a total of $5.0 million in performance letters of credit and retention guarantees primarily held by its foreign subsidiaries, of which $3.4 million are secured by separate credit facilities with various financial institutions as of March 31, 2025. Unused letters of credit under these separate credit facilities were $12.9 million as of March 31, 2025.
The Company is currently a party, and may become a party, to various other claims and legal proceedings in the ordinary course of business. If management believes that a loss arising from any claims and legal proceedings is probable and can reasonably be estimated, the Company records the amount of the loss (excluding estimated legal fees) or, when the loss is estimated using a range and no point within the range is more probable than another, the minimum estimated liability. As management becomes aware of additional information concerning such contingencies, any potential liability related to these matters is assessed, and the estimates are revised, if necessary. If management believes that a loss arising from such claims and legal proceedings is either (i) probable but cannot be reasonably estimated or (ii) reasonably estimable but not probable, the Company does not record the amount of the loss but does make specific disclosure of such matter.
Based upon currently available information and with the advice of counsel, management believes that the ultimate outcome of its current claims and legal proceedings, individually and in the aggregate, will not have a material adverse effect on the Company's financial position, cash flows or results of operations. However, claims and legal proceedings are subject to inherent uncertainties, and rulings unfavorable to the Company could occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse effect on the Company's financial position, cash flows or results of operations.
Previously Settled Matters
The Company and certain of its former executive officers were previously named as defendants in a putative shareholder class action lawsuit filed in 2019. In September 2024, the court formally approved the parties' agreement to settle the action for $13.7 million, which was funded entirely by the Company's insurance carriers, and the settlement agreement was entered into between the parties.
In September 2024, the Company reached an agreement to resolve the matter styled 37 Building Products, Ltd. v. Telsmith, Inc., et al. for $6.3 million, which the Company paid that same month. Upon settlement, the full loss contingency of $8.2 million, inclusive of post-judgment interest, that was recorded as of June 30, 2024 was released. The $1.9 million net benefit derived from the loss contingency release offset by the final settlement amount was recorded in "Selling, general and administrative
11
expenses" in the Consolidated Statements of Operations during the third quarter of 2024.
In October 2024, the Company reached an agreement to resolve the action styled VenVer S.A. and Americas Coil Tubing LLP v. GEFCO, Inc. for $8.4 million, which was paid in the fourth quarter of 2024. In connection with this settlement, management recorded a loss in "Restructuring, impairment and other asset charges, net" in the Consolidated Statements of Operations during the third quarter of 2024.
Note 8. Revenue Recognition
The following tables disaggregate the Company's revenue by major source for the three-month periods ended March 31, 2025 and 2024 (excluding intercompany sales):
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||
| (in millions) | Infrastructure Solutions | Materials Solutions | Total | Infrastructure Solutions | Materials Solutions | Total | |||||||||||||||||||||||||||||
| Net Sales-Domestic: | |||||||||||||||||||||||||||||||||||
| Equipment sales | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Parts and component sales | |||||||||||||||||||||||||||||||||||
| Service and equipment installation revenue | |||||||||||||||||||||||||||||||||||
| Used equipment sales | |||||||||||||||||||||||||||||||||||
| Freight revenue | |||||||||||||||||||||||||||||||||||
| Other | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total domestic revenue | |||||||||||||||||||||||||||||||||||
| Net Sales-International: | |||||||||||||||||||||||||||||||||||
| Equipment sales | |||||||||||||||||||||||||||||||||||
| Parts and component sales | |||||||||||||||||||||||||||||||||||
| Service and equipment installation revenue | |||||||||||||||||||||||||||||||||||
| Freight revenue | |||||||||||||||||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||||||||||||||
| Total international revenue | |||||||||||||||||||||||||||||||||||
| Total net sales | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
As of March 31, 2025, the Company had contract assets of $5.8 million and contract liabilities, excluding customer deposits, of $6.5 million, including $1.1 million of deferred revenue related to extended warranties. As of December 31, 2024, the Company had contract assets of $6.6 million and contract liabilities, excluding customer deposits, of $5.8 million, including $1.3 million of deferred revenue related to extended warranties.
