UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-11595
Astec A logo.jpg
Astec Industries, Inc.
(Exact name of registrant as specified in its charter)
Washington, D.C.  20549Tennessee62-0873631
FORM 10-Q
 (Mark One)
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from                     to
Commission File Number                    001-11595
Astec Industries, Inc.
(Exact name of registrant as specified in its charter)
Tennessee62-0873631
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
incorporation or organization)
1725 Shepherd Road Chattanooga, Tennessee37421
Chattanooga, TN37421
(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 classTrading Symbol(s)Name of each exchange on which registered
(423) 899-5898Common StockASTEThe Nasdaq Stock Market LLC
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant:

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.

Large Accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller 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 28, 2023, there were 22,715,855 shares of Common Stock outstanding.



ASTEC INDUSTRIES, INC.
Index to Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2023

Page
YES ý
NO ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
YES ý
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. (Check one):
Large Accelerated Filer ý
Accelerated Filer
Non-accelerated filer ☐ (Do not check if a smaller reporting company)
Emerging Growth Company ☐Item 1.
Smaller Reporting Company ☐Financial Statements (Unaudited)
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 Item 2.
NO ý
1


Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
ClassOutstanding at October 24, 2017
Common Stock, par value $0.2023,069,748
2


ASTEC INDUSTRIES, INC.
 INDEX








3



PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements
Astec Industries, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
  
September 30,
2017
  
December 31,
2016
 
ASSETS      
Current assets:      
  Cash and cash equivalents $66,379  $82,371 
  Investments  1,655   1,024 
  Trade receivables  105,002   106,659 
  Other receivables  4,691   4,014 
  Inventories  399,346   360,404 
  Prepaid expenses and other  32,825   22,361 
    Total current assets  609,898   576,833 
Property and equipment, net  180,703   180,538 
Investments  14,468   13,965 
Goodwill  42,103   40,804 
Other long-term assets  29,840   31,461 
    Total assets $877,012  $843,601 
LIABILITIES AND EQUITY        
Current liabilities:        
  Short-term debt $--  $4,632 
  Current maturities of long-term debt  2,689   2,538 
  Accounts payable  60,107   57,297 
  Income tax payable  378   747 
  Accrued product warranty  13,989   13,156 
  Customer deposits  50,143   39,102 
  Accrued payroll and related liabilities  21,272   25,693 
  Accrued loss reserves  2,726   2,852 
  Other current liabilities  25,932   22,844 
    Total current liabilities  177,236   168,861 
Long-term debt  2,216   4,116 
Deferred income tax liabilities  1,812   1,669 
Other long-term liabilities  20,546   20,114 
    Total liabilities  201,810   194,760 
Shareholders' equity  674,024   647,830 
Non-controlling interest  1,178   1,011 
    Total equity  675,202   648,841 
    Total liabilities and equity $877,012  $843,601 

(Unaudited)
See
ASTEC INDUSTRIES, INC.
Consolidated Balance Sheets
(In millions, except share and per share data, unaudited)
March 31, 2023December 31, 2022
ASSETS
Current assets:
Cash, cash equivalents and restricted cash$42.5 $66.0 
Investments3.6 3.9 
Trade receivables and contract assets, net of allowance for credit losses of $2.1 and $2.3, respectively172.2 167.1 
Other receivables, net of allowance for credit losses of $0.7, respectively5.8 6.5 
Inventories420.1 393.4 
Prepaid and refundable income taxes9.1 15.9 
Prepaid expenses and other assets27.1 28.2 
Assets held for sale— 15.4 
Total current assets680.4 696.4 
Property and equipment, net of accumulated depreciation of $236.2 and $233.8, respectively176.7 173.6 
Investments16.9 15.1 
Goodwill45.6 45.2 
Intangible assets, net of accumulated amortization of $46.7 and $45.1, respectively21.2 22.5 
Deferred income tax assets34.7 32.1 
Other long-term assets32.9 29.5 
Total assets$1,008.4 $1,014.4 
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt$0.2 $0.2 
Short-term debt10.8 9.4 
Accounts payable112.0 107.2 
Customer deposits67.5 69.5 
Accrued product warranty12.4 11.9 
Accrued employee related liabilities34.6 35.3 
Accrued loss reserves2.3 1.9 
Other current liabilities32.2 38.6 
Total current liabilities272.0 274.0 
Long-term debt65.0 78.1 
Deferred income tax liabilities2.2 2.1 
Other long-term liabilities33.6 33.3 
Total liabilities372.8 387.5 
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock - authorized 2,000,000 shares of $1.00 par value; none issued— — 
Common stock – authorized 40,000,000 shares of $0.20 par value; issued and outstanding – 22,690,567 as of March 31, 2023 and 22,624,031 as of December 31, 20224.5 4.5 
Additional paid-in capital135.2 135.8 
Accumulated other comprehensive loss(40.1)(40.1)
Company stock held by deferred compensation programs, at cost(1.1)(1.1)
Retained earnings537.0 527.8 
Shareholders' equity635.5 626.9 
Noncontrolling interest0.1 — 
Total equity635.6 626.9 
Total liabilities and equity$1,008.4 $1,014.4 

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,
20232022
Net sales$347.9 $291.2 
Cost of sales258.7 226.5 
Gross profit89.2 64.7 
Selling, general and administrative expenses67.9 59.7 
Restructuring and other asset charges, net3.7 1.0 
Income from operations17.6 4.0 
Other (expenses) income, net:
Interest expense(2.0)(0.4)
Interest income0.5 0.2 
Other income, net0.4 1.2 
Income before income taxes16.5 5.0 
Income tax provision4.4 0.9 
Net income12.1 4.1 
Net loss attributable to noncontrolling interest— — 
Net income attributable to controlling interest$12.1 $4.1 
Per share data:
Earnings per common share - Basic$0.53 $0.18 
Earnings per common share - Diluted$0.53 $0.18 
Weighted average shares outstanding - Basic22,655,821 22,782,476 
Weighted average shares outstanding - Diluted22,742,937 22,904,167 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
2

ASTEC INDUSTRIES, INC.
Consolidated Statements of Comprehensive Income
(In millions, unaudited)

Three Months Ended March 31,
20232022
Net income$12.1 $4.1 
Other comprehensive income:
Foreign currency translation adjustments0.1 4.2 
Other comprehensive income0.1 4.2 
Comprehensive income12.2 8.3 
Comprehensive income attributable to noncontrolling interest(0.1)(0.1)
Comprehensive income attributable to controlling interest$12.1 $8.2 

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,
20232022
Cash flows from operating activities:
Net income$12.1 $4.1 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization6.3 6.7 
Provision for credit losses0.2 0.6 
Provision for warranties3.9 3.2 
Deferred compensation benefit— (0.8)
Share-based compensation0.8 1.8 
Deferred tax benefit(2.6)(4.0)
Gain on disposition of property and equipment(3.4)— 
Amortization of debt issuance costs0.1 — 
Distributions to deferred compensation programs' participants(0.1)(0.1)
Change in operating assets and liabilities:
(Purchase) sale of trading securities, net(0.8)0.6 
Receivables and other contract assets(4.5)5.3 
Inventories(27.2)(53.7)
Prepaid expenses2.5 (1.0)
Other assets(5.4)(1.4)
Accounts payable3.5 17.3 
Accrued loss reserves0.4 (0.2)
Accrued employee related liabilities(0.8)3.7 
Other accrued liabilities(5.9)(3.0)
Accrued product warranty(3.4)(2.4)
Customer deposits(1.9)9.3 
Income taxes payable/prepaid7.0 4.4 
Net cash used in operating activities(19.2)(9.6)
Cash flows from investing activities:
Expenditures for property and equipment(8.0)(11.6)
Proceeds from sale of property and equipment20.0 0.2 
Purchase of investments(0.2)(0.3)
Net cash provided by (used in) investing activities11.8 (11.7)

(Continued)
4

ASTEC INDUSTRIES, INC.
Consolidated Statements of Cash Flows (Continued)
(In millions, unaudited)

Three Months Ended March 31,
20232022
Cash flows from financing activities:
Payment of dividends(2.9)(2.8)
Proceeds from borrowings on credit facilities and bank loans32.1 5.4 
Repayments of borrowings on credit facilities and bank loans(44.0)(3.6)
Withholding tax paid upon vesting of share-based compensation awards(1.4)(1.3)
Net cash used in financing activities(16.2)(2.3)
Effect of exchange rates on cash0.1 0.9 
Decrease in cash, cash equivalents and restricted cash(23.5)(22.7)
Cash, cash equivalents and restricted cash, beginning of period66.0 134.4 
Cash, cash equivalents and restricted cash, end of period$42.5 $111.7 
Supplemental cash flow information:
Cash paid during the year for:
Interest, net of capitalized interest$1.2 $0.1 
Income taxes paid$0.3 $0.4 
Supplemental disclosures of non-cash items:
Non-cash investing activities:
Capital expenditures in accounts payable$1.3 $0.9 
Non-cash financing activities:
Additions to right-of-use assets and lease liabilities$0.1 $0.4 

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 StockCommon Stock AmountAdditional Paid-in-CapitalAccumulated Other Comprehensive LossCompany Shares Held by SERPRetained EarningsNoncontrolling InterestTotal Equity
Balance, December 31, 202222,624,031 $4.5 $135.8 $(40.1)$(1.1)$527.8 $— $626.9 
Net income— — — — — 12.1 — 12.1 
Other comprehensive income— — — — — — 0.1 0.1 
Dividends ($0.13 per share)— — — — — (2.9)— (2.9)
Share-based compensation— — 0.8 — — — — 0.8 
Issuance of common stock under incentive plan66,536 — — — — — — — 
Withholding tax paid upon equity award vesting— — (1.4)— — — — (1.4)
Balance, March 31, 202322,690,567 $4.5 $135.2 $(40.1)$(1.1)$537.0 $0.1 $635.6 

Common StockCommon Stock AmountAdditional Paid-in-CapitalAccumulated Other Comprehensive LossCompany Shares Held by SERPRetained EarningsNoncontrolling InterestTotal Equity
Balance, December 31, 202122,767,052 $4.5 $130.6 $(32.4)$(1.2)$549.3 $0.5 $651.3 
Net income— — — — — 4.1 — 4.1 
Other comprehensive income— — — 4.1 — — 0.1 4.2 
Dividends ($0.12 per share)— — — — — (2.8)— (2.8)
Share-based compensation— — 1.8 — — — — 1.8 
Issuance of common stock under incentive plan69,995 0.1 — — — — — 0.1 
Withholding tax paid upon equity award vesting— — (1.3)— — — — (1.3)
Balance, March 31, 202222,837,047 $4.6 $131.1 $(28.3)$(1.2)$550.6 $0.6 $657.4 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
6

ASTEC INDUSTRIES, INC.
Notes toTo Unaudited Condensed Consolidated Financial Statements
4



Astec Industries, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2017  2016  2017  2016 
Net sales $252,054  $247,752  $872,364  $820,868 
Cost of sales  212,970   192,363   691,985   620,071 
    Gross profit  39,084   55,389   180,379   200,797 
Selling, general, administrative and engineering expenses  45,494   43,950   142,836   132,716 
    Income (loss) from operations  (6,410)  11,439   37,543   68,081 
Interest expense  188   264   638   1,057 
Other income, net of expenses  1,113   505   1,886   1,324 
    Income (loss) from operations before income taxes  (5,485)  11,680   38,791   68,348 
Income taxes  (2,782)  4,845   12,055   25,694 
    Net income (loss)  (2,703)  6,835   26,736   42,654 
Net loss attributable to non-controlling interest  (36)  (3)  (137)  (119)
    Net income (loss) attributable to controlling interest $(2,667) $6,838  $26,873  $42,773 
                 
Earnings (loss) per common share                
Net income (loss) attributable to controlling interest:                
    Basic $(0.12) $0.30  $1.17  $1.86 
    Diluted $(0.12) $0.30  $1.16  $1.85 
Weighted average number of common shares outstanding:                
    Basic  23,029   23,001   23,023   22,989 
    Diluted  23,029   23,145   23,180   23,138 
 
Dividends declared per common share
 $0.10  $0.10  $0.30  $0.30 

See Notes to Unaudited Condensed Consolidated Financial Statements
5


Astec Industries, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)

   
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2017  2016  2017  2016 
Net income (loss) $(2,703) $6,835  $26,736  $42,654 
Other comprehensive income (loss):                
Income tax benefit on change in unrecognized pension and post-
  retirement benefit costs
  --   111   --   -- 
Foreign currency translation adjustments  1,346   69   4,906   (219)
Income tax provision on foreign currency translation adjustments  --   (57)  --   (783)
Other comprehensive income (loss)  1,346   123   4,906   (1,002)
Comprehensive income (loss)  (1,357)  6,958   31,642   41,652 
Comprehensive income (loss) attributable to non-controlling interest  8   (130)  (117)  (55)
Comprehensive income (loss) attributable to controlling interest $(1,365) $7,088  $31,759  $41,707 
                 
See Notes to Unaudited Condensed Consolidated Financial Statements


6



Astec Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
  
Nine Months Ended
September 30,
 
  2017  2016 
Cash flows from operating activities:      
Net income $26,736  $42,654 
Adjustments to reconcile net income to net cash provided
  by operating activities:
        
    Depreciation and amortization  19,253   18,118 
    Provision for doubtful accounts  216   327 
    Provision for warranties  11,842   13,135 
    Deferred compensation provision (benefit)  (725)  1,240 
    Stock-based compensation  2,774   2,021 
    Deferred income tax benefit  (224)  (2,019)
    Gain on disposition of fixed assets  (292)  (322)
Distributions to SERP participants  (206)  (525)
Change in operating assets and liabilities:        
    Sale (purchase) of trading securities, net  74   (1,545)
    Trade and other receivables  766   (5,224)
    Inventories  (39,332)  (8,120)
    Prepaid expenses and other assets  4,601   (3,132)
    Accounts payable  2,820   3,234 
    Accrued product warranty  (11,072)  (11,011)
    Customer deposits  11,040   35,685 
    Prepaid and income taxes payable, net  (16,246)  5,655 
    Other  (1,276)  6,602 
Net cash provided by operating activities  10,749   96,773 
Cash flows from investing activities:        
Business acquisition, net of cash acquired  --   (39,613)
Expenditures for property and equipment  (13,920)  (17,483)
Proceeds from sale of property and equipment  337   577 
Other  (580)  (174)
Net cash used by investing activities  (14,163)  (56,693)
Cash flows from financing activities:        
Payment of dividends  (6,920)  (6,912)
Borrowings under bank loans  --   1,695 
Repayments of bank loans  (6,583)  (5,570)
Sale (purchase) of Company shares held by SERP, net  126   (99)
Withholding tax paid upon vesting of restricted stock units  (501)  (1,024)
Purchase of subsidiary shares  (31)  (724)
Net cash used by financing activities  (13,909)  (12,634)
Effect of exchange rates on cash  1,331   (34)
Net increase (decrease) in cash and cash equivalents  (15,992)  27,412 
Cash and cash equivalents, beginning of period  82,371   25,062 
Cash and cash equivalents, end of period $66,379  $52,474 

See Notes to Unaudited Condensed Consolidated Financial Statements
7


Astec Industries, Inc.
 
Condensed Consolidated Statement of Equity 
For the Nine Months Ended September 30, 2017 
(in thousands) 
(unaudited) 
                         
                         
  
Common
Stock
Shares
  
Common
Stock
Amount
  
Additional
Paid-in-
Capital
  
Accum-
ulated
Other
Compre-
hensive
Loss
  
Company
Shares
Held
by SERP
  
Retained
Earnings
  
Non-
controlling
Interest
  
Total
Equity
 
Balance, December
  31, 2016
  23,046  $4,609  $139,970  $(31,562) $(1,958) $536,771  $1,011  $648,841 
Net income  --   --   --   --   --   26,873   (137)  26,736 
Other comprehensive
  income
  --   --   --   4,906   --   --   --   4,906 
Change in ownership
  percentage of
  subsidiary
  --   --   --   --   --   --   (18)  (18)
Dividends declared  --   --   7   --   --   (6,927)  --   (6,920)
Stock-based
  compensation
  
--
   --   1,710   --   --   --   --   1,710 
Stock issued under
  incentive plans
  24   5   (5)  --   --   --   --   -- 
Withholding tax
  paid upon vesting
  of RSUs
  --   --   (501)  --   --   --   --   (501)
SERP transactions,
  net
  --   --   173   --   (47)  --   --   126 
Other  --   --   --   --   --   --   322   322 
Balance, September
 30, 2017
  23,070  $4,614  $141,354  $(26,656) $(2,005) $556,717  $1,178  $675,202 

See Notes to Unaudited Condensed Consolidated Financial Statements

8

ASTEC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts, unless otherwise specified)

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 and markets equipment and components used primarily in 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 also manufactures certain equipment and components unrelated to road construction, including equipment for the mining, quarrying, construction and demolition industries and port and rail yard operators; industrial heat transfer equipment; commercial whole-tree pulpwood chippers; horizontal grinders; blower trucks; concrete plants; commercial and industrial burners; and combustion control systems.

The Company operates in two reportable segments (plus Corporate and Other) - Infrastructure Solutions and Materials Solutions. The Company's two reportable business segments comprise sites based upon the nature of the products or services produced, the type of customer for the products, the similarity of economic characteristics, the manner in which management reviews results and the nature of the production process, among other considerations.

The Corporate and Other category consists primarily of the parent company, Astec Insurance Company ("Astec Insurance" or the "captive"), a captive insurance company, and the controls and automation business, which do not meet the requirements for separate disclosure as an operating segment or inclusion in one of the other reporting segments.

Basis of Presentation

The accompanying unaudited condensed 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 accounting principles generally accepted in the U.S. ("U.S. GAAP"). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") forGAAP have been condensed or omitted pursuant to the SEC rules and regulations governing interim financial informationstatements. However, the Company believes that the disclosures made in the unaudited consolidated financial statements and with the instructionsrelated notes are adequate to Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Exchange Act of 1934.  Accordingly, they do not include all ofmake the information and footnotes required by U.S. GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the nine-month period ended September 30, 2017 arepresented not necessarily indicative of the results that may be expected for the year ending December 31, 2017.  It is suggested that these unaudited condensedmisleading. These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto included in the Astec Industries, Inc. Company's Annual Report on Form 10-K for the year ended December 31, 2016.2022. All intercompany balances and transactions between the Company and its affiliates have been eliminated in consolidation.


