ASTEC INDUSTRIES INCASTE
ASTEC INDUSTRIES INC Income Taxes Disclosure
Income Taxes
The income tax disclosures that follow are inclusive of the requirements set forth in ASU 2023-09, Income Taxes (Topic 740), which the Company adopted on a prospective basis.
For financial reporting purposes, income before income taxes includes the following components:
| Years Ended December 31, | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| United States | $ | 63.7 | $ | 25.9 | $ | 36.4 | ||||||||||||||
| Foreign | (10.6) | (12.0) | 6.4 | |||||||||||||||||
| Income before income taxes | $ | 53.1 | $ | 13.9 | $ | 42.8 | ||||||||||||||
The provision for income taxes consists of the following:
| Years Ended December 31, | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
Current provision: | ||||||||||||||||||||
| Federal | $ | 7.8 | $ | 13.3 | $ | 8.2 | ||||||||||||||
| State | 2.5 | 0.9 | 4.5 | |||||||||||||||||
| Foreign | 3.6 | 2.6 | 2.8 | |||||||||||||||||
Total current provision | 13.9 | 16.8 | 15.5 | |||||||||||||||||
Deferred provision (benefit): | ||||||||||||||||||||
| Federal | 3.6 | (8.2) | (3.6) | |||||||||||||||||
| State | — | 0.8 | (2.8) | |||||||||||||||||
| Foreign | (3.2) | 0.4 | — | |||||||||||||||||
Total deferred provision (benefit) | 0.4 | (7.0) | (6.4) | |||||||||||||||||
Total provision: | ||||||||||||||||||||
| Federal | 11.4 | 5.1 | 4.6 | |||||||||||||||||
| State | 2.5 | 1.7 | 1.7 | |||||||||||||||||
| Foreign | 0.4 | 3.0 | 2.8 | |||||||||||||||||
Total income tax provision | $ | 14.3 | $ | 9.8 | $ | 9.1 | ||||||||||||||
The Company's "Income tax provision" is computed based on the domestic and foreign federal statutory rates and the average state statutory rates, net of related federal benefit.
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The reconciliation of the provision for income taxes at the statutory federal income tax rate to the amount provided for the year ended December 31, 2025 is as follows:
| (in millions, except percentage data) | Year Ended December 31, 2025 | |||||||||||||
| Tax expense at the statutory federal income tax rate | $ | 11.2 | 21.0 | % | ||||||||||
State and local income tax, net of federal income tax effect (1) | 2.0 | 3.8 | % | |||||||||||
| Foreign tax effects | ||||||||||||||
| Brazil | ||||||||||||||
| Change in valuation allowances | (1.2) | (2.3) | % | |||||||||||
| Other | 1.3 | 2.4 | % | |||||||||||
| United Kingdom | ||||||||||||||
| Change in valuation allowances | 2.5 | 4.7 | % | |||||||||||
| Other | (0.1) | (0.2) | % | |||||||||||
| Other foreign jurisdictions | 0.1 | 0.2 | % | |||||||||||
| Effect of cross-border tax laws | ||||||||||||||
| Foreign-derived intangible income | (1.0) | (1.9) | % | |||||||||||
| Other | (0.2) | (0.4) | % | |||||||||||
| Research and development tax credits | (3.7) | (7.0) | % | |||||||||||
| Changes in valuation allowances | 0.3 | 0.6 | % | |||||||||||
| Nontaxable or nondeductible items | 1.5 | 2.8 | % | |||||||||||
| Changes in unrecognized tax benefits | 1.2 | 2.3 | % | |||||||||||
Other items (2) | 0.4 | 0.9 | % | |||||||||||
| Total income tax provision | $ | 14.3 | 26.9 | % | ||||||||||
(1) State taxes in Tennessee, Illinois, California, Pennsylvania, Maine, Michigan and New York made up the majority (greater than 50 percent) of the tax effect in this category. | ||||||||||||||
(2) Calculation includes the impact of a rounding adjustment. | ||||||||||||||