Note 9. Operations by Industry Segment and Geographic Area
The Company has two
Segment Operating Adjusted EBITDA is the measure of segment profit or loss used by the Company's Chief Executive Officer ("CEO"), who is the CODM, to evaluate performance and allocate resources to the reportable segments. The CODM uses this measure to allocate resources, including headcount, financial resources and capital resources, for each segment, predominantly in the annual budgeting process. Additionally, Segment Operating Adjusted EBITDA is believed to strongly correlate with shareholder returns and is, therefore, included as a key component in the compensation of certain employees. This metric is used to monitor actual results versus budget and forecast on a monthly basis to assess segment performance as compared to expectations. Segment Operating Adjusted EBITDA is defined as net income or loss before the impact of interest income or
12
expense, income taxes, depreciation and amortization and certain other adjustments that are not considered by the CODM in the evaluation of ongoing operating performance.
A brief description of each segment is as follows:
Infrastructure Solutions - Sites within the Infrastructure Solutions segment design, engineer, manufacture and market a complete line of asphalt plants, concrete plants and their related components and ancillary equipment, including industrial automation controls and telematics platforms, as well as supply asphalt road construction equipment, industrial thermal systems, land clearing, recycling and other heavy equipment. The sites based in North America within the Infrastructure Solutions segment are primarily manufacturing operations, while those located outside of North America generally service and install equipment and provide parts in the regions in which they operate for many of the products produced by all of the Company's manufacturing sites. The primary purchasers of the products produced by this segment are asphalt and concrete producers, highway and heavy equipment contractors, commercial and residential paving contractors, utility contractors, forestry and environmental recycling contractors and domestic and foreign governmental agencies.
Materials Solutions - Sites within the Materials Solutions segment design and manufacture heavy rock processing equipment, in addition to servicing and supplying parts for the aggregate, mining, recycling, ports and bulk handling markets. The sites within the Materials Solutions segment are primarily manufacturing operations, with sites in Australia, Chile and Thailand functioning to market, service and install equipment and provide parts in the regions in which they operate for many of the products produced by all of the Company's manufacturing sites. Additionally, the Materials Solutions segment offers consulting and engineering services to provide complete "turnkey" processing systems. The principal purchasers of aggregate processing equipment include distributors, highway and heavy equipment contractors, sand and gravel producers, demolition, recycling and crushing contractors, open mine operators, quarry operators, port and inland terminal authorities, power stations and foreign and domestic governmental agencies.
Asset information for the Company's reportable segments is set forth below:
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (in millions) | Infrastructure Solutions | Materials Solutions | Total | Infrastructure Solutions | Materials Solutions | Total | |||||||||||||||||||||||||||||
| Reportable segment assets | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
13
Revenue, significant expense and capital expenditure information for the Company's reportable segments is set forth below:
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||
| (in millions) | Infrastructure Solutions | Materials Solutions | Total | Infrastructure Solutions | Materials Solutions | Total | |||||||||||||||||||||||||||||
| Reportable segment revenues: | |||||||||||||||||||||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Intersegment revenues | |||||||||||||||||||||||||||||||||||
| Total revenues - reportable segments | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Significant reportable segment expenses: | |||||||||||||||||||||||||||||||||||
| Manufacturing operation costs: | |||||||||||||||||||||||||||||||||||
| Equipment | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Parts | |||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||||||||||||||
Quality costs (1) | |||||||||||||||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||||||||||||||
Inventory period costs (2) | |||||||||||||||||||||||||||||||||||
Other segment items (3) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Reportable Segment Operating Adjusted EBITDA | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Reportable segment capital expenditures | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(1) Quality costs related to repair or other remediation expenses incurred for corrective action on product failures covered by warranties or voluntarily for certain warranty-type expenses occurring after the normal warranty period expires to help protect the reputation of the Company's products and maintain the goodwill of customers. | |||||||||||||||||||||||||||||||||||
(2) Inventory period costs primarily relate to inventory reserves and adjustments and net scrap sales. | |||||||||||||||||||||||||||||||||||
(3) Other segment items consists of foreign exchange gains and losses, investment income and loss and other income and expense amounts that are included in Segment Operating Adjusted EBITDA that are not considered to be significant segment expenses. | |||||||||||||||||||||||||||||||||||