The unaudited condensed consolidated balance sheet as of December 31, 2016 has been derived fromNoncontrolling interest in the auditedCompany's consolidated financial statements at that date but doesrepresents the 7% interest in a consolidated subsidiary which is not include allowned by the Company. Since the Company controls this subsidiary, the subsidiary's financial statements are consolidated with those of the informationCompany, and footnotes required bythe 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, which is undergoing a judicial reorganization in Brazil, to acquire their outstanding interest in full for R$10.0M (approximately $2.0 million, subject to the effect of exchange rates). Completion of the transaction is subject to obtaining certain judicial approval in Brazil.

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, self-insurance loss reserves, capitalization of internal use software, goodwill 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 completea fair statement of the results of operations and comprehensive income (loss) for the three months ended March 31, 2023 and 2022, the financial statements.position as of March 31, 2023 and December 31, 2022 and the cash flows for the three months ended March 31, 2023 and 2022, 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.


DollarAll dollar amounts, except share and share amounts shown are in thousands, except per share amounts, are in millions of dollars unless otherwise specified.indicated.


Recent
7

Reclassifications and Adjustments

Certain reclassifications have been made to the prior period financial information to conform to the presentation used in the financial statements for the three months ended March 31, 2023.

The Company elected to present research and development expenses in "Selling, general and administrative expenses". These amounts were previously included in a separate financial statement caption in the Consolidated Statements of Operations.

The Company reclassified certain accrued liability balances from "Other current liabilities" to "Accrued employee related liabilities" to more appropriately reflect the nature of such accrued balances.

The Company elected to present gains and losses recognized on the change in fair value of derivative instruments and foreign currency transaction gains and losses, net in "Other income (expenses), net". These amounts were previously included in "Cost of sales".

There was no change to previously reported "Total current liabilities" or "Net income (loss) attributable to controlling interest" related to these reclassifications.

During the first quarter of 2023, the Company identified immaterial errors associated with over-accruals of inventory-related expenses in its historical financial statements. The cumulative effect of the errors generated in 2021 and 2022 was corrected during the first quarter of 2023, resulting in a decrease in "Cost of sales" of $1.9 million. Such adjustment was not considered material to the Company's consolidated financial statements for the year ended December 31, 2022 or any of the financial statements for the previously filed annual periods.

Recently Adopted Accounting Pronouncements

In May 2014,October 2021, the Financial Accounting Standards Board ('FASB") issued ASU 2021-08, "Business Combinations (Topic 805): Accounting Standards Update ("ASU") No. 2014-09, "Revenuefor Contract Assets and Contract Liabilities from Contracts with Customers", which supersedes existing revenue guidance under U.S. GAAP.requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 2014-09, Revenue from Contracts with Customers (Topic 606). The standard's core principle is that a companyupdate will recognize revenue when it transfers promised goods or services to customersgenerally result in an amount that reflectsentity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the consideration to whichacquiree immediately before the company expects to be entitled in exchange for those goods or services. The implementation of this new standard will require companies to use more judgment and to make more estimatesacquisition date rather than under current guidance. The standard, as amended, is effective for public companies for annual periods beginning after December 15, 2017. The Company plans to adopt the new standard effective January 1, 2018 using the modified retrospective method. Company management has reviewed documentation of revenue streams received from its 16 manufacturing subsidiaries to assist in its effort to determine the effect the new standard will have on its financial reporting. Numerous meetings and conference calls have been held with Company management, controllers of the manufacturing subsidiaries and outside revenue experts to discuss the information in an effort to identify areas where a change in timing of revenue recognition may be required under the new guidance. As additional documentation is currently being assimilated, reviewed and evaluated, the Company has not yet determined what impact, if any, the adoption of this new standard will have on the Company's financial position, cash flows or results of operations.

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10)", which requires, among other things, equity investments with readily determinable fair values, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income. The standard is effective for public companies in fiscal years beginning after December 15, 2017, and the Company expects to adopt the standard effective January 1, 2018. The Company does not expect the adoption of this standard to have a material impact on the Company's financial position, cash flows or results of operations.
9


In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", which significantly changes the accounting for operating leases by lessees. The accounting applied by lessors is largely unchanged from that applied under previous guidance. The new guidance requires lessees to recognize lease assets and lease liabilities in the balance sheet, initially measured at the present value of the lease payments, for leases which were classified as operating leases under previous guidance. Lease cost included in the statement of income will be calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Lessees may make an accounting policy election to exclude leases with a term of 12 months or less from the requirement to record related assets and liabilities.value. The new standard is effective for public companieson a prospective basis for fiscal years beginning after December 15, 2018.2022, with early adoption permitted. The Company planselected to early adopt the new standard effective Januarythis guidance on April 1, 2019.2022. The Company does not expect the adoption of this standard to have a material impact on its results of operations; however, the Company has not determined the impact the adoption of this new standard will have on its financial position or cash flows.

In March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606)", which doesdid not change the core principles of ASU No. 2014-09 discussed above, but rather clarifies the implementation guidance in order to eliminate the potential for diversity in practice arising from inconsistent application of the principal versus agent guidance. Under the new guidance, when an entity determines it is a principal in a transaction, the entity recognizes revenue in the gross amount of consideration; however in transactions where an entity determines it is an agent, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled. The standard is effective for public companies for annual periods beginning after December 15, 2017. The Company plans to adopt the new standard effective January 1, 2018. The Company has not yet determined what impact, if any, the adoption of this new standard will have on the Company's financial position, cash flows or results of operations.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments". The standard changes how credit losses are measured for most financial assets and certain other instruments that currently are not measured through net income. The standard will require an expected loss model for instruments measured at amortized cost as opposed to the current incurred loss approach. In valuing available for sale debt securities, allowances will be required to be recorded, rather than the current approach of reducing the carrying amount, for other than temporary impairments. A cumulative adjustment to retained earnings is to be recorded as of the beginning of the period of adoption to reflect the impact of applying the provisions of the standard. The standard is effective for public companies for periods beginning after December 15, 2019 and the Company expects to adopt the new standard as of January 1, 2020. The Company has not yet determined what impact, if any, the adoption of this new standard will have on the Company's financial position, cash flows or results of operations.

In August 2016, the FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)" which clarifies how certain cash receipts and cash payments should be presented on the statement of cash flows. The statement also addresses how the predominance principle should be applied when cash payments have aspects of more than one class of cash flows. The standard is effective for public companies in fiscal years beginning after December 15, 2017, and the Company expects to adopt the standard effective January 1, 2018. The Company does not expect the adoption of this new standard to have a material impact on the Company's statement of cash flows.

In October 2016, the FASB issued ASU No. 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory," which requires companies to account for the income tax effects of intercompany sales and transfers of assets other than inventory, such as intangible assets, when the transfer occurs. This is a change from current guidance, which requires companies to defer the income tax effects of intercompany transfers of assets until the asset has been sold to an outside party or otherwise recognized by being depreciated, amortized, or impaired. The new guidance will require companies to defer the income tax effects of only intercompany transfers of inventory. The standard is effective for public companies in fiscal years beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period and requires companies to apply a modified retrospective approach. The Company plans to adopt the new standard effective January 1, 2018. The Company has not yet determined what impact the adoption of this new standard will have on the Company's financial position, cash flows or results of operations.
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In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805), Clarifying the Definition of a Business," which provides additional guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  The standard is effective for public companies for annual or interim periods beginning after December 15, 2017.  The Company plans to adopt the new standard effective January 1, 2018.  The Company does not expect the application of this standard to have a material impact on its financial position, results of operations, cash flows or cash flows.disclosures.


In January 2017, the FASB issued ASU No. 2017-04, "Intangibles-Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment," which eliminates Step 2 from the goodwill impairment test for public companies.  Currently, Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill.  The newRecent accounting guidance stipulates that an entity should perform its annualnot discussed above is not applicable, did not have, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.  An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, up to the amount of goodwill allocated to the reporting unit.  The standard is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted. The Company plans to early adopt this standard for its annual impairment testing to be performed as of December 31, 2017.  The Company does not expect the application of this standardexpected to have a material impact on its financial position, resultsthe Company.

Note 2.Acquisition

MINDS Acquisition - The Company entered into a Share Purchase Agreement, dated as of March 22, 2022, by and between MINDS Automation Group, Inc., a leader in plant automation control systems and cloud-based data management in the asphalt industry in Canada. The acquisition was completed on April 1, 2022 at a purchase price of $19.3 million, which was paid in cash. The Company's allocation of the purchase price resulted in the recognition of $9.3 million of goodwill and $9.3 million of intangible assets primarily consisting of customer relationships (9 year life) and developed technology (7 year life). Significant inputs and assumptions used in determining the fair values of these intangible assets include management's forecasts of future revenues, earnings and cash flows, a discount rate based on the median weighted average cost of capital of the Company and select market competitors, and the proportion of intangible assets acquired in relation to tangible assets. Goodwill acquired is attributable to future growth opportunities provided by the acquired intellectual capital and the ability to generate cross-selling synergies. The acquisition provides the Company with a broader line of controls and automation products designed to deliver enhanced productivity through improved equipment performance. Results of operations or cash flows.have been consolidated from the date of acquisition. The goodwill is not deductible for income tax purposes. Proforma financial information is not included since not significant.


In August 2017,Acquisition and integration costs incurred were nominal during the FASB issued ASU No. 2017-12, "Derivativesthree months ended March 31, 2023 for this acquisition. Acquisition and Hedging (Topic 815), Targeted Improvements to Hedging Activities", to improveintegration costs incurred were $0.5 million during the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activitiesthree months ended March 31, 2022. These costs are recorded in its financial statements.  The new guidance is effective for public companies for fiscal years beginning after December 15, 2018"Selling, general and interim periods within those fiscal years with early adoption permitted in any interim period after its issuance.  The Company plans to adopt the new standard effective January 1, 2019.  The Company does not expect the application of this standard to have a material impact on its financial position, results of operations or cash flows.

Note 2.  Earnings (Loss) per Share
Basic earnings (loss) per share are determined by dividing earnings (loss) by the weighted average number of common shares outstanding during each period.  Diluted earnings (loss) per share include the potential dilutive effect of restricted stock units and shares heldadministrative expenses" in the Company's Supplemental Executive Retirement Plan.Consolidated Statements of Operations.


8

The following table sets forthsummarizes the computationallocations of net income (loss) attributable to controlling interest and the number of basic and diluted shares used in the computation of earnings (loss) per share:total purchase price:


  
Three Months
Ended
September 30,
  
Nine Months
Ended
September 30,
 
  2017  2016  2017  2016 
Numerator:            
Net income (loss) attributable to controlling interest $(2,667) $6,838  $26,873  $42,773 
Denominator:                
Denominator for basic earnings (loss) per share  23,029   23,001   23,023   22,989 
Effect of dilutive securities:                
Restricted stock units  --   79   94   85 
Supplemental Executive Retirement Plan  --   65   63   64 
Denominator for diluted earnings (loss) per share  23,029   23,145   23,180   23,138 
                 

(in millions)Amount
Cash$1.5 
Trade receivables2.7 
Inventories0.7 
Prepaid expenses and other assets0.4 
Property and equipment0.2 
Goodwill9.3 
Intangible assets9.3 
Other long-term assets0.5 
Total assets acquired$24.6 
Accounts payable(0.7)
Accrued payroll and related liabilities(0.8)
Other current liabilities(1.1)
Deferred income tax liabilities(2.4)
Other long-term liabilities(0.3)
Total liabilities assumed(5.3)
Total purchase price$19.3 

Note 3. Receivables
Receivables are net of allowances for doubtful accounts of $1,480 and $1,511 as of September 30, 2017 and December 31, 2016, respectively.
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Note 4.  Inventories
Inventories consist of the following:

  
September 30,
2017
  
December 31,
2016
 
Raw materials and parts $143,523  $137,763 
Work-in-process  142,603   115,613 
Finished goods  88,094   84,898 
Used equipment  25,126   22,130 
   Total $399,346  $360,404 

Raw material inventory is comprised of purchased steel and other purchased items for use in the manufacturing process or held for sale for the after-market parts business. The category also includes the manufacturing cost of completed equipment sub-assemblies produced for either integration into equipment manufactured at a later date or for sale in the Company's after-market parts business.

Work-in-process inventory consists of the value of materials, labor and overhead incurred to date in the manufacturing of incomplete equipment or incomplete equipment sub-assemblies being produced.

Finished goods inventory consists of completed equipment manufactured for sale to customers.

Used equipment inventory consists of equipment accepted in trade or purchased on the open market. The category also includes equipment rented to prospective customers on a short-term or month-to-month basis. Used equipment is valued at the lower of acquired or trade-in cost or net realizable value determined on each separate unit.


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. The net realizable values

Inventories consist of the Company's products are impacted by a number of factors, including changes in the price of steel, competitive sales pricing, quantities of inventories on hand, the age of the individual inventory items, market acceptance of the Company's products, actions by our competitors, the condition of our used and rental inventory and general economic factors. Once an inventory item's value has been deemed to be less than cost, a net realizable value allowance is calculated and a new "cost basis" for that item is effectively established. This new cost is retained for that item until such time as the item is disposed of or the Company determines that an additional write-down is necessary. Additional write-downs may be required in the future based upon changes in assumptions due to general economic downturns in the markets in which the Company operates, changes in competitor pricing, new product design or other technological advances introduced by the Company or its competitors and other factors unique to individual inventory items.following:


The most significant component of the Company's inventory is steel. A significant decline in the market price of steel could result in a decline in the market value of the equipment or parts we sell. During periods of significant declining steel prices, the Company reviews the valuation of its inventories to determine if reductions are needed in the recorded value of inventory on hand to its net realizable value.
(in millions)March 31, 2023December 31, 2022
Raw materials and parts$311.9 $302.9 
Work-in-process71.7 57.3 
Finished goods36.1 32.1 
Used equipment0.4 1.1 
Total$420.1 $393.4 


The Company reviews the individual items included in its finished goods, used equipment and rental equipment inventory on a model-by-model or unit-by-unit basis to determine if any item's net realizable value is below its carrying value. This analysis is expanded to include items in work-in-process and raw material inventory if factors indicate those items may also be impacted. In performing this review, judgments are made and, in addition to the factors discussed above, additional consideration is given to the age of the specific items of used or rental inventory, prior sales offers or lack thereof, the physical condition of the specific items and general market conditions for the specific items. Additionally, an analysis of raw material inventory is performed to calculate reserves needed for obsolete inventory based upon quantities of items on hand, the age of those items and their recent and expected future usage or sale.
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When the Company determines that the value of inventory has become impaired through damage, deterioration, obsolescence, changes in price levels, excessive levels of inventory or other causes, the Company reduces the carrying value to the net realizable value based on estimates, assumptions and judgments made from the information available at that time. Abnormal amounts of idle facility expense, freight, handling cost and wasted materials are recognized as current period charges.

Note 5.  Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation of $234,594 and $220,444 as of September 30, 2017 and December 31, 2016, respectively.

Note 6.4. 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 Company ("Astec Insurance"), the Company's captive insurance company, and marketable equity securities held in an unqualifiedthe Company's deferred compensation programs. The Company's deferred compensation programs include a non-qualified Supplemental Executive Retirement Plan ("SERP").  The obligations of and a separate non-qualified Deferred Compensation Plan. Although the deferred compensation programs' investments are allocated to individual participants, and investment decisions are made solely by those participants, they are non-qualified plans. Consequently, the Company associated withowns the financial assets heldand the related offsetting liability for disbursement until such time as a participant makes a qualifying withdrawal. The SERP assets and related offsetting liability are recorded in non-current "Investments" and "Other long-term liabilities", respectively, in the SERP also constitute a liability of the Company for financial reporting purposes and are included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets.Consolidated Balance Sheets. The Company's subsidiaries also occasionally enter into foreign currency exchange contracts to mitigate exposure to fluctuations in currency exchange rates.


The carrying amount of cash and cash equivalents, trade receivables and contract assets, other receivables, revolving debt, accounts payable and short-term 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. The fair values of foreign currency exchange contracts are based on quotations from various banks for similar instruments using models with market basedmarket-based inputs.


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Financial assets and liabilities are categorized based upon 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 -
Inputs reflect management's best estimate of what market participants would use in pricing
the asset or liability at the measurement date. Consideration is given to the risk inherent in
the valuation technique and the risk inherent in the inputs to the model.

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As indicated in the tables below, (which excludes the Company's pension assets), the Company has determined that all of its financial assets and liabilities as of September 30, 2017March 31, 2023 and December 31, 20162022 are Level 1 and Level 2 in the fair value hierarchy as defined above:

   September 30, 2017 
   Level 1  Level 2  Total 
Financial Assets:         
Trading equity securities:         
SERP money market fund $389  $--  $389 
SERP mutual funds  4,070   --   4,070 
Preferred stocks  365   --   365 
Trading debt securities:            
Corporate bonds  5,591   --   5,591 
Municipal bonds  --   2,093   2,093 
Floating rate notes  397   --   397 
Asset backed securities  --   556   556 
U.S. Treasury notes  1,039   --   1,039 
Other  --   1,623   1,623 
Derivative financial instruments  --   32   32 
    Total financial assets $11,851  $4,304  $16,155 
             
Financial Liabilities:            
SERP liabilities $--  $8,061  $8,061 
Derivative financial instruments  --   261   261 
    Total financial liabilities $--  $8,322  $8,322 



 December 31, 2016 
 Level 1  Level 2  Total March 31, 2023
Financial Assets:         
(in millions)(in millions)Level 1Level 2Total
Financial assets:Financial assets:
Trading equity securities:         Trading equity securities:
SERP money market fund $92  $--  $92 
SERP mutual funds  3,335   --   3,335 
Deferred compensation programs' mutual fundsDeferred compensation programs' mutual funds$4.9 $— $4.9 
Preferred stocks  475   --   475 Preferred stocks0.3 — 0.3 
Equity fundsEquity funds0.6 — 0.6 
Trading debt securities:            Trading debt securities:
Corporate bonds  5,413   --   5,413 Corporate bonds4.3 — 4.3 
Municipal bonds  --   2,248   2,248 Municipal bonds— 0.4 0.4 
Agency bondsAgency bonds— 2.2 2.2 
Floating rate notes  118   --   118 Floating rate notes0.1 — 0.1 
Asset backed securities  --   637   637 
U.S. Treasury note  388   --   388 
U.S. government securitiesU.S. government securities1.9 — 1.9 
Asset-backed securitiesAsset-backed securities— 3.8 3.8 
Other  --   2,283   2,283 Other1.4 0.6 2.0 
Derivative financial instruments  --   144   144 Derivative financial instruments— 0.1 0.1 
Total financial assets $9,821  $5,312  $15,133 Total financial assets$13.5 $7.1 $20.6 
            
Financial Liabilities:            
SERP liabilities $--  $7,882  $7,882 
Financial liabilities:Financial liabilities:
Derivative financial instruments  --   89   89 Derivative financial instruments$— $0.1 $0.1 
Deferred compensation programs' liabilitiesDeferred compensation programs' liabilities— 6.1 6.1 
Total financial liabilities $--  $7,971  $7,971 Total financial liabilities$— $6.2 $6.2 
The Company reevaluates the volume of trading activity for each of its investments at the end of each quarter and adjusts the level within the fair value hierarchy as needed.  No investments changed hierarchy levels from December 31, 2016 to September 30, 2017.
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10


December 31, 2022
(in millions)Level 1Level 2Total
Financial assets:
Trading equity securities:
Deferred compensation programs' mutual funds$4.4 $— $4.4 
Preferred stocks0.3 — 0.3 
Equity funds0.6 — 0.6 
Trading debt securities:
Corporate bonds5.0 — 5.0 
Municipal bonds— 0.3 0.3 
Floating rate notes0.2 — 0.2 
U.S. government securities0.8 — 0.8 
Asset-backed securities— 5.4 5.4 
Other1.3 0.7 2.0 
Total financial assets$12.6 $6.4 $19.0 
Financial liabilities:
Deferred compensation programs' liabilities$— $5.7 $5.7 
Total financial liabilities$— $5.7 $5.7 
The trading equity investments noted above are valued at their fair value based on their quoted market prices, and the debt securities are valued based upon a mix of observable market prices and model driven prices derived from a matrix of observable market prices for assets with similar characteristics obtained with the assistance of a nationally recognized third party pricing service.  Additionally, a significant portion of the SERP's investments in trading equity securities are in money market and mutual funds.  As these money market and mutual funds are held in a SERP, they are also included in the Company's liability under its SERP.

