Astec Industries(ASTE) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited Q1 2022 financial statements reflect increased net sales, decreased net income and EPS, asset growth driven by inventories, prior period error corrections, and a subsequent acquisition Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $675.7 | $636.0 | | Inventories | $352.9 | $298.7 | | Total Assets | $943.4 | $905.8 | | Total Current Liabilities | $256.5 | $223.3 | | Total Liabilities | $286.0 | $254.5 | | Total Equity | $657.4 | $651.3 | Consolidated Statement of Operations Highlights (in millions, except per share data) | Account | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Sales | $291.2 | $284.4 | | Gross Profit | $66.1 | $68.2 | | Income from Operations | $5.4 | $9.5 | | Net Income Attributable to Controlling Interest | $4.1 | $8.5 | | Diluted EPS | $0.18 | $0.37 | Consolidated Statement of Cash Flows Highlights (in millions) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(9.6) | $14.6 | | Net cash used in investing activities | $(11.7) | $(3.0) | | Net cash used in financing activities | $(2.3) | $(5.6) | | (Decrease) increase in cash | $(22.7) | $6.0 | - In Q1 2022, the company identified and corrected immaterial errors from prior periods (2018-2021) related to an overstatement of work-in-process inventory and over-time revenue recognition calculation errors, with prior period financial statements revised accordingly[37][38] - In April 2022, the company acquired MINDS Automation Group, Inc., a leader in asphalt plant automation control systems, for $18.2 million in cash[103] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial performance, noting increased net sales, decreased profitability due to inflation, record backlog growth, ongoing strategic transformation costs, and persistent operational headwinds Q1 2022 vs Q1 2021 Performance (in millions) | Metric | Q1 2022 | Q1 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $291.2 | $284.4 | +2.4% | | Gross Profit | $66.1 | $68.2 | -3.1% | | Income from Operations | $5.4 | $9.5 | -43.2% | | Diluted EPS | $0.18 | $0.37 | -51.4% | - Backlog increased 98.4% to $834.7 million as of March 31, 2022, from $420.8 million a year prior, driven by pent-up demand, dealer inventory replenishment, and the U.S. IIJA[119][132] - The ongoing Simplify, Focus and Grow (SFG) strategic transformation, including ERP system implementation and lean manufacturing initiatives, incurred costs of $5.3 million in Q1 2022[113][115] - The company faces significant operational headwinds from the COVID-19 pandemic's contributory effects, including material price inflation, increased shipping costs, supply chain disruptions, and labor shortages[116][122][123] Segment Sales and Operating Adjusted EBITDA (in millions) | Segment | Q1 2022 Sales | Q1 2021 Sales | Q1 2022 Adj. EBITDA | Q1 2021 Adj. EBITDA | | :--- | :--- | :--- | :--- | :--- | | Infrastructure Solutions | $197.5 | $201.5 | $16.4 | $26.2 | | Materials Solutions | $93.7 | $82.9 | $12.2 | $9.7 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposures have not materially changed since the disclosures made in its Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes to the company's market risk exposures since the filing of the 2021 Form 10-K[155] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2022, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[156] - No changes occurred during the first quarter of 2022 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[157] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in legal actions in the ordinary course of business, with management not expecting any pending litigation to have a material adverse effect beyond prior disclosures - The company reports no new pending or threatened litigation that management believes will result in a materially adverse outcome, beyond what was disclosed in the 2021 Annual Report and Note 8 of this report[158] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021, and investors are advised to consider those factors - The report refers to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2021, and indicates no material changes[159] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None reported[160] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[160] Item 4. Mine Safety Disclosures The company provided no mine safety disclosures for the period - None reported[160] Item 5. Other Information The company reported no other information for the period - None reported[160] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including severance agreements, CEO/CFO certifications (Sections 302 and 906), and iXBRL data files - Exhibits filed include severance agreements for executives, certifications by the CEO and CFO pursuant to Sarbanes-Oxley Sections 302 and 906, and financial statements formatted in iXBRL[161]