14
The reconciliation of Reportable Segment Operating Adjusted EBITDA to total "Income before income taxes" is set forth below:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Segment Operating Adjusted EBITDA - reportable segments | $ | $ | |||||||||
| Corporate and Other expenses | ( | ( | |||||||||
| Transformation program | ( | ( | |||||||||
| Restructuring and other related charges | ( | ||||||||||
| Gain on sale of property and equipment, net | |||||||||||
| Transaction costs | ( | ||||||||||
| Interest expense, net | ( | ( | |||||||||
| Depreciation and amortization | ( | ( | |||||||||
| Net income attributable to noncontrolling interest | ( | ||||||||||
| Income before income taxes | $ | $ | |||||||||
"Net sales" into major geographic regions, attributable to the shipping location or the location where service was performed, were as follows:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| United States | $ | $ | |||||||||
| Canada | |||||||||||
| Africa | |||||||||||
| Europe | |||||||||||
| Asia | |||||||||||
| Brazil | |||||||||||
| Australia | |||||||||||
| Mexico | |||||||||||
| South America (Excluding Brazil) | |||||||||||
| Central America (Excluding Mexico) | |||||||||||
| Other | |||||||||||
| Total foreign | |||||||||||
| Total net sales | $ | $ | |||||||||
Note 10. Strategic Transformation, Restructuring and Other Asset Gains, net
The Company's strategic transformation program includes the ongoing multi-year phased implementation of a standardized enterprise resource planning ("ERP"), which is replacing much of the existing disparate core financial systems. The upgraded ERP will initially convert internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms. An implementation of this scale is a major financial undertaking and requires substantial time and attention of management and key employees.
Net capitalized implementation costs associated with the ERP implementation totaled $31.0 million, of which $3.7 million and $27.3 million were included in "Prepaid expenses and other assets" and "Other long-term assets," respectively, in the Consolidated Balance Sheets as of March 31, 2025. Net capitalized implementation costs totaled $31.9 million, of which $3.7 million and $28.2 million were included in "Prepaid expenses and other assets" and "Other long-term assets," respectively, in the Consolidated Balance Sheets as of December 31, 2024. Accumulated amortization associated with these capitalized implementation costs totaled $6.4 million and $5.5 million as of March 31, 2025 and December 31, 2024, respectively.
15
Costs associated with these strategic transformation programs are presented below:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Strategic transformation programs | |||||||||||
Selling, general and administrative expenses | $ | $ | |||||||||
Cost of sales | |||||||||||
| Total costs related to strategic transformation initiatives | $ | $ | |||||||||
Amortization of capitalized implementation costs (1) | $ | $ | |||||||||
(1) Amortization of capitalized implementation costs is recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations. | |||||||||||
In addition, the Company periodically sells or disposes of its assets in the normal course of its business operations as they are no longer needed or used and may incur gains or losses on these disposals. Certain of the costs associated with these decisions are separately identified as restructuring. The Company reports asset impairment charges, excluding goodwill impairment, and gains or losses on the sales of property and equipment collectively, with restructuring charges in "Restructuring and other asset gains, net" in the Consolidated Statements of Operations to the extent they are experienced.
Restructuring, asset impairment charges and the gain on sale of property and equipment, net are presented below:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Restructuring charges: | |||||||||||
| Costs associated with exited operations – Enid | $ | $ | |||||||||
| Total restructuring related charges | |||||||||||
| Gain on sale of property and equipment, net: | |||||||||||
| Gain on sale of property and equipment, net | ( | ||||||||||
| Total gain on sale of property and equipment, net | ( | ||||||||||
| Restructuring and other asset gains, net | $ | $ | ( | ||||||||
Restructuring charges by reportable segment are as follows:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Infrastructure Solutions | $ | $ | |||||||||
| Total restructuring related charges | $ | $ | |||||||||
The net gains on sale of property and equipment by reportable segment are as follows:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Infrastructure Solutions | $ | $ | ( | ||||||||
| Materials Solutions | ( | ||||||||||
| Total gain on sale of property and equipment, net | $ | $ | ( | ||||||||
Note 11. Earnings Per Common Share
Basic earnings per common share is determined by dividing "Net income attributable to controlling interest" by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share includes the dilutive effect of common stock equivalents, consisting of restricted stock units, performance stock units and stock held in the Company's deferred compensation programs, using the treasury stock method. Potential common shares that have an
16
antidilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. Performance stock units, which are considered contingently issuable, are considered dilutive when the related performance criterion has been met.