Trading debt securities are comprised of marketable debt securities held by Astec Insurance. Astec Insurance has an investment strategy that focuses on providing regular and predictable interest income from a diversified portfolio of high-quality fixed income securities.

Net unrealized gains or losses incurred on investments held amounted to a net gain of $258 as of September 30, 2017 and a net loss of $107 as of December 31, 2016.

Note 7.  Debt
On April 12, 2017, the Company and certain of its subsidiaries entered into an amended and restated credit agreement whereby Wells Fargo extended to the Company an unsecured line of credit of up to $100,000, including a sub-limit for letters of credit of up to $30,000. There were no borrowings outstanding under the agreement (or the previous agreement) at any time during the nine-month period ended September 30, 2017.  Letters of credit totaling $8,594, including $6,200 of letters of credit issued to banks in Brazil to secure the local debt of Astec do Brasil Fabricacao de Equipamentos Ltda. ("Astec Brazil"), were outstanding under the credit facility as of September 30, 2017, resulting in additional borrowing ability of $91,406 under the credit facility. The credit agreement has a five-year term expiring in April 2022.  Borrowings under the agreement are subject to an interest rate equal to the daily one-month LIBOR rate plus a 0.75% margin, resulting in a rate of 1.99% as of September 30, 2017. The unused facility fee is 0.125%. Interest only payments are due monthly. The amended and restated credit agreement contains certain financial covenants, including provisions concerning required levels of annual net income and minimum tangible net worth.

The Company's South African subsidiary, Osborn Engineered Products SA (Pty) Ltd ("Osborn"), has a credit facility of $7,007 with a South African bank to finance short-term working capital needs, as well as to cover performance letters of credit, advance payment and retention guarantees. As of September 30, 2017, Osborn had no outstanding borrowings but had $1,044 in performance, advance payment and retention guarantees outstanding under the facility. The facility has been guaranteed by Astec Industries, Inc., but is otherwise unsecured. A 0.75% unused facility fee is charged if less than 50% of the facility is utilized. As of September 30, 2017, Osborn had available credit under the facility of $5,963. The interest rate is 0.25% less than the South Africa prime rate, resulting in a rate of 10.0% as of September 30, 2017.

The Company's Brazilian subsidiary, Astec Brazil, has outstanding working capital loans totaling $4,100 as of September 30, 2017 from Brazilian banks with interest rates ranging from 10.4% to 11.0%.  The loans' maturity dates range from November 2018 to April 2024 and the debts are secured by Astec Brazil's manufacturing facility and also by letters of credit totaling $6,200 issued by Astec Industries, Inc.  Additionally, Astec Brazil has various 5-year equipment financing loans outstanding with Brazilian banks in the aggregate of $805 as of September 30, 2017 that have interest rates ranging from 3.5% to 16.3%.  These equipment loans have maturity dates ranging from September 2018 to April 2020.  Astec Brazil's loans are included in the accompanying unaudited condensed consolidated balance sheets as current maturities of long-term debt ($2,689) and long-term debt ($2,216) as of September 30, 2017.

Note 8.5. 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 cost.
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Changes in the Company's product warranty liability for the three and nine-monthmonth periods ended September 30, 2017March 31, 2023 and 20162022 are as follows:


 
Three Months
Ended
September 30,
  
Nine Months
Ended
September 30,
 
 2017  2016  2017  2016 Three Months Ended March 31,
(in millions)(in millions)20232022
Reserve balance, beginning of the period $14,269  $11,858  $13,156  $9,100 Reserve balance, beginning of the period$11.9 $10.5 
Warranty liabilities accrued  3,594   4,835   11,842   13,135 Warranty liabilities accrued3.9 3.2 
Warranty liabilities settled  (3,888)  (5,442)  (11,072)  (11,011)Warranty liabilities settled(3.4)(2.4)
Other  14   256   63   283 
Reserve balance, end of the period $13,989  $11,507  $13,989  $11,507 Reserve balance, end of the period$12.4 $11.3 

Note 9.6. Accrued Loss Reserves

The Company records 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 $8,361 as of September 30, 2017$6.2 million and $7,892 as of$5.8 million at March 31, 2023 and December 31, 2016,2022, respectively, of which $5,635 and $5,040$3.9 million were included in other"Other long-term liabilitiesliabilities" in the accompanying unaudited condensed consolidated balance sheets as of September 30, 2017Consolidated Balance Sheets at both March 31, 2023 and December 31, 2016, respectively.2022.


Note 10.7. Income Taxes
The Company's combined effective
For the three months ended March 31, 2023, the Company recorded an income tax expense of $4.4 million, reflecting a 26.7% effective tax rate, was 50.7% and 41.5%compared to a $0.9 million income tax expense for the three-month periodsthree months ended September 30, 2017 and 2016, respectively.March 31, 2022, reflecting an 18.0% effective tax rate. The unusually highincome tax rateexpense for the third quarter of 2017 is due to the high percentage (asthree months ended March 31, 2023 was higher compared to the same period in 2022, primarily due to higher pretax loss for the third quarter of 2017) impact of the Company's federalbook income and valuation allowance increases related to a domestic production activities deductions,subsidiary, partially offset by a net discrete tax benefit related to a research and development tax credits and a favorable U.S. federal return to book adjustment on the Company's 2016 return. The Company's combined effective income tax rate was 31.1% and 37.6% for the nine-month periods ended September 30, 2017 and 2016, respectively.  The Company's effective tax rates for the three-month and nine-month periods ended September 30, 2017 and September 30, 2016 include the effect of state income taxes and other discrete items as well as a benefit for research and development credits.  The Company's effective tax rates for the three-month and nine-month periods ended September 30, 2017 also include a discrete benefit for favorable adjustments related to the 2016 tax returns.credit.

The Company's recorded liability for uncertain tax positions was $12.2 million and $12.0 million as of September 30, 2017 has increased by approximately $94 as compared toMarch 31, 2023 and December 31, 20162022, respectively. The increase is the result of $0.2 million of incremental reserves associated with the 2023
11

research and development credit. The Company does not anticipate a significant change in unrecognized tax benefits due primarily 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 increaseadverse 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, 2023, 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 estimated exposureperiods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties and/or interest assessments.

On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law. The IRA levies a 1% excise tax on net stock repurchases after December 31, 2022 and imposes a 15% corporate alternative minimum tax ("CAMT") for tax positions.years beginning after December 31, 2022. The Company did not repurchase any shares during the three months ended March 31, 2023. CAMT does not impact the Company's results of operations or financial position.


Note 8. Commitments and Contingencies

Certain customers have financed purchases of Company products through arrangements with third-party financing institutions. Under these arrangements, the Company is contingently liable for customer debt of $1.9 million and $2.4 million at March 31, 2023 and December 31, 2022, respectively. These arrangements expire at various dates running through September 2025. Additionally, the Company is also contingently liable for 1.75% of the unpaid balance, determined as of December 31 of the prior year (or approximately $0.1 million for 2023), on certain past customer equipment purchases that were financed by an outside finance company. 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 $0.8 million and $1.0 million related to these guarantees which were included in "Other current liabilities" in the Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, respectively.

The Company reviews off-balance sheet guarantees individually and at the loss pool level based on one agreement. 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 credit worthiness with respect to assessing credit losses related to off-balance sheet guarantees.

In addition, the Company is contingently liable under letters of credit issued under its $250.0 million revolving credit facility (the "Credit Facilities"), which outstanding letters of credit totaled $2.6 million as of March 31, 2023. The outstanding letters of credit expire at various dates through February 2024. The maximum potential amount of future payments under letters of credit issued under the Credit Facilities for which the Company could be liable is $30.0 million as of March 31, 2023. As of March 31, 2023, the Company's foreign subsidiaries are contingently liable for a total of $4.4 million in performance letters of credit, advance payments and retention guarantees, of which $2.9 million is secured by separate credit facilities with local financial institutions. The maximum potential amount of future payments under these letters of credit and bank guarantees for which the Company could be liable is $9.7 million as of March 31, 2023.

The Company and certain of its former executive officers were named as defendants in a putative shareholder class action lawsuit filed on February 1, 2019, as amended on August 26, 2019, in the United States District Court for the Eastern District of Tennessee. The action is styled City of Taylor General Employees Retirement System v. Astec Industries, Inc., et al., Case No. 1:19-cv-24-CEA-CHS. The complaint generally alleges that the defendants violated the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder, by making allegedly false and misleading statements and that the individual defendants were control persons under Section 20(a) of the Exchange Act. The complaint is filed on behalf of shareholders who purchased stock of the Company between July 26, 2016 and October 22, 2018 and seeks monetary damages on behalf of the purported class. On October 25, 2019, the defendants filed a Motion to Dismiss. On February 19, 2021, the Motion to Dismiss was granted with prejudice and judgment was entered for the defendants.On March 19, 2021, plaintiff filed a Motion to Alter or Amend the Judgment and For Leave to File the Proposed Amended Complaint, which was denied on May 5, 2021. Plaintiff appealed the Motion to Dismiss and denial of its Motion to Alter or Amend the Judgment and For Leave to File the Proposed Amended Complaint to the United States Court of Appeals for the Sixth Circuit. On March 31, 2022, the United States Court of Appeals for the Sixth Circuit issued an opinion reversing the dismissal of the Company and one former executive officer, affirming the dismissal of certain other former executive officers and remanding the action to the United States District Court for the Eastern District of Tennessee for proceedings consistent with the opinion. On July 11, 2022 Defendants filed an answer to the complaint, and the action is now in discovery.

The Company's GEFCO, Inc. ("GEFCO") subsidiary has been named a defendant in a lawsuit originally filed on August 16, 2018 with an amended complaint filed on January 25, 2019, in the United States District Court for the Western District of Oklahoma. The action is styled VenVer S.A. and Americas Coil Tubing LLP v. GEFCO, Inc., Case No. CIV-18-790-SLP. The complaint alleges breaches of warranty and other similar claims regarding equipment sold by GEFCO in 2013. In addition to seeking a rescission of the purchase contract, the plaintiff is seeking special and consequential damages. The original purchase price of
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the equipment was approximately $8.5 million. GEFCO disputes the plaintiff's allegations and intends to defend this lawsuit vigorously. On July 7, 2020, the plaintiffs filed a separate lawsuit directly against Astec Industries, Inc. that generally mirrored the allegations in the GEFCO suit. In January 2023, the court allowed Astec Industries, Inc. to be added as a defendant to the GEFCO suit and, as a result, the separate suit against Astec Industries, Inc. was dismissed. The Company disputes the plaintiffs' allegations and is vigorously defending the GEFCO suit. The Company is unable to determine whether or not a future loss will be incurred due to this litigation or estimate the possible loss or range of loss, if any, at this time.

In addition to the two matters noted above, 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.

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Note 9. Revenue Recognition

The following tables disaggregate the Company's revenue by major source for the three month periods ended March 31, 2023 and 2022 (excluding intercompany sales):

Three Months Ended March 31, 2023Three Months Ended March 31, 2022
(in millions)Infrastructure SolutionsMaterials SolutionsCorporate and OtherTotalInfrastructure SolutionsMaterials SolutionsCorporate and OtherTotal
Net Sales-Domestic:
Equipment sales$106.9 $67.7 $1.3 $175.9 $95.2 $45.6 $— $140.8 
Parts and component sales59.3 21.3 0.1 80.7 56.4 20.8 — 77.2 
Service and equipment installation revenue16.5 0.2 — 16.7 6.7 0.2 — 6.9 
Used equipment sales0.9 — — 0.9 1.7 — — 1.7 
Freight revenue6.9 2.1 — 9.0 6.6 1.6 — 8.2 
Other— (2.2)0.3 (1.9)0.1 (0.4)— (0.3)
Total domestic revenue190.5 89.1 1.7 281.3 166.7 67.8 — 234.5 
Net Sales-International:
Equipment sales24.2 13.4 2.0 39.6 16.6 14.7 — 31.3 
Parts and component sales13.0 9.8 0.1 22.9 12.3 9.7 — 22.0 
Service and equipment installation revenue1.0 0.9 0.2 2.1 1.2 0.7 — 1.9 
Used equipment sales0.4 0.4 — 0.8 0.2 0.5 — 0.7 
Freight revenue0.8 0.3 — 1.1 0.5 0.3 — 0.8 
Other— — 0.1 0.1 — — — — 
Total international revenue39.4 24.8 2.4 66.6 30.8 25.9 — 56.7 
Total net sales$229.9 $113.9 $4.1 $347.9 $197.5 $93.7 $— $291.2 
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Sales into major geographic regions were as follows:

Three Months Ended March 31,
(in millions)20232022
United States$281.3 $234.5 
Canada21.8 14.2 
Europe11.0 5.4 
Australia9.7 10.2 
Africa8.1 9.1 
South America (Excluding Brazil)5.6 5.2 
Brazil4.5 3.8 
Central America (Excluding Mexico)2.1 2.6 
Asia0.9 4.0 
Mexico0.8 0.7 
Other2.1 1.5 
Total foreign66.6 56.7 
Total net sales$347.9 $291.2 

As of March 31, 2023, the Company had contract assets of $5.6 million and contract liabilities, excluding customer deposits, of $5.7 million, including $2.5 million of deferred revenue related to extended warranties. As of December 31, 2022, the Company had contract assets of $3.8 million and contract liabilities, excluding customer deposits, of $5.5 million, including $2.9 million of deferred revenue related to extended warranties.

Note 11.10. Segment Information

The Company has threetwo reportable segments, each of which comprise sites based upon the nature of the products or services produced, the type of customer for the products, the similarity of economic characteristics, the manner in which management reviews results and the nature of the production process, among other considerations.

Segment Operating Adjusted EBITDA is comprisedthe measure of multiple business unitssegment profit or loss used by the Company's Chief Executive Officer, whom is determined to be the chief operating decision maker ("CODM"), to evaluate performance and allocate resources to the operating segments is Segment Operating Adjusted EBITDA. Segment Operating Adjusted EBITDA, a non-GAAP financial measure, is defined as net income or loss before the impact of interest income or expense, income taxes, depreciation and amortization and certain other adjustments that offerare not considered by the CODM in the evaluation of ongoing operating performance. The Company's presentation of Segment Operating Adjusted EBITDA may not be comparable to similar productsmeasures used by other companies and services and meetis not necessarily indicative of the requirements for aggregation. results of operations that would have occurred had each reportable segment been an independent, stand-alone entity during the periods presented.

A brief description of each segment is as follows:


Infrastructure Group - ThisSolutions – Sites within the Infrastructure Solutions segment consists of five business units, three of which design, engineer, manufacture and market a complete line of portable, stationary and relocatable hot-mix asphalt plants, wood pelletconcrete plants and their related components and ancillary equipment as well as supplying asphalt pavers, material transfer vehicles, stabilizers, milling machines, paver screedsroad construction equipment, industrial thermal systems and related ancillaryother heavy equipment. The other two business unitssites based in thisNorth America within the Infrastructure Solutions segment are primarily operate as Company-owned dealersmanufacturing operations while those located outside of North America, service and install equipment and provide parts in the foreign countriesregions in which they are domiciled. These two business units sell, service and installoperate for many of the products produced by the manufacturing subsidiariesall of the Company, and a majority of their sales are to customers in the infrastructure industry.Company's manufacturing sites. The principalprimary purchasers of the products produced by this groupsegment are asphalt and concrete producers, highway and heavy equipment contractors, wood pellet processorsutility contractors, forestry and environmental recycling contractors and domestic and foreign and domestic governmental agencies.


AggregateMaterials Solutions – Sites within the Materials Solutions segment design and Mining Group - Thismanufacture heavy processing equipment, in addition to servicing and supplying parts for the aggregate, metallic mining, recycling, ports and bulk handling markets. The sites within the Materials Solutions segment consistsare primarily manufacturing operations, with the AME site functioning to market, service and install equipment and provide parts in the regions in which they operate for many of eight business units that design, engineer, manufacturethe products produced by all of the Company's manufacturing sites. Additionally, the Materials Solutions segment offers consulting and market aengineering services to provide complete line of jaw crushers, cone crushers, horizontal shaft impactors, vertical shaft impactors, material handling, roll rock crushers and stationary rockbreaker systems, vibrating feeders and high frequency vibrating screens, conveyors, inclined, vertical and horizontal screens and sand classifying and washing equipment."turnkey" processing systems. The principal purchasers of products produced by this group areaggregate processing equipment include distributors, highway and heavy equipment contractors, sand and gravel producers, demolition, recycle and crushing contractors, open mine operators, quarry operators, port and inland terminal operators, highway and heavy equipment contractorsauthorities, power stations and foreign and domestic governmental agencies.

16
15


Energy Group - This segment consists of five business units that design, engineer, manufactureCorporate and market a complete line of drilling rigs for the oilOther – The Corporate and gas, geothermal and water well industries, high pressure diesel pump trailers for fracking and cleaning oil and gas wells, commercial and industrial burners, combustion control systems, a variety of industrial heaters to fit a broad range of applications including heating equipment for refineries, roofing material plants, chemical processing, rubber plants, oil sands and energy related processing, heat transfer processing equipment, thermal fluid storage tanks, waste heat recovery equipment, whole-tree pulpwood and biomass chippers and horizontal grinders. The principal purchasers of products produced by this group are oil, gas and water well drilling industry contractors, processors of oil, gas and biomass for energy production and contractors in the construction and demolition recycling markets. This group includes the operations of Power Flame Incorporated, which was acquired in August 2016.