The following table sets forth a reconciliation of the number of shares used in the computation of basic and diluted earnings per common share:
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Denominator: | |||||||||||
| Denominator for basic earnings per common share | |||||||||||
| Effect of dilutive securities | |||||||||||
| Denominator for diluted earnings per common share | |||||||||||
| Antidilutive securities excluded from the calculation of diluted earnings per share | |||||||||||
Note 12. Subsequent Events
Agreement to Acquire TerraSource
On April 28, 2025, the Company entered into a Membership Interest Purchase Agreement (the "Purchase Agreement") with RLI TSG Holdings LLC, K-Tron Investment Co. and other sellers party thereto (collectively, the "Sellers"), pursuant to which, subject to the satisfaction of customary conditions, the Company will acquire 100 % of the equity interests of TerraSource Holdings, LLC, a market-leading manufacturer of material processing equipment and related aftermarket parts serving complementary crushing, screening and separation applications and headquartered in Missouri (such acquisition, the "Transaction"). The total cash consideration payable to the Sellers is $245.0 million, subject to a customary purchase price adjustment. The acquisition is expected to be accounted for as a business combination.
In connection with the Transaction, on April 28, 2025, the Company entered into a debt commitment letter (the "Commitment Letter") with Wells Fargo Bank, National Association, and the other lender parties thereto (collectively, the "Lenders"), pursuant to which, and subject to the terms and conditions set forth therein, the Lenders committed to provide provide a $500.0 million senior secured credit facility (which may be increased by up to $50.0 million), consisting of (i) a revolving credit facility in an aggregate principal amount of $150.0 million and (ii) a term loan facility in an aggregate principal amount of $350.0 million (the "Senior Credit Facility"). The Company intends to use the proceeds of the term loan facility, together with cash on hand, to fund the Transaction, to refinance the Company’s existing credit facilities and to pay for fees, costs and expenses incurred in connection with the foregoing. The funding of the Senior Credit Facility provided for in the Commitment Letter is contingent on the satisfaction of customary closing conditions.
The Transaction, which is subject to the satisfaction of regulatory clearance and other customary closing conditions, is targeted to close in the third quarter of 2025.
17
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 March 31, 2025 as compared to the same period of the prior year include the following:
•Net sales were $329.4 million, an increase of 6.5%
•Gross profit was $92.4 million, an increase of 20.2%
•Income from operations was $20.5 million, an increase of 225.4%
•Net income attributable to Astec was $14.3 million, an increase of 320.6%
•Diluted earnings per share was $0.62, an increase of 313.3%
•Backlog was $402.6 million, a decrease of 28.1%
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 first quarter of 2025, we have incurred total implementation costs of approximately $140 million.
See Note 10, 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.
18
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 increased in the first quarter 2025. We anticipate that steel prices will remain at elevated levels in conjunction with further tariff actions, marginal 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 first quarter of 2025 were $329.4 million compared to $309.2 million for the first quarter of 2024, an increase of $20.2 million, or 6.5%. The increase in net sales was primarily driven by net favorable pricing coupled with volume and mix that generated increases in (i) equipment sales of $20.4 million, (ii) used equipment sales of $2.3 million, (iii) freight revenue of $1.3 million and (iv) service and equipment installation revenue of $1.2 million. These increases were partially offset by a decrease in parts and component sales of $4.5 million. Sales reported by our foreign subsidiaries in U.S. dollars for the first quarter of 2025 would have been $1.6 million higher had foreign exchange rates been the same as 2024 rates.
Domestic sales for the first quarter of 2025 were $273.8 million, or 83.1% of consolidated net sales, compared to $243.2 million, or 78.7% of consolidated net sales, for the first quarter of 2024, an increase of $30.6 million, or 12.6%. Domestic sales increased primarily due to increases in (i) equipment sales of $28.4 million, (ii) used equipment sales $2.3 million, (iii) freight revenue of $1.1 million and (iv) service and equipment installation revenue of $1.0 million. These increases were partially offset by a decrease in parts and component sales of $1.8 million.
International sales for the first quarter of 2025 were $55.6 million, or 16.9% of consolidated net sales, compared to $66.0 million, or 21.3% of consolidated net sales, for the first quarter of 2024, a decrease of $10.4 million, or 15.8%. International sales decreased primarily due to decreases in equipment and parts and component sales of $8.0 million and $2.7 million, respectively.
Gross Profit
Gross profit for the first quarter of 2025 was $92.4 million, or 28.1% of net sales, as compared to $76.9 million, or 24.9% of net sales, for the first quarter of 2024, an increase of $15.5 million or 20.2%. The increase in gross profit was primarily driven by the impact of net favorable pricing coupled with favorable volume and mix which generated $16.0 million higher gross profit and manufacturing efficiencies of $3.7 million. These increases were partially offset by higher warranty program costs of $2.0 million and net unfavorable inventory adjustments of $1.5 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $71.9 million, or 21.8% of net sales, for the first quarter of 2025, compared to $71.4 million, or 23.1% of net sales, for the first quarter of 2024, an increase of $0.5 million, or 0.7%, primarily due to (i) increased personnel-related costs of $2.4 million, largely driven by $1.2 million of employee incentive compensation costs, (ii) increased technology support costs of $1.0 million and (iii) increased acquisition and integration costs of $0.8 million. These increases were partially offset by lower professional services of $0.9 million.
19
Restructuring Charges and Other Asset Gains, net
Restructuring charges and the gain on sale of property and equipment, net for the three-month periods ended March 31, 2025 and 2024 are presented below:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Restructuring charges: | |||||||||||
| Costs associated with exited operations – Enid | $ | — | $ | 0.1 | |||||||
| Total restructuring related charges | — | 0.1 | |||||||||
| Gain on sale of property and equipment, net: | |||||||||||
| Gain on sale of property and equipment, net | — | (0.9) | |||||||||
| Total gain on sale of property and equipment, net | — | (0.9) | |||||||||
| Restructuring and other asset gains, net | $ | — | $ | (0.8) | |||||||
Interest Expense
Interest expense of $2.0 million was incurred in the three months ended March 31, 2025, as compared to $2.7 million in the three months ended March 31, 2024, primarily related to lower interest rates combined with lower average outstanding borrowings on the Credit Facility in the first quarter of 2025 as compared to the same period in 2024.
Income Tax
Our income tax expense for the first quarter of 2025 was $5.4 million compared to $1.4 million for the first quarter of 2024. Our effective income tax rate was 27.4% for the first quarter of 2025 compared to 29.8% for the first quarter of 2024. The income tax expense for three months ended March 31, 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.
Backlog
| March 31, | ||||||||||||||||||||||||||
| (in millions, except percentage data) | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||
| Infrastructure Solutions | $ | 276.4 | $ | 372.7 | $ | (96.3) | (25.8) | % | ||||||||||||||||||
| Materials Solutions | 126.2 | 187.1 | (60.9) | (32.5) | % | |||||||||||||||||||||
| Domestic Backlog | 329.3 | 437.8 | (108.5) | (24.8) | % | |||||||||||||||||||||
| International Backlog | 73.3 | 122.0 | (48.7) | (39.9) | % | |||||||||||||||||||||
The backlog of orders as of March 31, 2025 was $402.6 million compared to $559.8 million as of March 31, 2024, a decrease of $157.2 million, or 28.1%.
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 dealer customers as a result of macroeconomic factors such as higher inflation, including the impact of recently enacted or increased tariffs, and elevated interest rates, among other factors. These factors have influenced customer ordering patterns and are expected to continue.