Corporate - ThisOther category consists primarily of the parent company, the Company's captive insurance company, Astec Insurance, and the controls and automation business, units thatwhich do not meet the requirements for separate disclosure as an operating segment or inclusion in one of the other reporting segmentssegments. The parent company and includesthe captive insurance company provide support and corporate oversight for other sites. The controls and automation business manufactures hardware and software products that are marketed independently and included in certain products of the Company's parent company, Astec Industries, Inc., and Astec Insurance. The Company evaluates performance and allocates resources to its operating segments based on profit or loss from operations before U.S. federal income taxes and corporate overhead and thus these costs are included in the Corporate category.other segments.


The accounting policies of the reportable segments are the same as those described in the summaryNote 1, Basis of significant accounting policies.Presentation and Significant Accounting Policies. Intersegment sales and transfers between foreign subsidiaries are valued at prices comparable to those for unrelated parties.


Segment Information:
  Three Months Ended September 30, 2017 
  
Infrastructure
Group
  
Aggregate
and Mining
Group
  
Energy
Group
  Corporate  Total 
Net sales to external customers $98,676  $99,474  $53,904  $--  $252,054 
Intersegment sales  9,041   3,551   5,627   --   18,219 
Gross profit  1,773   23,838   13,422   51   39,084 
Gross profit percent  1.8%  24.0%  24.9%  --   15.5%
Segment profit (loss) $(12,529) $9,565  $4,460  $(2,975) $(1,479)

  Nine Months Ended September 30, 2017 
  
Infrastructure
Group
  
Aggregate
and Mining
Group
  
Energy
Group
  Corporate  Total 
Net sales to external customers $407,025  $307,205  $158,134  $--  $872,364 
Intersegment sales  17,500   13,003   18,234   --   48,737 
Gross profit  66,394   74,652   39,173   160   180,379 
Gross profit percent  16.3%  24.3%  24.8%  --   20.7%
Segment profit (loss) $15,545  $29,360  $10,355  $(27,666) $27,594 

  Three Months Ended September 30, 2016 
  
Infrastructure
Group
  
Aggregate
and Mining
Group
  
Energy
Group
  Corporate  Total 
Net sales to external customers $109,227  $85,819  $52,706  $--  $247,752 
Intersegment sales  5,324   10,063   4,108   --   19,495 
Gross profit  24,929   20,935   9,473   52   55,389 
Gross profit percent  22.8%  24.4%  18.0%  --   22.4%
Segment profit (loss) $9,858  $7,651  $805  $(11,610) $6,704 


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Three Months Ended March 31, 2023Three Months Ended March 31, 2022
(in millions)Infrastructure SolutionsMaterials SolutionsCorporate and OtherTotalInfrastructure SolutionsMaterials SolutionsCorporate and OtherTotal
Revenues from external customers$229.9 $113.9 $4.1 $347.9 $197.5 $93.7 $— $291.2 
Intersegment sales0.7 13.3 0.2 14.2 1.1 9.7 — 10.8 
Segment Operating Adjusted EBITDA27.3 15.3 (6.8)35.8 16.4 12.2 (9.8)18.8 


  Nine Months Ended September 30, 2016 
  
Infrastructure
Group
  
Aggregate
and Mining
Group
  
Energy
Group
  Corporate  Total 
Net sales to external customers $414,817  $277,393  $128,658  $--  $820,868 
Intersegment sales  13,009   20,859   13,718   --   47,586 
Gross profit  101,349   72,224   27,069   155   200,797 
Gross profit percent  24.4%  26.0%  21.0%  --   24.5%
Segment profit (loss) $51,394  $28,135  $3,237  $(40,745) $42,021 


A reconciliation of total segment profits (losses)Segment Operating Adjusted EBITDA to the Company's consolidated totals"Net income attributable to controlling interest" is as follows:


  
Three Months
Ended
September 30,
  
Nine Months
Ended
September 30,
 
  2017  2016  2017  2016 
Total segment profit (loss) $(1,479) $6,704  $27,594  $42,021 
Recapture (elimination) of intersegment profit  (1,224)  131   (858)  633 
Net income (loss)  (2,703)  6,835   26,736   42,654 
Net loss attributable to non-controlling
  interest in subsidiaries
  (36)  (3)  (137)  (119)
Net income (loss) attributable to controlling interest $(2,667) $6,838  $26,873  $42,773 

Three Months Ended March 31,
(in millions)20232022
Net income attributable to controlling interest
Segment Operating Adjusted EBITDA$35.8 $18.8 
Adjustments:
Transformation program(7.2)(5.3)
Restructuring and other related charges(7.1)(1.0)
Gain on sale of property and equipment, net3.4 — 
Transaction costs— (0.6)
Interest expense, net(1.5)(0.2)
Depreciation and amortization(6.3)(6.7)
Income tax provision(4.4)(0.9)
Elimination of intercompany profit(0.6)— 
Net income attributable to controlling interest$12.1 $4.1 

Note 12.  Contingent Matters11. Strategic Transformation and Restructuring and Other Asset Charges
Certain customers have financed purchases of Company products through arrangements in which the Company is contingently liable for customer debt of $3,765 as of September 30, 2017.  The maximum potential amount of future payments for which the Company would be liable was equal to $3,765 as of September 30, 2017.  These arrangements also provide that the Company will receive the lender's full security interest in the equipment financed if the Company is required to fulfill its contingent liability under these arrangements.  The Company has recorded a liability of $659 related to these guarantees as of September 30, 2017.

In addition, the Company is contingently liable under letters of credit issued by Wells Fargo totaling $8,594 as of September 30, 2017, including $6,200 of letters of credit that guarantee certain Astec Brazil bank debt.  The outstanding letters of credit expire at various dates through October 2020.  As of September 30, 2017, the Company's foreign subsidiaries are contingently liable for a total of $4,104 in performance letters of credit, advance payments and retention guarantees.  The maximum potential amount of future payments under these letters of credit and guarantees for which the Company could be liable is $12,698 as of September 30, 2017.


The Company is currentlyundergoing a partymulti-year phased implementation of a standardized enterprise resource planning ("ERP") system across the global organization, which will replace 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 various claimscloud-based platforms. This new ERP system will provide for standardized processes and legal proceedingsintegrated technology solutions that have arisenenable the Company to better leverage automation and process efficiency. An implementation of this scale is a major financial undertaking and requires substantial time and attention of management and key employees.

In addition, beginning in the ordinary coursefirst quarter of business.  If management believes that2022, a loss arising from such claims and legal proceedings is probable and can reasonably be estimated, the Company records the amountlean manufacturing initiative at one of the loss (excluding estimated legal fees) orCompany's largest sites was initiated and is expected to drive improvement in gross margin at that site. Gross margin improvements are expected to be realized in conjunction with the minimum estimated liability whenproject completion in early to mid-2024. This improvement is intended to serve as the loss is estimated using a rangeoptimal blueprint for the Company's other manufacturing facilities.

Costs incurred of $7.2 million and no point within the range is more probable than another.  As management becomes aware of additional information concerning such contingencies, any potential liability$5.3 million related to these matters is assessedstrategic transformational initiatives in the three months ended March 31, 2023 and 2022, respectively, are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

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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 the estimatesCompany may incur gains or losses on these disposals. Certain of the costs associated with these decisions are revised, if necessary.  If management believes that a loss arising from such claimsseparately identified as restructuring. The Company reports asset impairment charges and legal proceedings is either (i) probable but cannot be reasonably estimatedgains or (ii) reasonably possiblelosses on the sales of property and equipment collectively, with restructuring charges in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations to the extent they are experienced.

Restructuring charges and the net gain on sale of property and equipment are presented below:

Three Months Ended March 31,
(in millions)20232022
Restructuring charges:
Costs associated with leadership change and overhead restructuring$7.0 $— 
Costs associated with exited operations - Enid0.1 0.2 
Costs associated with closing Tacoma— 0.8 
Total restructuring related charges7.1 1.0 
Gain on sale of property and equipment, net:
Gain on sale of property and equipment, net(3.4)— 
Total gain on sale of property and equipment, net(3.4)— 
Restructuring and other asset charges, net$3.7 $1.0 

Restructuring charges by segment are as follows:

Three Months Ended March 31,
(in millions)20232022
Infrastructure Solutions$0.3 $1.0 
Corporate and Other6.8 — 
Total restructuring related charges$7.1 $1.0 

Net gains on sale of property and equipment by segment are as follows:

Three Months Ended March 31,
(in millions)20232022
Infrastructure Solutions$(3.4)$— 
Total gain on sale of property and equipment, net$(3.4)$— 

Restructuring charges accrued, but not probable,paid, were $2.5 million and $4.7 million as of March 31, 2023 and December 31, 2022, respectively.

In January 2021, the Company does not recordannounced plans to close the amount of the loss, but does make specific disclosure of such matter.  Based upon currently available informationTacoma facility in order to simplify 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 ofconsolidate 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.
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Note 13.  Shareholders' Equity
Under the Company's long-term incentive plans, key members of management may be issued restricted stock units ("RSUs") each year based upon the annual financial performance of the Company and its subsidiaries. The number of RSUs granted to employees each year is determined based upon the performance of individual subsidiaries and consolidated annual financial performance.  Generally, for RSUs granted through February 2016, each award will vestTacoma facility ceased manufacturing operations at the end of five years from2021. The transfer of the datemanufacturing and marketing of grant, or atTacoma product lines to other facilities within the time a recipient retires after reaching age 65, if earlier. Awards granted in February 2017 and thereafter will vest at the end of three years from the date of grant or at the time a recipient retires after reaching age 65, if earlier.  Additional RSUs are granted to the Company's outside directors under the Company's Non-Employee Directors Compensation Plan with a one year vesting period.

A total of 30 and 77 RSUs vestedInfrastructure Solutions segment was completed during the nine-month periodsfirst quarter of 2022. In conjunction with this action, the Company recorded $0.8 million of restructuring related charges during the three months ended September 30, 2017March 31, 2022 in "Restructuring and 2016, respectively.other asset charges, net" in the Consolidated Statements of Operations. The Company withheld 8recorded the Tacoma facility's land, building and 24 shares due to statutory payroll tax withholding requirements upon the vestingcertain equipment assets of the RSUs$15.4 million as held for sale in its Consolidated Balance Sheets at December 31, 2022. The sale of these assets was completed in the first nine monthsquarter of 2017 and 2016, respectively, and used2023 for $19.9 million. The Company funds to remitrecorded a gain on the related required minimum withholding taxes to the various tax authorities.  The vesting date fair valuesale of the RSUs that vested during the first nine months of 2017 and 2016 was $1,975 and $3,289, respectively.  The grant date fair value of the RSUs granted during the first nine months of 2017 and 2016 was $5,399 and $1,946, respectively.  Compensation expense of $2,057 and $1,697$3.4 million, which was recorded in "Restructuring and other asset charges, net" in the nine-month periods ended September 30, 2017Consolidated Statements of Operations.

Additional restructuring costs of $0.1 million and 2016, respectively, to reflect the fair value of RSUs granted (or anticipated to be granted for 2017 performance) to employees amortized over the portion of the vesting period occurring$0.2 million were incurred during the periods.three months ended March 31, 2023 and 2022, respectively, for the Company's exited oil and gas drilling product lines produced at its former Enid, Oklahoma ("Enid") location.


Effective as of January 6, 2023, Mr. Barry A. Ruffalo's employment as President and Chief Executive Officer was terminated. In connection with his separation, the Company entered into an agreement with Mr. Ruffalo (the "Separation Agreement") pursuant
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to which, Mr. Ruffalo was entitled to certain severance payments and benefits. During the first quarter of 2023, $1.8 million of restructuring costs, related to the modification of Mr. Ruffalo's equity awards and other third-party transition support costs, were recorded in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations. The related recovery of $1.6 million of incurred share-based compensation expense was recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations. The Separation Agreement also included a release and waiver by Mr. Ruffalo and other customary provisions.

Management continually reviews the Company's organizational structure and operations to ensure they are optimized and aligned with achieving near-term and long-term operational and profitability targets. In connection with this review, in February 2023, the Company implemented a limited restructuring plan to right-size and reduce the fixed cost structure of certain overhead departments. Charges of $5.3 million for employee termination costs, including equity award modifications, were incurred in the first quarter of 2023 and recorded in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations. The related recovery of $0.8 million of incurred share-based compensation expense was recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

Note 14.  Other Income, Net12. 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 Expenses
Other income, net of expenses for the three and nine-month periods ended September 30, 2017 and 2016 is presented below:

  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2017  2016  2017  2016 
Interest income $735  $178  $1,067  $621 
Gain (loss) on investments  (38)  (26)  3   (41)
License fee income  301   247   626   503 
Other  115   106   190   241 
  Total $1,113  $505  $1,886  $1,324 

Note 15.  Derivative Financial Instruments
The Company is exposed to certain risks related to its ongoing business operations. The primary risk managed by using derivative instruments is foreign currency risk.  From time to time the Company's foreign subsidiaries enter into foreign currency exchange contracts to mitigate exposure to fluctuations in currency exchange rates.  The fair value of the derivative financial instruments is recorded on the Company's balance sheet and is adjusted to fair value at each measurement date.  The changes in fair value are recognized in the accompanying unaudited consolidated statements of operations in the current period.  The Company does not engage in speculative transactions nor does it hold or issue financial instruments for trading purposes.  The average U.S. dollar equivalent notional amount ofcommon shares outstanding foreign currency exchange contracts was $11,256 during the nine-month period ended September 30, 2017. The Company reported $32reporting period. Diluted earnings per common share includes the dilutive effect of derivative assets in other current assets and $261 of derivative liabilities in other current liabilities at September 30, 2017. At December 31, 2016, the Company reported $144 of derivative assets in other current assets and $89 of derivative liabilities in other current liabilities.  The Company recognized, as a component of cost of sales, net losses of $291 and $383 on the changes in fair value of derivative financial instruments in the three-month periods ended September 30, 2017 and 2016, respectively. The Company recognized, as a component of cost of sales, net losses of $683 and $897 on the changes in fair value of derivative financial instruments in the nine-month periods ended September 30, 2017 and 2016, respectively.  There were no derivatives that were designated as hedges at September 30, 2017.
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Note 16.  Business Combination
 The Company acquired substantially all of the assets and certain liabilities of Power Flame Incorporated ("PFI") for a total purchase price of $39,765 on August 1, 2016. The purchase price was paid in cash with $4,000 deposited into escrow for a period of time not to exceed two years pending final resolution of certain post-closing adjustments and any indemnification claims. The Company's allocation of the purchase price resulted in the recognition of $12,632 of goodwill and $17,990 of other intangible assetscommon stock equivalents, consisting of technology (19 year useful life), trade names (15 year useful life)restricted stock units, performance stock units and customer relationships (18 year useful life). The revenues and results of operations of PFI were not significant in relation to the Company's consolidated financial statements for the period ended December 31, 2016 and would not have been material on a proforma basis to any earlier period. PFI's operating results are included in the Energy Group beginning in the third quarter of 2016.

PFI, located in Parsons, Kansas, began operations in 1948 and manufactures and sells gas, oil and combination gas/oil and low NOx burners with outputs ranging from 400 thousand BTU's per hour to 120 million BTU's per hour as well as combustion control systems designed for commercial, industrial and process heating applications.

Note 17.  Subsequent Event
On October 1, 2017, the Company acquired substantially all of the assets and liabilities of RexCon LLC ("RexCon") for a total purchase price of $26,008. The purchase price was paid in cash with $3,000 deposited into escrow for a period of time not to exceed eighteen months pending final resolution of certain post-closing adjustments and any indemnification claims.  The revenues and results of operations of RexCon were not significant in relation to the Company's consolidated financial statements for the period ended September 30, 2017 and would not have been material on a proforma basis to any earlier period.  RexCon's operating results are expected to be includedstock held in the Company's Energy Group beginningsupplemental executive retirement plan, using the treasury stock method. 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 fourth quartercomputation of 2017.basic and diluted earnings per common share:


RexCon, located in Burlington, Wisconsin since 2009, was founded in 2003 through an asset acquisition with the original company being founded over 100 years ago.  RexCon is a manufacturer of high-quality stationary and portable, central mix and ready mix concrete batch plants, concrete mixers and concrete paving equipment. RexCon specializes in providing portable, high-production concrete equipment to contractors and producers worldwide in a totally integrated turnkey production system, including customized site layout and design engineering, batch plants, mixers, water heaters and chillers, ice production and delivery systems, material handling conveyors, gensets and power distribution, cement silos and screws, central dust collection, aggregate heating and cooling systems, batch automation controls, and batch office trailers.

Three Months Ended March 31,
20232022
Denominator:
Denominator for basic earnings per common share22,655,821 22,782,476 
Effect of dilutive securities87,116 121,691 
Denominator for diluted earnings per common share22,742,937 22,904,167 
Antidilutive securities excluded from the calculation of diluted earnings per share63,949 — 
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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, 2022. 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 made pursuant towithin the safe harbor provisionsmeaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations, operating improvements, businesses in which we operate and the United States and global economies. Statements contained anywhere in this Quarterly Report on Form 10-Q that are not limited to historical information are considered forward-looking statements within the meaning of Section 27Ahereby 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 Securities Act of 1933 and Section 21Eopinion," or use of the Securities Exchange Act of 1934 and are sometimes identified by the words "will," "would," "should," "could," "may," "believes," "anticipates," "intends," "forecasts" and "expects"future tense and similar expressions.  Such forward-looking statements include, without limitation, statements regarding the Company's expected sales and results of operations during 2017, the Company's expected capital expenditures in 2017, the expected benefit and impact of financing arrangements, the ability of the Company to meet its working capital and capital expenditure requirements through November 2018, the amount and impact of any currentwords or future state or federal funding for transportation construction programs, the need for road improvements, the amount and impact of other public sector spending and funding mechanisms, changes in the economic environment as it affects the Company, the market confidence of customers and dealers, the Company being called upon to fulfill certain contingencies, the expected dates of granting of restricted stock units, changes in interest rates and the impact of such changes on the financial results of the Company, changes in the prices of steel and oil and the impact of such changes generally and on the demand for the Company's products, customer's buying decisions, the Company's business, the ability of the Company to offset future changes in prices in raw materials, the change in the strength of the dollar and the level of the Company's presence and sales in international markets, the impact that further development of domestic oil and natural gas production capabilities would have on the domestic economy and the Company's business, the seasonality of the Company's business, the Company's investments, the percentage of the Company's equipment sold directly to end users, the amount or value of unrecognized tax benefits, the impact of IRS tax regulations, payment of dividends by the Company, and the ultimate outcome of the Company's current claims and legal proceedings.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 discusseddescribed 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, 2022, 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 the Companyus on the date hereof, and the Company assumeswe assume no obligation to update any such forward-looking statements to reflect future events or circumstances.circumstances, except as required by law.