Net Sales by Segment
| Three Months Ended March 31, | |||||||||||||||||||||||
| (in millions, except percentage data) | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||
| Infrastructure Solutions | $ | 236.0 | $ | 202.2 | $ | 33.8 | 16.7 | % | |||||||||||||||
| Materials Solutions | 93.4 | 107.0 | (13.6) | (12.7) | % | ||||||||||||||||||
20
Infrastructure Solutions
Sales in this segment were $236.0 million for the first quarter of 2025 compared to $202.2 million for the same period in 2024, an increase of $33.8 million, or 16.7%. The increase was primarily driven by net favorable pricing coupled with volume and mix that generated increased (i) equipment sales of $32.1 million, (ii) used equipment sales of $2.1 million, (iii) freight revenue of $1.9 million and (iv) service and equipment installation revenue of $1.0 million. These increases were partially offset by lower parts and component sales of $3.3 million.
Domestic sales for the Infrastructure Solutions segment increased $35.8 million, or 19.3%, for the first quarter of 2025 compared to the same period in 2024, primarily due to increases in (i) equipment sales of $32.9 million, (ii) used equipment sales of $2.1 million, (iii) freight revenue of $1.8 million and (iv) service and equipment installation revenue of $0.9 million. These increases were partially offset by lower parts and component sales of $1.9 million.
International sales for the Infrastructure Solutions segment decreased $2.0 million, or 12.3%, for the first quarter of 2025 compared to the same period in 2024, primarily due to decreased parts and component and equipment sales of $1.4 million and $0.8 million, respectively.
Materials Solutions
Sales in this segment were $93.4 million for the first quarter of 2025 compared to $107.0 million for the same period in 2024, a decrease of $13.6 million, or 12.7%. The decrease was primarily driven by net unfavorable volume and mix, partially offset by favorable pricing that generated decreased equipment sales and parts and component sales of $11.7 million and $1.2 million, respectively.
Domestic sales for the Materials Solutions segment decreased by $5.2 million, or 9.1%, for the first quarter of 2025 compared to the same period in 2024, primarily driven by decreased equipment sales and freight revenue of $4.5 million and $0.7 million, respectively.
International sales for the Materials Solutions segment decreased $8.4 million, or 16.9%, for the first quarter of 2025 compared to the same period in 2024, primarily due to decreased equipment and parts and component sales of $7.2 million and $1.3 million, respectively.
Segment Operating Adjusted EBITDA
Segment Operating Adjusted EBITDA is the measure of segment profit or loss used by the 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 9, 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 income taxes.
| Three Months Ended March 31, | $ Change | % Change | |||||||||||||||||||||
| (in millions, except percentage data) | 2025 | 2024 | |||||||||||||||||||||
| Infrastructure Solutions | $ | 42.9 | $ | 25.6 | $ | 17.3 | 67.6 | % | |||||||||||||||
| Materials Solutions | 5.2 | 5.3 | (0.1) | (1.9) | % | ||||||||||||||||||
Infrastructure Solutions
Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $42.9 million for the first quarter of 2025 compared to $25.6 million for the same period in 2024, an increase of $17.3 million or 67.6%. The increase in Segment Operating Adjusted EBITDA was primarily driven by (i) the impact of net favorable pricing coupled with favorable volume and mix which generated $19.0 million higher gross profit (ii) manufacturing efficiencies of $4.9 million and (iii) reduced prototype and project costs of $0.7 million. These increases were partially offset by (i) net unfavorable inventory adjustments of $3.3 million, (ii) higher quality-related costs of $2.8 million and (iii) higher personnel related costs of $1.2 million.
Materials Solutions
Segment Operating Adjusted EBITDA for the Materials Solutions segment was $5.2 million for the first quarter of 2025 compared to $5.3 million for the same period in 2024, a decrease of $0.1 million, or 1.9%. The decrease in Segment Operating Adjusted EBITDA was primarily driven by the impact of net unfavorable volume and mix, partially offset by favorable pricing, that resulted
21
in $3.0 million lower gross profit and manufacturing inefficiencies of $1.0 million. These decreases were partially offset by net favorable inventory adjustments of $1.8 million.
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 $12.9 million for the first quarter of 2025 compared to $12.0 million for the same period in 2024, an increase of $0.9 million, or 7.5%, primarily driven by transaction costs of $0.8 million and employee incentive compensation costs of $0.7 million.
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, 2025, our total liquidity was $238.9 million, consisting of $90.1 million of cash and cash equivalents available for operating purposes and $148.8 million available for additional borrowings under our revolving credit facility, to the extent our compliance with financial covenants permits such borrowings. Our foreign subsidiaries held $29.6 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 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, 2025.