The risks and uncertainties identified herein 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 the Company's Annual Report on Form 10-K for the year ended December 31, 2016, should be carefully considered when evaluating the Company's business and future prospects.

Overview
The Company is a leading manufacturer and seller of equipment for the road building, aggregate processing, geothermal, water, oil and gas, and wood processing industries. The Company's businesses:

·design, engineer, manufacture and market equipment used in each phase of road building, including mining, quarrying and crushing the aggregate, mobile bulk and material handling solutions, producing asphalt or concrete, recycling old asphalt or concrete and applying the asphalt;

·design, engineer, manufacture and market additional equipment and components, including equipment for geothermal drilling, water, oil and natural gas drilling, industrial heat transfer, wood chipping and grinding, wood pellet processing, commercial and industrial burners, combustion control systems; and

·manufacture and sell replacement parts for equipment in each of its product lines.

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The Company, as we refer to it herein, consists of a total of 20 companies that are consolidated in our financial statements, which includes 16 manufacturing companies, two companies that operate as dealers for the manufacturing companies, a captive insurance company and the parent company.  The forgoing does not give effect to RexCon, Inc., which was added effective October 1, 2017 as described below. The companies fall within three reportable operating segments: the Infrastructure Group, the Aggregate and Mining Group and the Energy Group.

Infrastructure Group- This segment consists of five business units, three of whichWe design, engineer, manufacture and market a complete line of asphalt plants, asphalt pavers, wood pellet plantsequipment and components used primarily in road building and related componentsconstruction activities, as well as certain other products. Our products are used in each phase of road building, from quarrying and ancillary equipment. The two remaining companies incrushing the Infrastructure Group primarily sell, service and install equipment produced by the manufacturing subsidiariesaggregate to application of the Company, with the majority of sales to the infrastructure industry.

Aggregateroad surface for both asphalt and Mining Group- This segment consists of eight business units that design,concrete. We also manufacture and market heavycertain equipment and parts incomponents unrelated to road construction, including equipment for the aggregate, metallic mining, quarrying, recycling, portsconstruction and bulk handling industries.

Energy Group- This segment consists of five business units that design, manufacturedemolition industries and market heaters, gas, oilport and combination gas/oil burners, combustion control systems, drilling rigs, concrete plants, wood chippers and grinders, pump trailers,rail yard operators; industrial heat transfer equipment; commercial whole-tree pulpwood chippers; horizontal grinders; blower trucks; commercial and industrial burners,burners; and combustion control systems, storagesystems.

Our products are marketed both domestically and internationally primarily to asphalt producers; highway and heavy equipment contractors; utility contractors; sand and relatedgravel producers; construction, demolition, recycle and crushing contractors; mine and quarry operators; port and inland terminal authorities; power stations; and domestic and foreign government agencies. In addition to equipment sales, we manufacture and sell replacement parts for equipment in each of our product lines and replacement parts for some competitors' equipment. The distribution and sale of replacement parts is an integral part of our business.

See Note 10, Segment Information, of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion of our reportable segments.


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Executive Summary

Highlights of our financial results for the three months ended March 31, 2023 as compared to the oilsame period of the prior year include the following:

Net sales were $347.9 million, an increase of 19.5%

Gross profit was $89.2 million, an increase of 37.9%

Income from operations increased $13.6 million to $17.6 million

Net income attributable to Astec increased 195.1% to $12.1 million

Diluted earnings per share were $0.53, an increase of 194.4%

Backlog of $800.2 million, a decrease of 4.1% as compared to March 31, 2022

Significant Items Impacting Operations in 2023

Strategic Transformation – We are undergoing a multi-year phased implementation of a standardized ERP system across our global organization, which will replace much of our existing disparate core financial systems. The upgraded ERP will initially convert our internal operations, manufacturing, finance, human capital resources management and gas, construction,customer relationship systems to cloud-based platforms. This new ERP system will provide for standardized processes and water well industries.  The forgoing does not give effectintegrated technology solutions that enable us to RexCon, Inc.,better leverage automation and process efficiency. An implementation of this scale is a major financial undertaking and requires substantial time and attention of management and key employees. We materially completed the ERP global design in 2022, launched the human capital resources module in our locations in the United States in January 2023 and expect to convert the operations of one manufacturing site along with Corporate in 2023 to set the foundation before accelerating the implementation at additional manufacturing sites. We anticipate incurring total costs associated with the ERP implementation in the range of $125 to $150 million, with an estimated $25 to $30 million incurred per year beginning in 2022.

In addition, in the first quarter of 2022, a lean manufacturing initiative at one of our largest sites was initiated and is expected to drive improvement in gross margin at that site. We substantially completed the design efforts for this project during 2022. We also began executing investments to acquire and install manufacturing equipment intended to drive increased efficiencies in our production processes. We plan to continue these capital investments during 2023, which was added effective October 1, 2017are anticipated to be completed by the end of the year. Gross margin improvements are expected to be realized in conjunction with the project completion in early to mid-2024. This improvement is intended to serve as described below.the optimal blueprint for our other manufacturing facilities.


Individual Company subsidiariesWe incurred $7.2 million of non-capitalizable costs directly associated with these strategic transformation initiatives during the three months ended March 31, 2023. These costs are included in "Selling, general and administrative expenses" in the compositionConsolidated Statements of Operations. Additionally, at March 31, 2023, we have capitalized $23.1 million in deferred implementation costs associated with the ERP implementation that will be amortized ratably over the remaining contract term once the ERP is ready for use, of which $2.3 million and $20.8 million were included in "Prepaid expenses and other assets" and "Other long-term assets" in the Consolidated Balance Sheets, respectively.

Tacoma Site Closure In January 2021, we announced plans to close the Tacoma facility in order to simplify and consolidate operations. The Tacoma facility ceased manufacturing operations at the end of 2021. The transfer of the Company's segments are as follows:

1.
Infrastructure Group – Astec, Inc., Roadtec, Inc., Carlson Paving Products, Inc., Astec Australia, Pty Ltd and Astec Mobile Machinery GmbH.
2.
Aggregate and Mining Group – Telsmith, Inc., Kolberg-Pioneer, Inc., Johnson Crushers International, Inc., Osborn Engineered Products SA (Pty) Ltd, Breaker Technology, Inc., Astec Mobile Screens, Inc., Astec do Brasil Fabricacao de Equipamentos LTDA and Telestack Limited.

3.
Energy Group – Heatec, Inc., CEI, Inc., GEFCO, Inc., Peterson Pacific Corp. and Power Flame Incorporated (beginning in August 2016).  RexCon, Inc., a manufacturer of high-quality stationary and portable, central mix and ready mix concrete batch plants, concrete mixers and concrete paving equipment was added to this group effective October 1, 2017 upon the acquisition of substantially all of the assets and liabilities of RexCon LLC.

manufacturing and marketing of Tacoma product lines to other facilities within the Infrastructure Solutions segment was completed during the first quarter of 2022. The Company also has one other category, Corporate, that contains the business units that do not meet the requirementsTacoma facility's land, building and certain equipment assets of $15.4 million were included in "Assets held for separate disclosure as a separate operating segment or inclusion in one of the other reporting segments. The business unitssale" in the Corporate categoryConsolidated Balance Sheets at December 31, 2022. The sale of these assets was completed in the first quarter of 2023 for $19.9 million. We recorded a $3.4 million gain for the sale of these assets in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations.

Leadership Change and Overhead Restructuring As previously announced on January 6, 2023, Mr. Barry A. Ruffalo's employment as President and Chief Executive Officer was terminated and he was succeeded by Mr. Jaco van der Merwe. In accordance with the terms of Mr. Ruffalo's separation agreement, we recorded $1.8 million of restructuring costs related to the modification of Mr. Ruffalo's equity awards as well as third-party transition support costs in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations. The related recovery of $1.6 million of incurred share-based compensation expense was recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

Management continually reviews our organizational structure and operations to ensure they are Astec Insurance Company ("Astec Insurance" or "the captive")optimized and Astec Industries, Inc.,aligned with achieving our near-term and long-term operational and profitability targets. In connection with this review, in February 2023, we implemented a limited restructuring plan to right-size and reduce the parent company. These two companies provide supportfixed cost structure of certain overhead departments. Charges of $5.3 million for employee termination costs, including equity award modifications, were incurred in the first quarter of 2023 in "Restructuring and corporate oversight for allother asset charges, net" in the companies that fall withinConsolidated Statements of Operations. The related recovery of $0.8
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million of incurred share-based compensation expense was recorded in "Selling, general and administrative expenses" in the reportable operating segments.Consolidated Statements of Operations.


The Company'sIndustry and Business Condition

Our financial performance is affected by a number of factors, including the cyclical nature and varying conditions of the markets it serves.we serve. Demand in these markets fluctuates in response to overall economic conditions and is particularly sensitive to the amount of public sector spending on infrastructure development, privately funded infrastructure development changes in the price of crude oil, which affects the cost of fuel and liquid asphalt, and changes in the priceprices of liquid asphalt, oil, natural gas and steel. In addition, many of our markets are highly competitive, and our products compete worldwide with similar products produced and sold by a number of other manufacturers and dealers.


Backlog represents the dollar value of orders for equipment and parts which are expected to be recognized in net sales in the future. Orders are contractually binding purchase commitments from customers, which are included in backlog when we are in receipt of an executed contract and any required deposits or security and have not yet been recognized into net sales. Certain orders for which we have received binding letters of intent or contracts will not be included in backlog until all required contractual documents and deposits are received. Backlog is not a measure defined by U.S. GAAP, and our methodology for determining backlog may vary from the methodology used by other companies in determining their backlog amounts. In addition, our backlog should not necessarily be viewed as an accurate indicator of revenue for any particular period.

Backlog levels provide management and investors additional details surrounding the expectation of committed orders that are expected to convert to future net sales. Management uses backlog information for capacity and resource planning as well as to monitor inventory levels in our facilities relative to expected future net sales.

Our $800.2 million backlog of orders at March 31, 2023 continues to remain strong. The Company believesbacklog of orders decreased $34.5 million, or 4.1%, compared to $834.7 million as of March 31, 2022 and decreased 12.3% from $912.7 million at December 31, 2022. The decrease in backlog was driven by strong first quarter 2023 sales volumes outpacing new orders compared to a build of backlog throughout 2022 largely due to strong customer demand and logistics and manufacturing throughput disruptions. We expect backlog levels to normalize from the historically high levels we have experienced in recent years based on macroeconomic factors such as high inflation and rising interest rates influencing customer spending. Additionally, we are focused on prudent expansion of our production capacity that federal highway funding influenceswe anticipate will allow us to more effectively convert backlog to sales in the purchasing decisions of the Company's customers, who are typically more comfortable making capital equipment purchases with long-term federal legislation in place. future.

Federal funding provides for approximately 25%a significant portion of all highway, street, roadway and parking construction in the United States.
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In July 2012, We believe that federal highway funding influences the "Moving Ahead for Progresspurchasing decisions of our customers, who are typically more amenable to making capital equipment purchases with long-term federal legislation in the 21st Century Act" ("Map-21") was approved by the U.S. federal government, which authorized $105 billion of federal spending on highway and public transportation programs through fiscal year 2014. In August 2014, theplace. The U.S. government approved short-term funding of $10.8enacted the Infrastructure Investment and Jobs Act ("IIJA") in November 2021. The IIJA allocates $548 billion through May 2015. Federal transportation funding operated on short-term appropriations until December 4, 2015 when the Fixing America's Surface Transportation Act ("FAST Act") was signed into law. The $305 billion FAST Act approved funding for highways of approximately $205 billion and transit projects of approximately $48 billion forin government spending to new infrastructure over the five-year period ending September 30, 2020.

The Company believes aconcluding in 2026, with certain amounts specifically allocated to fund highway and bridge projects. We believe that multi-year highway programprograms (such as the FAST Act)IIJA) will have the greatest positive impact on the road construction industry and allow itsour customers to plan and execute longer-term projects, but given the inherent uncertainty in the political process, the level of governmental funding for federal highway projects will similarly continue to be uncertain. In late 2016, the newly-elected administration stated one of its priorities would be a new infrastructure bill including increased funding for roads, bridges, tunnels, airports, railroads, ports and waterways, pipelines, clean water infrastructure, energy infrastructure and telecommunication needs. The funding for the bill as proposed would rely in part on direct federal spending as well as increased private sector funding in exchange for federal tax credits. Governmental funding that is committed or earmarked for federal highway projects is always subject to repeal or reduction. Although continued funding under the FAST Act or funding of a bill passed by the new administration is expected, it may be at lower levels than originally approved or anticipated.  In addition, Congress could pass legislation in future sessions that would allow for the diversion of previously appropriated highway funds for other purposes, or it could restrict funding of infrastructure projects unless states comply with certain federal policies. The level of future federal highway construction is uncertain and any future funding may be at levels lower than those currently approved or that have been approved in the past.projects.

The public sector spending described above is needed to fund road, bridge and mass transit improvements. The Company believes that increased funding is unquestionably needed to restore the nation's highways to a quality level required for safety, fuel efficiency and mitigation of congestion. In the Company's opinion, amounts needed for such improvements are significantly greater than amounts approved to date, and funding mechanisms such as the federal usage fee per gallon of gasoline, which is still at the 1993 level of 18.4 cents per gallon, would likely need to be increased along with other measures to generate the funds needed.

In addition to public sector funding, the economies in the markets the Company serves, the price of oil and its impact on customers' purchasing decisions and the price of steel may each affect the Company's financial performance. Economic downturns generally result in decreased purchasing by the Company's customers, which, in turn, causes reductions in sales and increased pricing pressure on the Company's products. Rising interest rates also typically negatively impact customers' attitudes toward purchasing equipment. The Federal Reserve has maintained historically low interest rates in response to the economic downturn which began in 2009; however, the Federal Reserve raised the Federal Funds Rate in 2016 and again in March and June 2017, and may implement additional increases in the future.


Significant portions of the Company'sour revenues from the Infrastructure GroupSolutions segment relate to the sale of equipment involved in the production, handling, recycling or installationapplication of asphalt mix. Liquid asphalt is a by-product of oil production.refining. An increase or decrease in the price of oil impacts the cost of asphalt, which is likely to alter demand for asphalt and therefore affect demand for certain Companyof our products. While increasing oil prices may have a negative financial impact on many of the Company'sour customers, the Company'sour equipment can use a significant amount of recycledreclaimed asphalt pavement, thereby partially mitigating the effect of increased oil prices on the final cost of asphalt for the customer. The Company continuesWe continue to develop products and initiatives to reduce the amount of oil and related products required to produce asphalt mix.asphalt. Oil priceprices stabilized at relatively high levels during the fourth quarter of 2022 and have continued to remain consistent through the first quarter of 2023. Price volatility makescontinues to make it difficult to predict the costs of oil-based products used in road construction such as liquid asphalt and gasoline. Oil prices rose during much of 2016have routinely fluctuated in recent years and have continuedare expected to continue to fluctuate duringin the first nine months 2017 due primarily to weather related impacts. Minor fluctuations infuture. Based on the current macroeconomic environment we anticipate that oil prices should not have a significant impact on customers' buying decisions. Other factors such as political uncertainty in oil producing countries, interruptions in oil production due to disasters, whether natural or man-made, or other economic factors could significantly impact oil prices, which could negatively impact demand for the Company's products. However, the Company believes the continued funding of the FAST Act federal highway bill passed in December 2015 has greater potential to impact the buying decisions of the Company's customers than does the fluctuation of oil prices in 2017 and 2018.will remain at relatively high levels throughout 2023.
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Contrary to the impact of oil prices on many of the Company's Infrastructure Group products as discussed above, the products manufactured by the Energy Group, which are used in drilling for oil and natural gas, in heaters for refineries and oil sands, and in double fluid pump trailers for fracking and oil and gas extraction, would benefit from higher oil and natural gas prices, to the extent that such higher prices lead to increased development in the oil and natural gas production industries. The Company believes further development of domestic oil and natural gas production capabilities is needed and would positively impact the domestic economy and the Company's business.

Steel is a major component inof our equipment. Driven by supply constraints, steel prices increased throughout the Company's equipment. Steel prices stabilized inprior year, stabilizing at historically high levels at the thirdend of 2022, which we expect to carry through into the second quarter of 2017 after increasing2023. During 2022, we observed a slowing in market demand and reduced lead times as buyers were responding to recessionary pressures and restricted their purchases to near-term needs. However, lead times have increased during the first half of 2017.  The Company expects seasonal declines during the fourth quarter of 20172023 and moderate increaseswe anticipate that steel demand will remain relatively strong during 2023, driven by the first half of 2018.  The Company continuesIIJA domestically and impacted by international production capacity restrictions. We continue to utilize forward-looking contracts (with no minimum or specified quantity guarantees) coupled with advanced steel purchasesemploy flexible strategies to ensure supply and minimize the impact of any price increases. The Company will reviewvolatility. Potential ongoing constraints in the trendssupply of certain steel products may continue pressuring the availability of other components used in our manufacturing process.Furthermore, given the volatility of steel prices and the nature of our customers' orders, we may not be able to pass through all increases in steel prices duringcosts to our customers, which negatively impacts our gross profit and margins.

We actively manage our global supply chain for any identified constraints and volatility. Supply chain constraints have eased recently; however, we continue to experience challenges related to vendor capacity, albeit at a decreasing number of suppliers.
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As a result, we have elevated lead times in certain components used in our manufacturing processes. We are continuing to focus on identifying and qualifying alternative suppliers wherever possible, which has helped alleviate the fourth quarter of 2017 into early 2018challenges in our supply chain. We also continually monitor potential future supply costs and establishavailability in an effort to proactively address challenges that might occur. We cannot estimate the full impact that any future contract pricing accordingly.disruptions might have on our operations.