We had $96.0 million in outstanding borrowings under the Credit Facilities as of March 31, 2025. Our outstanding letters of credit totaling $5.2 million decreased borrowing availability to $148.8 million under the revolving credit facility as of March 31, 2025.
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 March 31, 2025, open purchase obligations totaled $134.7 million, of which $131.6 million are expected to be fulfilled within the remainder of 2025.
We estimate that our capital expenditures will be between $35.0 million and $45.0 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.
22
Cash Flows
The following table summarizes cash flows during the three months ended March 31, 2025 and 2024, respectively:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Net cash provided by (used in) operating activities | $ | 20.5 | $ | (47.0) | |||||||
| Net cash used in investing activities | (4.2) | (5.9) | |||||||||
| Net cash (used in) provided by financing activities | (15.0) | 48.4 | |||||||||
| Effect of exchange rates on cash | 0.5 | (0.6) | |||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | 1.8 | (5.1) | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 92.6 | $ | 58.1 | |||||||
Net cash provided by (used in) operating activities
Our operating activities provided net cash of $20.5 million for the three months ended March 31, 2025 as compared to a net use of $47.0 million for the three months ended March 31, 2024. This increase is primarily due to lower net cash usages for our operating assets and liabilities of $52.5 million coupled with increased cash inflows from net income reduced by non-cash charges of $15.0 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 $35.2 million, which includes $13.7 million recorded in the first quarter of 2024 related to a subsequently finalized litigation settlement, (ii) inventory purchases of $19.7 million, (iii) payments of trade accounts payables of $10.1 million and (iv) lower employee-related payments of $7.8 million. The decreased net cash usage was partially offset by decreased customer deposits of $15.2 million associated with lower backlog and the timing impacts for accrued liabilities of $14.9 million, which includes $13.7 million recorded in the first quarter of 2024 related to a subsequently finalized litigation settlement.
Net cash used in investing activities
Net cash used in investing activities was $4.2 million during the three months ended March 31, 2025 as compared to $5.9 million during the three months ended March 31, 2024, primarily due to decreased capital expenditures of $1.9 million.
Net cash (used in) provided by financing activities
Our financing activities used net cash of $15.0 million during the three months ended March 31, 2025 as compared to providing net cash of $48.4 million during the three months ended March 31, 2024, primarily due to net repayments on our Credit Facilities in 2025 as compared to net borrowings in 2024.
Dividends
We paid quarterly dividends of $0.13 per common share to shareholders in the first quarter of both 2025 and 2024.
Financial Condition
Our total current assets increased to $737.2 million as of March 31, 2025 from $722.8 million as of December 31, 2024, an increase of $14.4 million, or 2.0%, due primarily to increases in (i) inventories of $12.2 million, (ii) trade and other receivables of $5.4 million and (iii) cash, cash equivalents and restricted cash of $1.8 million. These increases were partially offset by a decrease in prepaid and refundable income taxes of $4.6 million.
Our total current liabilities increased to $277.0 million as of March 31, 2025 from $271.7 million as of December 31, 2024. Increases of $12.4 million and $1.7 million in accounts payables and accrued product warranty, respectively, were partially offset by (i) decreases in customer deposits of $5.0 million, (ii) decreases in short term debt of $1.8 million and (iii) decreases in other current liabilities of $1.8 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.
23
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our quantitative and qualitative disclosures about market risk are incorporated by reference from "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the year ended December 31, 2024. Our market risk exposures have not materially changed since our Annual Report on Form 10-K for the year ended December 31, 2024 was filed.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management has established and maintains disclosure controls and procedures that are designed to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including our CEO and Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required disclosure. Management carried out an evaluation, under the supervision and with the participation of our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our CEO and CFO have concluded that as of March 31, 2025, the Company's disclosure controls and procedures were effective.
Internal Control over Financial Reporting
We are currently undertaking a significant multi-year global ERP implementation to upgrade our information technology platforms and business processes. The implementation is occurring in phases over several years, which began in 2023. During 2023, we implemented the human capital resources management module, including the payroll application for all locations within the United States, the ERP at Corporate and one manufacturing site and the consolidations and reporting module. During 2024, we implemented the ERP at two additional manufacturing sites.
As a result of this multi-year implementation, we expect certain changes to our processes and procedures, which, in turn, will result in changes to our internal control over financial reporting. While we expect this implementation to strengthen our internal control over financial reporting by automating certain manual processes and standardizing business processes and reporting across our organization, we will continue to evaluate and monitor our internal control over financial reporting as processes and procedures in the affected areas evolve.
With the exception of the implementations described above, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the three month period ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
24
PART II ‑ OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in legal actions arising in the ordinary course of our business. Except as noted elsewhere in this Report, there are no pending or threatened litigation proceedings that our management believes will result in an outcome that would materially affect our business, financial position, cash flows or results of operations. Nevertheless, there can be no assurance that future litigation to which we become a party will not have a material adverse effect on our business, financial position, cash flows or results of operations.
See Note 7, Commitments and Contingencies of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding material legal proceedings in which we are involved.
Item 1A. Risk Factors
In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition or future results. Other than as described below, there have been no material changes from the risk factors previously disclosed therein. The risks described in our Annual Report on Form 10-K for the year ended December 31, 2024 and in this Quarterly Report on Form 10-Q are not the only risks facing our Company. Additional risks and uncertainties not currently known to management or that management currently deems to be immaterial also may materially and adversely affect our business, financial condition or operating results.
We may not complete the acquisition of TerraSource Holdings, LLC ("TerraSource") or complete the acquisition within the time frame we anticipate; the acquired business may underperform relative to our expectations; the acquisition may cause our financial results to differ from our expectations or the expectations of the investment community; we may not be able to achieve anticipated cost savings or other anticipated benefits.
The completion of the acquisition of TerraSource is subject to a number of conditions. The failure to satisfy all of the required conditions could delay the completion of the acquisition or prevent it from occurring at all. Furthermore, we expect to incur significant indebtedness in connection with the acquisition of TerraSource, which could have a material adverse effect on our financial position.
The success of the acquisition will depend, in part, on our ability to successfully combine and integrate the acquired business and realize the anticipated benefits, including synergies, cost savings, innovation opportunities and operational efficiencies from the acquisition. If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, and the value of our common stock may decline.
The integration of the acquired business may result in material challenges, including, without limitation:
•We and TerraSource must obtain certain regulatory approvals and clearances to complete the acquisition, which, if delayed, not granted or granted with unacceptable conditions, could prevent, substantially delay or impair completion of the acquisition, result in additional expenditures of money and resources or reduce the anticipated benefits of the acquisition;
•the acquisition, including uncertainty regarding the acquisition, may cause customers, suppliers or strategic partners to delay or defer decisions concerning us and TerraSource, and may adversely affect each company’s ability to effectively manage its respective businesses;
•failure to motivate and retain key personnel could diminish the anticipated benefits of the acquisition;
•the possibility of significant costs involved in connection with completing the acquisition, including costs to achieve expected synergies;
•coordinating geographically overlapping organizations;
•unanticipated issues in integrating information technology, communications and other systems; and
•unforeseen expenses or delays associated with the acquisition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
25
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the three month period ended March 31, 2025, no officers or directors, as defined in Rule 16a-1(f) under the Exchange Act, adopted and/or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement
Item 6. Exhibits
| Exhibit Number | Exhibit Description | Filed Herewith | ||||||||||||
| 31.1 | X | |||||||||||||
| 31.2 | X | |||||||||||||
| 32.1 | X | |||||||||||||
| 32.2 | X | |||||||||||||
| 101.INS | XBRL Instance Document | X | ||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||
| 104 | Cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in iXBRL (included as Exhibit 101). | X | ||||||||||||
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ASTEC INDUSTRIES, INC. (Registrant) | |||||
| Date: April 29, 2025 | /s/ Brian J. Harris | ||||
| Brian J. Harris Chief Financial Officer (Principal Financial Officer) | |||||
| Date: April 29, 2025 | /s/ Robert G. Putney | ||||
| Robert G. Putney Vice President, Chief Accounting Officer and Business Development (Principal Accounting Officer) | |||||
27