In addition, while we have continued to the factors stated above, manyexperience shortages of the Company's markets are highly competitive, and its products compete worldwide with a number of other manufacturers and dealers that produce and sell similar products. From 2010 through mid-2012, a weak U.S. dollar, combined with improving economic conditionsnecessary production personnel in certain foreign economies, hadmarkets we have seen a positive impact onslight easing in the Company's international sales. From mid-2012 through September 30, 2017, the strong U.S. dollar has negatively impacted pricing in certain foreign markets the Company serves. While the exchange rates with many of the countries in which the Company operates have improved somewhattight labor market. However, higher turnover during the first ninepandemic periods of 2020 through 2022 have contributed to lower tenured production staff. Higher labor costs to attract staff in our manufacturing operations are normalizing at elevated levels. We continue to adjust our production schedules and manufacturing workload distribution, outsource components, implement efficiency improvements and actively modify our recruitment process and compensation and benefits to attract and retain production personnel in our manufacturing facilities.

Whenever possible, we attempt to cover increased costs of production by adjusting the prices of our products. Backlog fulfillment times from the initial order to completing the contracted sale vary and can extend past twelve months of 2017,with the Company expects the U.S. dollar to remain strong as compared to historical ratesgrowth we have experienced in the near term relativebacklog. For this reason, we have limitations on our ability to most foreign currencies. Increasing domestic interest rates or weakening economic conditions abroad could cause the U.S. dollarpass on cost increases to continue to strengthen, which could negatively impact the Company's international sales.

In the United States and internationally, the Company's equipment is marketed directly toour customers as well as through dealers. During 2016, approximately 75% to 80% of equipment sold by the Company was sold directly to the end user. The Company expects this ratio to be between 65% and 70% for 2017.

The Company is operated on a decentralized basis with a complete management team for each operating subsidiary. Finance, insurance, legal, shareholder relations, corporate accountingshort-term basis. In addition, the markets we serve are competitive in nature, and other corporate matters are primarily handled atcompetition limits our ability to pass through cost increases in many cases. Through our operational excellence initiatives, we also strive to minimize the corporate level (i.e., Astec Industries, Inc., the parent company). The engineering, design, sales,effect of inflation through cost reductions and improved manufacturing and basic accounting functions are handled at each individual subsidiary. Standard accounting procedures are prescribed and followed in all reporting.efficiencies.


During 2016, the Company implemented revised profit sharing plans whereby corporate officers, subsidiary presidents and other employees at each subsidiary have the opportunity to earn profit sharing incentives based upon the Company's and/or the individual groups or subsidiaries' return on capital employed, EBITDA margin and safety.  Corporate officers' and subsidiary presidents' awards when calculated at targeted performance are between 35% and 100% of their base salary, depending upon their responsibilities, and the plans allow for awards of up to 200% of the target. Each subsidiary has the opportunity to earn up to 10% of its after-tax profit as a profit sharing incentive award to be paid to its employees.

The Company also implemented revised long-term incentive plans during 2016 whereby corporate officers, subsidiary presidents and other corporate or subsidiary management employees will be awarded Restricted Stock Units ("RSUs") if certain goals are met based upon the Company's Total Shareholder's Return ("TSR") as compared to a peer group and the Company's pretax profit margin. The grant date value of corporate officers' and subsidiary presidents' awards when calculated at targeted performance are between 20% and 100% of their base salary, depending upon their responsibilities, and the plans allow for awards of up to 200% of the target. Additional RSUs may be granted to other key subsidiary management employees based upon individual subsidiary profits.
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Results of Operations


Net Sales

Net sales for the thirdfirst quarter of 20172023 were $252,054$347.9 million compared to $247,752$291.2 million for the thirdfirst quarter of 2016,2022, an increase of $4,302$56.7 million or 1.7%19.5%. Sales are generatedThe increase in net sales was primarily from new equipment and parts sales to domestic and international customers.  Sales increaseddriven by changes in the Aggregatevolume, pricing and Mining Groupmix of sales that generated increases in (i) equipment sales of $43.4 million, (ii) service and the Energy Group butequipment installation revenue of $10.0 million, (iii) parts and component sales of $4.4 million and (iv) freight revenue of $1.1 million. These increases were partially offset by a decrease in other revenue of $1.5 million, primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers and decreased used equipment sales of $0.7 million. Included in the Infrastructure Group.  During the third quarterthese net increases is $3.9 million of 2017, the Company identified significant design issues at its customers' Georgia and Arkansas wood pellet plants.  As the Company is financing the Georgia plant, no revenues have been recorded to date related to this order; however, the Company has been recording revenue on the Arkansas plant order under the percent of completion method.  Due to the identification of the design issues in the third quarter of 2017, the Company increased its estimate of the remaining costs to complete the Arkansas pellet plant order which resulted in negative $13,405 pellet plant revenue for the third quarter of 2017.  Pellet plant revenue for the third quarter of 2016 was $19,139.  Domesticincremental net sales and backlogs not related to pellet plants continue to be positively impacted by effects of the long-term federal highway bill enacted in December 2015 and other state and local funding mechanisms.  International sales are showing improvement due to increased order activity resulting from pent up demand, improved global market conditions, the stabilization of the U.S. dollar in certain foreign markets and a slight recovery in the mining and oil and gas sectors coupled with the Company's strategy of keeping its sales and service structure in place during the recent downturn.an acquired business. Sales reported by the Company'sour foreign subsidiaries in U.S. dollars for the thirdfirst quarter of 20172023 would have been $1,106 lower$3.3 million higher had 2017 foreign exchange rates been the same as third quarter 20162022 rates.


Net sales for the nine months ending September 30, 2017 were $872,364 compared to $820,868 for the same period in 2016, an increase of $51,496 or 6.3%. Sales are generated primarily from new equipment and parts sales to domestic and international customers.  Sales increased in the Aggregate and Mining Group and the Energy Group but decreased in the Infrastructure Group.  Pellet plant sales were $2,370 and $64,589 for the nine months ended September 30, 2017 and 2016, respectively.  Domestic sales not related to pellet plants continue to be positively impacted by effects of the long-term federal highway bill enacted in December 2015 and other state and local funding mechanisms.  International sales improved due to increased order activity resulting from pent up demand, improved global market conditions, the stabilization of the U.S. dollar in certain foreign markets and a slight recovery in the mining and oil and gas sectors coupled with the Company's strategy of keeping its sales and service structure in place during the recent downturn.  Sales reported by the Company's foreign subsidiaries in U.S. dollars for the nine months ending September 30, 2017 would have been $1,412 lower had 2017 foreign exchange rates been the same as rates for the nine months ending September 30, 2016.

Domestic sales for the thirdfirst quarter of 20172023 were $196,478$281.3 million, or 78.0%80.9% of consolidated net sales, compared to $199,851$234.5 million, or 80.7%80.5% of consolidated net sales, for the thirdfirst quarter of 2016, a decrease2022, an increase of $3,373$46.8 million, or 1.7%20.0%. Domestic sales for the third quarter of 2017 as compared to the third quarter of 2016 decreased by $14,077 in the Infrastructure Group (primarilyincreased primarily due to the $32,544 decline(i) $35.1 million higher equipment sales, (ii) $9.8 million higher service and equipment installation revenue, (iii) $3.5 million higher parts and component sales and (iv) $0.8 million higher freight revenue. These increases were partially offset by decreased other revenue of $1.6 million, primarily driven by higher utilization of our interest subsidy programs offered to certain of our dealer customers and decreased used equipment sales of $0.8 million. Included in pellet plantthese increases is $1.5 million of incremental net sales between periods discussed above) and $175 in the Energy Group but increased $10,879 in the Aggregate and Mining Group.from an acquired business.


Domestic
International sales for the nine months ending September 30, 2017first quarter of 2023 were $686,883$66.6 million, or 78.7%19.1% of consolidated net sales, compared to $676,310$56.7 million, or 82.4%19.5% of consolidated net sales, for the same period in 2016,first quarter of 2022, an increase of $10,573$9.9 million, or 1.6%. Domestic sales for the first nine months of 2017 as compared to the same period in 2016 increased $26,631 in the Energy Group (including increased sales of $14,640 attributable to Power Flame, which was acquired on August 1, 2016) and $16,859 in the Aggregate and Mining Group but decreased $32,917 due to the $62,219 decline in pellet plant sales in the Infrastructure Group.
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International sales for the third quarter of 2017 were $55,576 or 22.0% of consolidated net sales compared to $47,901 or 19.3% of consolidated net sales for the third quarter of 2016, an increase of $7,675 or 16.0%17.5%. International sales for the third quarter of 2017 as compared to the third quarter of 2016 increased $3,526 in the Infrastructure Group, $2,776 in the Aggregate and Mining Group and $1,373 in the Energy Group.  The increases in international sales occurred primarily in Canada, Brazil, the Middle East and Asia and were partially offset by decreases in sales in Mexico, Central America, Europe and the West Indies.  The majority of the increase in sales was due to increased(i) $8.3 million higher new equipment sales, in the Company's mobile asphalt equipment coupled with significant growth in aggregate(ii) $0.9 million higher parts and mining equipment and industrial heater sales.  These increased sales were achieved in spite of the continuing strength of the U.S. dollar as compared to the currencies in many of the countries in which the Company operates, low oil and gas pricing and the continuing sluggishness in the mining sector.  The increased sales volumes may indicate a softening of the impact of these issues on the Company's sales; however, the issues continue to be a significant headwind to the Company regaining historical levels of international sales.  The Company is continuing its strategy of keeping itscomponents sales and service structure(iii) $0.3 million higher freight revenue. Included in place during the downturn in international business.

International sales for the nine months ending September 30, 2017 were $185,481 or 21.3%these increases is $2.4 million of consolidatedincremental net sales compared to $144,558 or 17.6% of consolidated net sales for the nine months ending September 30, 2016,from an increase of $40,923 or 28.3%. International sales for the first nine months of 2017 as compared to the same period in 2016 increased $25,125 in the Infrastructure Group, $12,953 in the Aggregate and Mining Group and $2,845 in the Energy Group.  The increases in international sales occurred primarily in Canada, Russia, Australia, Brazil and Asia, offset by decreases in sales in South America, Japan/Korea and Central America.  The majority of the increase in sales was due to increased sales in the Company's mobile asphalt equipment and asphalt plant related products coupled with significant growth in aggregate and mining equipment sales. These increased sales were achieved in spite of the continuing strength of the U.S. dollar as compared to the currencies in many of the countries in which the Company operates, low oil and gas pricing and the continuing sluggishness in the mining sector.  The increased sales volumes may indicate a softening of the impact of these issues on the Company's sales; however, the issues continue to be a significant headwind to the Company regaining historical levels of international sales.  The Company is continuing its strategy of keeping its sales and service structure in place during the downturn in internationalacquired business.


Parts sales for the third quarter of 2017 were $64,299 compared to $63,082 for the third quarter of 2016, an increase of $1,217 or 1.9%.  Parts sales as a percentage of net sales remained flat at 25.5% between periods.  Parts sales increased $1,906 in the Aggregate and Mining but decreased $559 in the Energy Group and $130 in the Infrastructure Group.

Parts sales for the nine months ending September 30, 2017 were $214,083 compared to $200,974 for the same period of 2016, an increase of $13,109 or 6.5%.  Parts sales as a percentage of net sales remained flat at 24.5% between periods.  Parts sales increased $4,729 in the Infrastructure Group, $5,333 in the Aggregate and Mining Group and $3,047 in the Energy Group.

Gross Profit

Consolidated gross profit decreased $16,305 or 29.4% to $39,084 for the third quarter of 2017 compared to $55,389 for the third quarter of 2016.  Gross profit as a percentage of sales decreased 690 basis points to 15.5% for the third quarter of 2017 compared to 22.4% for the third quarter of 2016.  During the third quarter of 2017, the Company identified significant design issues at its customers' Georgia and Arkansas wood pellet plants.  Due to the identification of the design issues in the third quarter of 2017, the Company increased its estimate of the remaining costs to complete both plants which resulted in negative $22,738 gross margin on the two orders for the third quarter of 2017.  Gross margin recorded in the third quarter of 2016 on pellet plant sales was $7,152. Non-pellet plant related gross margins improved in each segment due to increased sales, changes in product mix and improved overhead absorption driven by increased manufacturing hours being absorbed.

Consolidated gross profit decreased $20,418 or 10.2% to $180,379 for the nine months ending September 30, 2017 compared to $200,797 for the nine months ending September 30, 2016.  Gross profit as a percentage of sales decreased 380 basis points to 20.7% for nine months ended September 30, 2017 compared to 24.5% for the nine months ended September 30, 2016.  Due to the issues discussed above and cost overruns on the construction portion of the Arkansas order during the second quarter of 2017, gross margin on pellet plant orders for the first nine monthsquarter of 2017 were negative $27,0982023 was $89.2 million, or 25.6% of net sales, as compared to gross margin of $22,826 for the first nine months of 2016. The Company expects the gross margins to be recognized in the future on the two pellet plant orders will not be material. Non-pellet plant related gross margins improved in each segment due to increased sales, changes in product mix and improved overhead absorption driven by increased manufacturing hours being absorbed.
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Selling, General, Administrative and Engineering Expenses
Selling, general, administrative and engineering expenses increased $1,544 to $45,494$64.7 million, or 18.0%22.2% of net sales, for the thirdfirst quarter of 2017,2022, an increase of $24.5 million or 37.9%. The increase was primarily driven by the impact of net favorable volume, pricing and mix that generated $39.3 million higher gross profit and $2.3 million of gross profit generated by an acquired business. These increases were partially offset by the impact of inflation on materials, labor and overhead of $13.8 million and manufacturing inefficiencies due in part to the effects of lower tenured production staff associated with the turnover experienced in the prior year of $3.5 million. Manufacturing inefficiencies are inclusive of the impact of an out-of-period benefit of $1.9 million associated with the correction of over-accruals of inventory-related expenses recorded in the first quarter of 2023.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the first quarter of 2023 were $67.9 million, or 19.5% of net sales, compared to $43,950$59.7 million or 17.7%20.5% of net sales, for the thirdfirst quarter of 20162022, an increase of $8.2 million, or 13.7%, primarily due to (i) $2.9 million of higher exhibit and promotional costs primarily due to the ConExpo industry trade show held once every three years, (ii) increased engineering expensesnet payroll and employee benefit costs of $1,322 (primarily research and development and outside services) and$2.3 million, comprised of increased sales promotion expenseheadcount throughout our organization, increased health insurance claims experience of $1,715,$1.5 million, increased deferred compensation program costs associated with our stock price changes of $0.8 million, partially offset by a reductionlower share-based compensation expense of $2.9 million related to the
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recovery of share-based compensation expense for awards that were forfeited or modified in profit sharingconjunction with the termination of our previous CEO and the limited overhead restructuring action implemented in February 2023, (iii) $1.9 million increased costs related to our strategic transformation program and (iv) incremental expenses associated with the acquisition of $1,597.MINDS that was completed in April 2022 of $1.1 million. These increases were partially offset by lower amortization expense of $1.0 million and reduced acquisition costs of $0.6 million primarily associated with the acquisition of MINDS.


Selling, general, administrative
Restructuring and engineering expenses increased $10,120 to $142,836 or 16.4%Other Asset Charges, Net

Restructuring and the net gain on sale of net salesproperty and equipment for the nine months ending September 30, 2017, comparedthree month periods ended March 31, 2023 and 2022 are presented below: 

Three Months Ended March 31,
(in millions)20232022
Restructuring charges:
Costs associated with leadership change and overhead restructuring$7.0 $— 
Costs associated with exited operations - Enid0.1 0.2 
Costs associated with closing Tacoma— 0.8 
Total restructuring related charges7.1 1.0 
Gain on sale of property and equipment, net:
Gain on sale of property and equipment, net(3.4)— 
Total gain on sale of property and equipment, net(3.4)— 
Restructuring and other asset charges, net$3.7 $1.0 

See Note 11, Strategic Transformation and Restructuring and Other Asset Charges of the Notes to $132,716 or 16.2%Unaudited Consolidated Financial Statements included in Part I, Item 1 of net salesthis Quarterly Report on Form 10-Q for same period in 2016.  The overall increase was primarily due to increases in ConExpo exhibit costs ($4,578), costs incurred by Power Flame which was acquired on August 1, 2016 ($3,578), sales promotion expense ($2,719) and research and development costs ($1,792), offset by reductions in SERP expense ($1,965) and profit sharing expenses ($917).discussion of the individual restructuring actions taken.


Interest Expense

Interest expense for the thirdfirst quarter of 2017 decreased $762023 increased $1.6 million to $188$2.0 million from $264$0.4 million in the first quarter of 2022, primarily related to outstanding borrowings on our revolving credit facility in the first quarter of 2023. No borrowings were outstanding on our prior revolving credit facility during the first quarter of 2022.

Other Income, Net

Other income was $0.4 million for the thirdfirst quarter of 2016,2023 compared to $1.2 million in the first quarter of 2022, primarily duerelated to a reductionhigher net foreign currency transaction gains in bank debt at Astec Brazil.2022 that did not recur in 2023.


Interest
Income Tax

Our income tax expense for the nine months ended September 30, 2017 decreased $419first quarter of 2023 was $4.4 million compared to $638 from $1,057$0.9 million for the first nine months of 2016, due primarily to reduced interest on tax return audits and a reduction in bank debt at Astec Brazil.

Other Income, Net of Expenses
Other income, net of expenses was $1,113 for the third quarter of 2017 compared to $505 for the third quarter of 2016, an increase of $608. The increase was primarily due to interest income received on pellet plant related sales.

Other income, net of expenses was $1,886 for the nine months ended September 30, 2017 compared to $1,324 for the nine months ended September 30, 2016, an increase of $562. The increase was primarily due to interest income received on pellet plant related sales.

Income Tax Expense
The Company's combined2022. Our effective income tax rate was 50.7%26.7% for the thirdfirst quarter of 20172023 compared to 41.5%18.0% for the thirdfirst quarter of 2016.2022. The unusually highincome tax rateexpense for the third quarter of 2017 is2023 was higher compared to 2022, primarily due to the high percentage (as comparedhigher pretax book income and valuation allowance increases related to the pretax loss for the third quarter of 2017) impact of the Company's federala domestic production activities deductions,subsidiary partially offset by a net discrete tax benefit related to a research and development tax credits and a favorable U.S. federal return to book adjustment on the Company's 2016 return.credit.


The Company's combined effective income tax rate was 31.1% for the nine months ended September 30, 2017 compared to 37.6% nine months ended September 30, 2016.  The tax rate decline between periods is due to impacts of federal domestic production activities deductions, favorable state tax apportionment legislation, increased research and development tax credits and a favorable U.S. federal return to book adjustment on the Company's 2016 return.

Net Income
The Company had a net loss attributable to controlling interest of $2,667 for the third quarter of 2017 compared to net income attributable to controlling interest of $6,838 for the third quarter of 2016, a decrease in earnings of $9,505 or 139.0%. Net income (loss) attributable to controlling interest per diluted share was a loss of $0.12 for the third quarter of 2017 compared to income of $0.30 for the third quarter of 2016, a decrease of $0.42.  Diluted shares outstanding for the quarters ended September 30, 2017 and 2016 were 23,029 and 23,145, respectively.

The Company had net income attributable to controlling interest of $26,873 for the nine months ending September 30, 2017 compared to $42,773 for nine months ending September 30, 2016, a decrease of $15,900 or 37.2%. Net income attributable to controlling interest per diluted share was $1.16 for the nine months ending September 30, 2017 compared to $1.85 for the same period in 2016, a decrease of $0.69.  Diluted shares outstanding for the nine months ended September 30, 2017 and 2016 were 23,180 and 23,138, respectively.
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Dividends
In February 2013, the Company's Board of Directors approved a dividend policy pursuant to which the Company began paying a quarterly $0.10 per share dividend on its common stock beginning in the second quarter of 2013.  The actual amount of future quarterly dividends, if any, will be based upon the Company's financial position, results of operations, cash flows, capital requirements and restrictions under the Company's existing credit agreement, among other factors.  The Board retained the power to modify, suspend or cancel the Company's dividend policy in any manner and at any time it deems necessary or appropriate in the future.  The Company paid quarterly dividends of $0.10 per common share to shareholders in each quarter of 2016 and the first three quarters of 2017.

Backlog

The backlog of orders as of September 30, 2017March 31, 2023 was $385,454$800.2 million compared to $389,260$834.7 million as of September 30, 2016,March 31, 2022, a decrease of $3,806$34.5 million, or 1.0%4.1%. Domestic backlogsbacklog decreased $16,103$21.3 million, or 4.9% while3.0%, and international backlogs increased $12,297backlog decreased $13.2 million, or 19.3%.10.3%, respectively. The September 30, 2017backlog decreased $4.2 million to $513.5 million in the Infrastructure Solutions segment and decreased $32.6 million to $284.4 million in the Materials Solutions segment. The Corporate and Other backlog represents our controls and automation business and totaled $2.3 million as of March 31, 2023. The decrease in backlog was comprised of 80.3% domesticdriven by strong first quarter 2023 sales volumes outpacing new orders and 19.7% international orders, as compared to 83.6% domestic ordersa build of backlog throughout 2022 largely due to strong customer demand and 16.4% international orderslogistics and manufacturing throughput disruptions. We expect backlog levels to normalize from the historically high levels we have experienced in recent years based on macroeconomic factors such as high inflation and rising interest rates influencing customer spending. Additionally, we are focused on prudent expansion of September 30, 2016.  Includedour production capacity that we anticipate will allow us to more effectively convert backlog to sales in the September 30, 2017 and 2016 backlogs is approximately $60,000 for a three line pellet plant from one customer under a Company financed arrangement whereby the Company will record the related revenues when payment is received, which is expected in December 2018.  A majority of the September 30, 2016 backlog pertaining to a pellet plant order from a second customer was fulfilled in the last quarter of 2016 and the nine months of 2017, resulting in a remaining backlog of $15,373 related to this order at September 30, 2017.  Excluding pellet plant orders, the Company's September 30, 2017 backlog increased $61,083, or 24.8%, compared to September 30, 2016.  No additional pellet plant orders have been received. The Company is unable to determine whether the changes in backlogs were experienced by the industry as a whole; however, the Company believes the changes in backlogs reflect the current economic conditions the industry is experiencing.future.


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Segment Net Sales-QuarterSales:
  
Three Months Ended
September 30,
    
  2017  2016  $ Change  % Change 
Infrastructure Group $98,676  $109,227  $(10,551)  (9.7)%
Aggregate and Mining Group  99,474   85,819   13,655   15.9%
Energy Group  53,904   52,706   1,198   2.3%
                 

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Three Months Ended March 31,
(in millions)20232022$ Change% Change
Infrastructure Solutions$229.9 $197.5 $32.4 16.4 %
Materials Solutions113.9 93.7 20.2 21.6 %
Corporate and Other4.1 — 4.1 100.0 %


Infrastructure Group: Solutions

Sales in this groupsegment were $98,676$229.9 million for the thirdfirst quarter of 20172023 compared to $109,227$197.5 million for the same period in 2016, a decrease2022, an increase of $10,551$32.4 million, or 9.7%16.4%. The increase was primarily driven by favorable net volume, pricing and the mix of sales that generated increased (i) new equipment sales of $19.3 million, (ii) service and equipment installation revenue of $9.6 million, (iii) parts and component sales of $3.6 million and (iv) freight revenue of $0.6 million. These increases were partially offset by lower used equipment sales of $0.6 million.

Domestic sales for the Infrastructure Group decreased $14,077Solutions segment increased $23.8 million, or 14.4%14.3%, for the thirdfirst quarter of 20172023 compared to the same period in 2016. During the third quarter2022 primarily due to (i) increased new equipment sales of 2017, the Company identified significant design issues at its customers' Georgia$11.7 million, (ii) increased service and Arkansas wood pellet plants.  As the Company is financing the Georgia plant, no revenues have been recorded to date related to this order; however, the Company has been recording revenue on the Arkansas plant order under the percentequipment installation sales of completion method.  Due to the identification$9.8 million and (iii) increased parts and component sales of the design issues in the third quarter of 2017, the Company increased its estimate of the remaining costs to complete the Arkansas pellet plant order pellet plants which resulted in negative $13,405 pellet plant revenue for the third quarter of 2017.  Pellet plant revenue for the third quarter of 2016 was $19,139.  The group's domestic non-pellet plant related sales increased by $18,467 due primarily to increased domestic asphalt plant sales$2.9 million. These increases were partially offset by a reduction in mobilelower used equipment sales as compared to the very strong third quarter 2016 level.  Infrastructure Group domestic sales and backlogs continue to be favorably impacted by the increased federal funding under the FAST Act.  of $0.8 million.

International sales for the Infrastructure GroupSolutions segment increased $3,526$8.6 million, or 30.5%27.9%, for the thirdfirst quarter of 20172023 compared to the same period in 20162022 primarily due primarily to an increases in mobile asphaltincreased new equipment sales coupled with increasedand parts and component sales byof $7.6 million and $0.7 million, respectively.

Materials Solutions

Sales in this segment were $113.9 million for the Company-owned dealershipfirst quarter of 2023 compared to $93.7 million for the same period in Australia.  The Company's international sales have benefited from improved highway building activities in certain foreign countries, the release2022, an increase of pent up demand and improved global market conditions.$20.2 million, or 21.6%. The increase in international sales was also impactedprimarily driven by the Company's decision to market its mobile equipment products through equipment dealers in select territories in which historical direct sales efforts yielded less than desired volumes.  Sales increases in Canada, Australiafavorable net volume, pricing and the Middle Eastmix of sales that generated increased (i) new equipment sales of $20.8 million, (ii) parts and component sales of $0.6 million and (iii) freight revenue of $0.5 million. These increases were partially offset by decreases in sales in the West Indies, Central America and Russia.  Partsdecreased other revenue of $1.8 million primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers.

Domestic sales for the Infrastructure Group decreased 0.5%Materials Solutions segment increased by $21.3 million or 31.4% for the thirdfirst quarter of 20172023 compared to the same period in 2016.2022 driven by increased (i) equipment sales of $22.1 million, (ii) parts and component sales of $0.5 million and (iii) freight revenue of $0.5 million. These increases were partially offset by decreased other revenue of $1.8 million, primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers.


Aggregate and Mining Group: Sales in this group were $99,474 for the third quarter of 2017 compared to $85,819 for the same period in 2016, an increase of $13,655 or 15.9%.  DomesticInternational sales for the Aggregate and Mining Group increased by $10,879Materials Solutions segment decreased $1.1 million or 19.1%4.2% for the thirdfirst quarter of 20172023 compared to the same period in 20162022, primarily due primarily to increaseddecreased new equipment sales of $1.3 million.

Segment Operating Adjusted EBITDA:

Segment Operating Adjusted EBITDA is the Company's larger aggregate equipment duemeasure of segment profit or loss used by our Chief Executive Officer, whom is determined to be the CODM, to evaluate performance and allocate resources to the releaseoperating segments. Segment Operating Adjusted EBITDA, a non-GAAP financial measure, is defined as net income or loss before the impact of pent-up demand coupled with increased sales intointerest income or expense, income taxes, depreciation and amortization and certain other adjustments that are not considered by the Company's traditional rock quarry markets.  International salesCODM in the evaluation of ongoing operating performance. This non-GAAP financial measure can be useful to investors in understanding operating results and the performance of our core business from management's perspective. Our presentation of Segment Operating Adjusted EBITDA may not be comparable to similar measures used by other companies and is not necessarily indicative of the results of operations that would have occurred had each reportable segment been an independent, stand-alone entity during the periods presented. See Note 10, Segment Information, of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of Segment Operating Adjusted EBITDA to total consolidated net income attributable to controlling interest.

Three Months Ended March 31,$ Change% Change
(in millions)20232022
Infrastructure Solutions$27.3 $16.4 $10.9 66.5 %
Materials Solutions15.3 12.2 3.1 25.4 %
Corporate and Other(6.8)(9.8)3.0 30.6 %

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Infrastructure Solutions segment: Segment Operating Adjusted EBITDA for the Aggregate and Mining Group increased $2,776 or 9.7% inInfrastructure Solutions segment was $27.3 million for the thirdfirst quarter of 20172023 compared to the same period in 2016 due to an easing of pent up demand coupled with the Company's continued sales efforts in the international markets as well as an improved sales by the Company's Brazilian subsidiary.  International sales increases in Canada, Brazil and Post-Soviet States were partially offset by decreases in sales into Mexico and Europe.  Parts sales for this group increased 7.5% for the third quarter of 2017 compared to the same period in 2016 due primarily to international sales by the Company's subsidiary in South Africa.

Energy Group: Sales in this group were $53,904 for the third quarter of 2017 compared to $52,706$16.4 million for the same period in 2016,2022, an increase of $1,198$10.9 million or 2.3%66.5%. Domestic sales for the Energy Group decreased $175 or 0.4% for the third quarter of 2017 compared to the same periodThe increase in 2016.  Domestic sales were favorably impacted by improved sales of industrial heaters/boilers andSegment Operating Adjusted EBITDA resulted primarily from the impact of favorable net volume, pricing and mix that generated $27.3 million higher gross profit. These increases were partially offset by (i) the Power Flame acquisitionimpact of higher inflation on August 1, 2016; however, salesmaterials, labor and overhead costs of concrete plants fell below prior year levels with third quarter 2016 sales being higher than normal$8.8 million, (ii) increased selling, general and administrative costs of $6.3 million, primarily due to $3.9 million higher personnel related costs, $1.5 million of increased exhibit and promotional costs related to the saleConExpo industry trade show and $1.5 million increased consulting, prototype and project costs and (iii) manufacturing inefficiencies of two large concrete plants.  International sales$1.6 million, inclusive of the impact of an out-of-period benefit of $1.9 million associated with the correction of over-accruals of inventory-related expenses recorded in the first quarter of 2023.

Materials Solutions segment: Segment Operating Adjusted EBITDA for the Energy Group increased $1,373 or 18.2% due primarily to increased sales of industrial boilers and sales by Power Flame whichMaterials Solutions segment was acquired on August 1, 2016, offset by a decline in sales of wood chipping and grinding equipment.  Sales increases occurred in the Middle East, China, Canada and Brazil.  Parts sales for this group decreased 5.2%$15.3 million for the thirdfirst quarter of 20172023 compared to the same period in 2016 due primarily to growth in parts sales for industrial boiler and heater products as well as wood chipper and grinders.
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Segment Net Sales-Nine Months:
  
Nine Months Ended
September 30,
    
  2017  2016  $ Change  % Change 
Infrastructure Group $407,025  $414,817  $(7,792)  (1.9)%
Aggregate and Mining Group  307,205   277,393   29,812   10.7%
Energy Group  158,134   128,658   29,476   22.9%
                 

Infrastructure Group: Sales in this group were $407,025 for the nine months ending September 30, 2017 compared to $414,817$12.2 million for the same period in 2016, a decrease2022, an increase of $7,792$3.1 million or 1.9%25.4%Domestic sales forThe increase in Segment Operating Adjusted EBITDA between periods resulted primarily from the Infrastructure Group decreased $32,917 or 8.8% for the first nine monthsimpact of 2017 compared to the same period in 2016 due to a decline in pellet plant sales offset by growth in sales for mobile asphalt equipment.  Pellet plant sales were $2,370favorable net volume, pricing and $64,589 for the nine months ended September 30, 2017 and 2016, respectively.  Excluding pellet plant sales, the domestic sales of this group increased by $29,302 due to increased sales of both asphalt plants and mobile asphalt equipment.  International sales for the Infrastructure Group increased $25,125 or 63.2% for the first nine months of 2017 compared to the same period in 2016 due to growth in sales of both asphalt plants and mobile asphalt equipment as well as improved sales by the Company owned dealership in Australia.  The increased international sales occurred in Canada, Russia, Australia, Mexico and the Middle East andmix that generated $12.5 million higher gross profit. These increases were partially offset by decreases(i) the impact of higher inflation on materials, labor and overhead costs of $5.0 million, (ii) higher general, administrative and other costs of $2.6 million and (iii) manufacturing inefficiencies of $1.7 million. The general, administrative and other cost increases are primarily driven by $1.4 million net foreign currency transaction gains in sales2022 that did not recur in South America2023 and China. Parts sales for the Infrastructure Group$1.3 million of increased 4.9% for the nine months ending September 30, 2017 comparedexhibit and promotional costs related to the same period in 2016 due primarily to improved sales of parts for asphalt plants and mobile asphalt equipment.

Aggregate and Mining Group: Sales in this group were $307,205 for the nine months ending September 30, 2017 compared to $277,393 for the same period in 2016, an increase of $29,812 or 10.7%.  Domestic sales for the Aggregate and Mining Group increased by $16,859 or 8.6% for the nine months ending September 30, 2017 compared to the same period in 2016 due primarily to improved sales to the Company's traditional rock quarry markets, increased sales of the Company's larger aggregate equipment due to the release of pent-up demand and increased sales by the Company's Northern Ireland based subsidiary into the U.S. domestic market.  International sales for the Aggregate and Mining Group increased $12,953 or 15.7% for the nine months ending September 30, 2017 compared to the same period in 2016 due to an easing of pent up demand, the Company's continued sales efforts in the international markets, and improved sales by the Company's Brazilian subsidiary, which had historically low sales in 2016.  International sales increases in Canada, Brazil, Post-Soviet States, China and Australia wereConExpo industry trade show, partially offset by decreased sales in Mexico, Japan/Korea$0.7 million lower personnel related costs.

Corporate and Central America.  Parts sales for this group increased 7.2%Other: Corporate and Other operations had net expenses of $6.8 million for the nine months ending September 30, 2017first quarter of 2023 compared to the same period in 2016.

Energy Group: Sales in this group were $158,134$9.8 million for the nine months ending September 30, 2017 compared to $128,658 for the same period in 2016, an increase of $29,476 or 22.9%.  Domestic sales for the Energy Group increased $26,631 or 25.1% for the nine months ending September 30, 2017 compared to the same period in 2016 due primarily to $14,640 of increased sales by Power Flame, which was acquired on August 1, 2016, as well as increases in oil and gas equipment and wood chipping and grinding equipment; however, concrete plant sales lagged behind 2016 levels due to two large concrete plants being sold in the thirdfirst quarter of 2016.  International sales for the Energy Group increased $2,845 or 12.7% due primarily to sales by Power Flame which was acquired on August 1, 2016.  International sales increases occurred in China, the Middle East, Africa and Brazil and were partially offset by decreases in South American and Australia.  Parts sales for this group increased 10.1% for the nine months ending September 30, 2017 compared to the same period in 2016 due to the acquisition of Power Flame and increased parts sales at each subsidiary in this group.
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Segment Profit (Loss)-Quarter:
  
Three Months Ended
September 30,
    
  2017  2016  $ Change  % Change 
Infrastructure Group $(12,529) $9,858  $(22,387)  (227.1)%
Aggregate and Mining Group  9,565   7,651   1,914   25.0%
Energy Group  4,460   805   3,655   454.0%
Corporate  (2,975)  (11,610)  8,635   74.4%

Infrastructure Group: Segment loss for this group was $12,529 for the third quarter of 2017 compared to a profit of $9,858 for the same period in 2016,2022, a decrease of $3.0 million, or 30.6%. The decrease in earningsnet expenses was primarily driven by $1.5 million of $22,387 or 227.1%.  Duringprofit contributed by MINDS and $1.5 million of lower general and administrative expenses, primarily associated with employee related costs including the third quarterrecovery of 2017, the Company identified significant design issues at its customers' Georgia and Arkansas wood pellet plants.  As the Company is financing the Georgia plant, no revenues have been recorded to dateshare-based compensation expense related to this order; however,awards forfeited or modified in conjunction with the Company has been recording revenue ontermination of our previous CEO and the Arkansas plant order under the percent of completion method.  Due to the identification of the design issueslimited overhead restructuring action implemented in the third quarter of 2017, the Company increased its estimate of the remaining costs to complete the orders for both pellet plantsFebruary 2023, which resulted in negative $22,738 pellet plant gross profit for the third quarter of 2017.  Excluding the impact of pellet plant sales and margins in 2017, segment gross margins decreased from 22.8% for the third quarter of 2016 to 21.9% for the third quarter of 2017.  Segment profits were also impacted by a $1,563 increase in engineering expenses (primarily research and development and outside services).

Aggregate and Mining Group: Segment profit for the Aggregate and Mining group was $9,565 for the third quarter of 2017 compared to $7,651 for the same period in 2016, an increase of $1,914 or 25.0%.  The increase in profits between periods is due to an increase in gross profit of $2,903 due to increased sales as gross margins remained relatively constant at 24.0% and 24.4% for the third quarters of 2017 and 2016, respectively.  The improved gross profits were partially offset by increased sales promotion expense of $1,504 which were offset by a $463 decrease in exhibit costs between periods.health insurance claims experience.


Energy Group: The Energy group had a profit of $4,460 for the third quarter of 2017 compared to $805 for the third quarter of 2016 an increase of $3,655 or 454.0%.  Gross profits for the segment increased by $3,949 for the third quarter of 2017 as compared to the third quarter of 2016 impacted by a $1,198 increase in sales between periods and a 690 basis point increase in gross margins.  Gross profits were favorably impacted by improved market conditions for drilling rigs and the acquisition of Power Flame on August 1, 2016.  The improved gross profits were partially offset by increased selling, general, administrative and engineering expenses of $446 at Power Flame.

Corporate: The Corporate Group had a loss of $2,975 for the third quarter of 2017 compared to a loss of $11,610 for the third quarter of 2016, a favorable change of $8,635 or 74.4%, due primarily to reductions in U.S. federal income taxes of $6,493 and profit sharing, restricted stock unit and SERP expenses of $1,973.

Segment Profit (Loss)-Nine Months:
  
Nine Months Ended
September 30,
    
  2017  2016  $ Change  % Change 
Infrastructure Group $15,545  $51,394  $(35,849)  (69.8)%
Aggregate and Mining Group  29,360   28,135   1,225   4.4%
Energy Group  10,355   3,237   7,118   219.9%
Corporate  (27,666)  (40,745)  13,079   32.1%

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Infrastructure Group: Segment profit for this group was $15,545 for the nine months ending September 30, 2017 compared to $51,394 for the same period in 2016, a decrease of $35,849 or 69.8%, of which $34,955 is due to reduced gross margins.  During the third quarter of 2017, the Company identified significant design issues at its customers' Georgia and Arkansas wood pellet plants.  As the Company is financing the Georgia plant, no revenues have been recorded to date on this order; however, the Company has been recording revenue on the Arkansas plant order under the percent of completion method.  Due to the identification of the design issues in the third quarter of 2017, the Company increased its estimate of the remaining costs to complete the orders for both pellet plants which resulted in negative $22,738 pellet plant gross profit in the third quarter of 2017.  Margins on pellet plants were also negatively impacted by installation cost overruns during the second quarter of 2017 resulting in total gross profits on pellet plant sales of negative $27,098 for the nine months ended September 30, 2017.  Excluding the impact of pellet plant sales and margins in 2017, segment gross margins decreased from 24.4% for the first nine months of 2016 to 23.1% for the first nine months of 2017 due primarily to product mix changes between years.  Segment profit was also negatively impacted by $2,086 of costs incurred related to ConExpo in 2017.

Aggregate and Mining Group: Segment profit for this group was $29,360 for the nine months ending September 30, 2017 compared to $28,135 for the same period in 2016, an increase of $1,225 or 4.4%.  Nine month gross profits for this segment increased by $2,428 as compared to the prior year due to an increase in sales of $29,812 and a 170 basis point decline in gross margins.  The increased gross profits were partially offset by increased selling, general, administrative and engineering expenses, including $1,935 of ConExpo related costs.

Energy Group: The Energy group had a profit of $10,355 for the nine months ending September 30, 2017 compared to $3,237 for the same period in 2016, an increase of $7,118 or 219.9%.  Profit for the segment was positively impacted by an increase in gross profit of $12,104 due to a $29,476 increase in sales and a 380 basis point increase in gross margins between periods.  The improved gross profits were partially offset by increased selling, general, administrative and engineering expenses between periods, primarily due to $3,577 of increased costs incurred by Power Flame, which was acquired on August 1, 2016.

Corporate: The Corporate Group had a loss of $27,666 for the nine months ending 2017 compared to a loss of $40,745 for the same period in 2016, a favorable change of $13,079 or 32.1% primarily due to reductions in U.S. federal income taxes of $11,527, SERP expenses of $1,730 and profit sharing expenses of $918.

Liquidity and Capital Resources
The Company's
Our primary sources of liquidity and capital resources are its cash and cash equivalents on hand, borrowing capacity under a $100,000$250.0 million revolving credit facility and cash flows from operations. The Company had $66,379As of March 31, 2023, our total liquidity was $222.0 million, consisting of $39.6 million of cash and cash equivalents available for operating purposes as of September 30, 2017, of which $16,857 was held by the Company's foreign subsidiaries. While the Company has no plans to transfer the cash held by its foreign subsidiaries to the U.S. in the foreseeable future,and $182.4 million available for additional borrowings under our revolving credit facility, to the extent foreign earnings are eventually repatriated, such amounts may be subject to income tax liabilities, both in the U.S. and in various applicable foreign jurisdictions. At September 30, 2017 and at all times during the first nine months of 2017, the Company had no borrowings outstanding under its credit facilitiesour compliance with Wells Fargo Bank, N.A. Net of letters of credit totaling $8,594, the Company had borrowing availability of $91,406 under the credit facility as of September 30, 2017.  The amended and restated credit agreement contains certain financial covenants including provisions concerning required levelspermits such borrowings. Our foreign subsidiaries held $23.5 million of annual net incomecash and minimum tangible net worth.  The Company wascash equivalents available for operating purposes, which is considered to be indefinitely invested in compliance with the financial covenants of the Wells Fargo agreement at September 30, 2017.those jurisdictions.


The Company's South African subsidiary, Osborn Engineered Products SA (Pty) Ltd ("Osborn"), has a credit facility of $7,007 with a South African bank to finance short-termOur future cash requirements primarily include working capital needs, as well as to cover performance letters of credit, advance payment and retention guarantees. As of September 30, 2017, Osborn had no outstanding borrowings but had $1,044 in performance, advance payment and retention guarantees outstanding under the facility. The facility has been guaranteed by Astec Industries, Inc., but is otherwise unsecured. A 0.75% unused facility fee is charged if less than 50% of the facility is utilized. As of September 30, 2017, Osborn had available credit under the facility of $5,963. The interest rate is 0.25% less than the South Africa prime rate, resulting in a rate of 10.0% as of September 30, 2017.
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The Company's Brazilian subsidiary, Astec Brazil, has outstanding working capital loans totaling $4,100 as of September 30, 2017 from Brazilian banks with interest rates ranging from 10.4% to 11.0%.  The loans' maturity dates range from November 2018 to April 2024 and the debts are secured by Astec Brazil's manufacturing facility and also by letters of credit totaling $6,200 issued by Astec Industries, Inc.  Additionally, Astec Brazil has various 5-year equipment financing loans outstanding with Brazilian banks in the aggregate of $805 as of September 30, 2017 that have interest rates ranging from 3.5% to 16.3%.  These equipment loans have maturity dates ranging from September 2018 to April 2020.  Astec Brazil's loans are included in the accompanying unaudited condensed consolidated balance sheets as current maturities of long-term debt ($2,689) and long-term debt ($2,216) as of September 30, 2017.

Cash Flows from Operating Activities:

  
Nine Months Ended
September 30,
  Increase 
  2017  2016  (Decrease) 
Net income $26,736  $42,654  $(15,918)
Deferred income tax benefit  (224)  (2,019)  1,795 
Depreciation and amortization  19,253   18,118   1,135 
Provision for warranties  11,842   13,135   (1,293)
Changes in working capital:            
    Trade and other receivables  766   (5,224)  5,990 
    Inventories  (39,332)  (8,120)  (31,212)
    Prepaid expenses  4,601   (3,132)  7,733 
    Accounts payable  2,820   3,234   (414)
    Customer deposits  11,040   35,685   (24,645)
    Product warranty accruals  (11,072)  (11,011)  (61)
    Prepaid and income taxes payable, net  (16,246)  5,655   (21,901)
Other, net  565   7,798   (7,233)
Net cash provided by operating activities $10,749  $96,773  $(86,024)

Net cash from operating activities decreased by $86,024 for the first nine months of 2017 as compared to the first nine months of 2016 due primarily to an increase in the growth of inventories of $31,212 related to increased sales and backlogs, a reduction in the growth of customer deposits of $24,645 (due primarily to a large pellet plant related deposit received in 2016), a $21,901 increase in cash used for income taxes and a $15,918 reduction in net income.

Cash Flows Used by Investing Activities:

  
Nine Months Ended
September 30,
  Increase 
  2017  2016  (Decrease) 
Expenditures for property and equipment $(13,920) $(17,483) $3,563 
Business acquisition, net of cash acquired  --   (39,613)  39,613 
Other  (243)  403   (646)
Net cash used by investing activities $(14,163) $(56,693) $42,530 

Net cash used by investing activities decreased by $42,530 for the first nine months of 2017 as compared to the same period in 2016 due primarily to decreased spending on business acquisitions in the first nine months of 2017 as compared to the first nine months of 2016 due to the acquisition of Power Flame, Inc on August 1, 2016.

Totalservice obligations, capital expenditures, for 2017 are forecastedvendor hosted software arrangements including the related implementation costs, unrecognized tax benefits and operating lease payments. In addition, our variable cash uses may include the payment of our quarterly cash dividend, financing other strategic initiatives of our business, including, but not limited to, be approximately $22,000.  The Company expects to finance these expenditures using currently available cash balances, internally generated fundstransformation initiatives, strategic acquisitions and available creditshare repurchases under the Company's credit facilities.  Capital expenditures are generally for machinery, equipment and facilities used by the Company in the production of its various products.  The Company believesour share repurchase authorization. We believe that itsour current working capital, cash flows generated from future operations and available capacity under itsour revolving credit facility will be sufficient to meet the Company's working capital and capital expenditure requirements through November, 2018.for our existing business for at least the next 12 months.


On December 19, 2022, we entered into a new credit agreement (the "Credit Agreement") with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto, which replaced the previously existing credit facility with a borrowing capacity of $150.0 million and a maturity date of December 29, 2023 (the "Previous Credit Facility"). The Credit Agreement provides for (i) a revolving credit facility (consisting of revolving credit loans and swingline loans) and a letter of credit facility, in an aggregate amount of up to $250.0 million, (ii) an incremental credit facility in an aggregate amount not to exceed $125.0 million (the "Credit Facilities") and (iii) a maturity date of December 19, 2027.

We had $65.0 million in outstanding borrowings under the Credit Facilities at March 31, 2023. Our outstanding letters of credit totaling $2.6 million decreased borrowing availability to $182.4 million under the revolving credit facility as of March 31, 2023. We anticipate continuing to utilize the Credit Facilities with more frequency in the near-term to support our domestic working capital needs. 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 the financial covenants of the Credit Facilities at March 31, 2023. Due to the increased borrowings under our Credit Facilities and higher interest rates, we expect our interest expense in 2023 to be significantly higher than in prior years.

Our Brazilian subsidiary maintains a separate term loan for working capital purposes with a bank in Brazil, which is secured by its manufacturing facility.

Certain of our international subsidiaries in South Africa, Australia, Brazil, Canada 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
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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.
Cash Flows used
We regularly enter into agreements, primarily to purchase inventory, in the ordinary course of business. As of March 31, 2023, open purchase obligations totaled $298.4 million, of which $286.7 million are expected to be fulfilled within one year.

We estimate that our capital expenditures will be between $25 million and $35 million for the year ending December 31, 2023, which may be impacted by Financing Activities:general economic, financial or operational changes and competitive, legislative and regulatory factors, among other considerations.

  
Nine Months Ended
September 30,
  Increase 
  2017  2016  (Decrease) 
Payment of dividends $(6,920) $(6,912) $(8)
Net change in borrowings from banks  (6,583)  (3,875)  (2,708)
Other, net  (406)  (1,847)  1,441 
Net cash used by financing activities $(13,909) $(12,634) $(1,275)


Cash Flows

The following table summarizes cash flows during the three months ended March 31, 2023 and 2022, respectively:

Three Months Ended March 31,
(in millions)20232022
Net cash used in operating activities$(19.2)$(9.6)
Net cash provided by (used in) investing activities11.8 (11.7)
Net cash used in financing activities(16.2)(2.3)
Effect of exchange rates on cash0.1 0.9 
Decrease in cash, cash equivalents and restricted cash(23.5)(22.7)
Cash, cash equivalents and restricted cash, end of period$42.5 $111.7 

Net cash used in operating activities

Net cash used in operating activities increased by $9.6 million during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to higher net cash usages in our operating assets and liabilities of $15.4 million mainly driven by the increase of inventories on hand of $26.5 million due to higher backlog and supply chain disruptions experienced in 2022 partially offset by higher net income adjusted for non-cash items of $5.7 million.

Net cash provided by (used in) investing activities

Our investing activities provided net cash of $11.8 million during the three months ended March 31, 2023 as opposed to a net cash use of $11.7 million during the three months ended March 31, 2022 primarily due to the sale of the Tacoma facility's land, building and certain equipment assets for $19.9 million and $3.6 million less purchases of purchase of property and equipment.

Net cash used in financing activities

Net cash used in financing activities increased by $1,275 for$13.9 million during the first ninethree months of 2017ended March 31, 2023 as compared to the same periodthree months ended March 31, 2022, primarily due to increased repayments net of borrowings of $13.7 million.

Dividends

We paid quarterly dividends of $0.13 and $0.12 per common share to shareholders in 2016 due primarilythe first quarter of 2023 and 2022, respectively.

Share Repurchases

As announced in a Form 8-K filing on July 30, 2018, we approved a share repurchase program, which authorizes us to repurchase up to $150.0 million of our common stock. As of March 31, 2023, $115.7 million remains available for repurchase under the approved share repurchase program. No shares were repurchased under the plan during the three months ended March 31, 2023, however, we may conduct opportunistic share repurchases under this authorization in future periods utilizing cash on hand or borrowings under our Credit Facilities. The timing, manner and number of shares repurchased will depend on a variety of factors, including, but not limited to, the Company's Osborn subsidiary paying off its outstanding linelevel of cash balances, credit in 2017.availability, financial performance, general business conditions, regulatory requirements, the market price of our stock and the availability of alternative investment opportunities.


Financial Condition
The Company's
Our total current assets increaseddecreased to $609,898$680.4 million as of September 30, 2017March 31, 2023 from $576,833$696.4 million as of December 31, 2016, an increase2022, a decrease of $33,065$16.0 million or 5.7%2.3%, due primarily to an increasesa decrease in inventoriescash, cash equivalents and restricted cash of $38,942$23.5 million, the
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sale of our Tacoma site previously recorded as "Assets held for sale" for $15.4 million and a decrease in prepaid assets and other current assets of $10,464 (primarily prepaid income taxes)$7.9 million partially offset by an increase in inventory of $26.7 million, to address the continued elevated backlog and a decline$5.1 million increase in cash of $15,992trade receivables and contract assets, net during the first ninethree months of 2017.2023.


The Company'sOur total current liabilities increaseddecreased to $177,236$272.0 million as of September 30, 2017March 31, 2023 from $168,861$274.0 million as of December 31, 2016, an increase2022, a decrease of $8,375$2.0 million, or 5.0%0.7%, due primarily to an increasea $6.4 million decrease in other current liabilities and a $2.0 million decrease in customer deposits, of $11,041partially offset by a reductionincreases of $4.8 million in accounts payable and $1.4 million of short-term bank debt due toduring the payofffirst three months of a $4,632 line of credit balance by the Company's Osborn subsidiary.2023.


Market Risk and Risk Management Policies
We have no material changes to the disclosure on this matter made in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

Off-balance Sheet Arrangements
As of September 30, 2017, the Company does not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K.

Contractual Obligations
During the nine months ended September 30, 2017, there were no substantial changes in the Company's commitments or contractual liabilities.

Item 3. Quantitative and Qualitative Disclosures aboutAbout Market Risk
The Company has no material changes to the disclosure on this matter made
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 the Company's our Annual Report on Form 10-K for the year ended December 31, 2016.2022. Our market risk exposures have not materially changed since our Annual Report on Form 10-K for the year ended December 31, 2022 was filed.


Item 4. Controls and Procedures


Disclosure Controls and Procedures
The Company
Our management has established and maintains disclosure controls and procedures that are designed to ensure that the information required to be disclosed by the Companyus in the reports it filesthat we file or submitssubmit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC'sSecurities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company's management, including its principal executive officerthe Chief Executive Officer and principal financial officer,Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company's management, Management carried out an evaluation, under the supervision and with the participation of the Company's principal executive officerour Chief Executive Officer and principal financial officer, has evaluatedChief Financial Officer, of the effectiveness of the Company'sour 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 upon thaton such evaluation, the Company's principal executive officerour Chief Executive Officer and principal financial officerChief Financial Officer have concluded that as of the end of the period covered by this report,March 31, 2023, the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective.
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Internal Control over Financial Reporting
There
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 beginning in 2023. During the first quarter of 2023, we implemented the human capital resources management module, including the payroll application for all locations within the United States.

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 implementation of the human capital resources management module described above, there have been no changes in the Company'sour internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarterthree month period ended September 30, 2017March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


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PART II - OTHER INFORMATION


Item 1. Legal Proceedings
The Company is involved from
From time to time, we are involved in legal actions arising in the ordinary course of itsour business. Other than as set forth in Note 8, Commitments and Contingencies, to the unaudited consolidated financial statements and Part I, "Item 3. Legal Proceedings" in the Company's our Annual Report on Form 10-K for the year ended December 31, 2016, the Company2022, we currently hashave no pending or threatened litigation that the Companyour management believes will result in an outcome that would materially affect the Company'sour business, financial position, cash flows or results of operations. Nevertheless, there can be no assurance that future litigation to which the Company becomeswe become a party will not have a material adverse effect on itsour business, financial position, cash flows or results of operations.


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 the Company's our Annual Report on Form 10-K for the year ended December 31, 2016,2022, which could materially affect the Company'sour business, financial condition or future results. There have been no material changesThe risks described in the Company's risk factors from those disclosed in the Company's our Annual Report on Form 10-K for the year ended December 31, 2016.  The risks described in the Company's Annual Report on Form 10-K for the year ended December 31, 20162022 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 the Company'sour business, financial condition or operating results.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit No.                                   Description                                                                                                                       
10.1Amendment to "Appendix A"Incorporated by Reference
Exhibit NumberExhibit DescriptionFiled HerewithFormPeriod EndedFiling Date
10.18-K1/6/20231/6/2023
31.1X
31.2X
32*32.1X
101.INS32.2XBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase

The exhibits are numbered in accordance with Item 601





Exhibit Index
Exhibit No.Description           
Amendment to "Appendix A" of the Astec Industries, Inc. Supplemental Executive Retirement Plan, effective October 26, 2017.
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.2002X
101.INS101XBRL Instance DocumentThe following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 formatted in Inline Extensible Business Reporting Language ("iXBRL"): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Equity and (vi) related notes, tagged as blocks of text and including detailed tags.X
101.SCH104XBRL Taxonomy Extension SchemaCover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in iXBRL (included as Exhibit 101).X
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEF*Management contract or compensatory plan or arrangementXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase

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: November 6, 2017May 4, 2023/s/ Benjamin G. Brock                                               Rebecca A. Weyenberg
Benjamin G. Brock
Chief Executive Officer
(Principal Executive Officer)
Date: November 6, 2017/s/ David C. Silvious                                                    
David C. Silvious
Rebecca A. Weyenberg
Chief Financial Officer Vice President, and Treasurer

(Principal Financial Officer)
Date: May 4, 2023/s/ Jamie E. Palm
Jamie E. Palm
Vice President, Chief Accounting Officer
and Corporate Controller
(Principal
Accounting Officer)





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