The reconciliations of the provision for income taxes at the statutory federal income tax rate to the amount provided for the years ended December 31, 2024 and 2023 is as follows:
| Years Ended December 31, | ||||||||||||||
| (in millions) | 2024 | 2023 | ||||||||||||
| Tax expense at the statutory federal income tax rate | $ | 2.9 | $ | 8.9 | ||||||||||
| State income tax, net of federal income tax | 3.9 | 0.4 | ||||||||||||
| Research and development tax credits | (2.8) | (2.8) | ||||||||||||
| Impact of uncertain tax positions | (0.5) | 1.0 | ||||||||||||
| Valuation allowance impact | 1.7 | 0.3 | ||||||||||||
| Changes in tax rates | 0.7 | 0.8 | ||||||||||||
| Share-based compensation | 0.1 | 0.6 | ||||||||||||
| Foreign-derived intangible income deduction | (0.4) | (0.7) | ||||||||||||
| Foreign tax credit | (0.4) | (0.5) | ||||||||||||
| Goodwill impairment | 2.9 | — | ||||||||||||
| Other items | 1.7 | 1.1 | ||||||||||||
| Total income tax provision | $ | 9.8 | $ | 9.1 | ||||||||||
Total cash paid for income taxes, net of refunds, disaggregated by jurisdiction for the year ended December 31, 2025 consists of the following:
| (in millions) | ||||||||
| Federal | $ | 12.1 | ||||||
| State | 4.9 | |||||||
| Foreign | ||||||||
| Brazil | 1.1 | |||||||
| South Africa | 1.0 | |||||||
| Other foreign jurisdictions | 0.6 | |||||||
| Total cash paid for taxes | $ | 19.7 | ||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
| December 31, | ||||||||||||||
| (in millions) | 2025 | 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Amortization of research and experimental expenditures | $ | 21.9 | $ | 30.7 | ||||||||||
| Inventory reserves | 9.1 | 7.6 | ||||||||||||
| Warranty reserves | 4.6 | 3.7 | ||||||||||||
| Credit loss reserves | 0.9 | 0.5 | ||||||||||||
| State tax loss carryforwards | 13.2 | 11.5 | ||||||||||||
| Accrued vacation | 1.9 | 1.4 | ||||||||||||
| Deferred compensation | 1.0 | 1.0 | ||||||||||||
| Share-based compensation | 2.1 | 1.3 | ||||||||||||
| Goodwill | 0.4 | 2.8 | ||||||||||||
| Foreign net operating loss | 11.0 | 8.3 | ||||||||||||
| Lease obligation | 3.4 | 1.6 | ||||||||||||
| Employee & insurance accruals | 3.1 | 3.1 | ||||||||||||
| Domestic credit carryforwards | 4.1 | 1.5 | ||||||||||||
| Uncertain tax provision reserve | 1.2 | 1.1 | ||||||||||||
| Deferred revenue | 0.5 | 0.9 | ||||||||||||
| Valuation allowances | (17.1) | (12.4) | ||||||||||||
| Other | 2.5 | — | ||||||||||||
| Total deferred tax assets | 63.8 | 64.6 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Property and equipment | 17.3 | 15.8 | ||||||||||||
| Intangibles | 23.6 | 0.9 | ||||||||||||
| Right-of-use assets | 3.4 | 1.5 | ||||||||||||
| Post-retirement benefits | 0.9 | 0.8 | ||||||||||||
| Other | — | 2.2 | ||||||||||||
| Total deferred tax liabilities | 45.2 | 21.2 | ||||||||||||
| Total net deferred assets | $ | 18.6 | $ | 43.4 | ||||||||||
As of December 31, 2025, the Company had gross state net operating losses ("NOL") carryforwards of $260.0 million and gross foreign NOL carryforwards of approximately $40.2 million, which are available to offset future taxable income. If not used, these carryforwards will expire between 2026 and 2035. The Company does not have a federal net operating loss carryforward.
A significant portion of the valuation allowance for deferred tax assets relates to the future utilization of state and foreign NOL and state tax credit carryforwards. Future utilization of these NOL and state tax credit carryforwards is evaluated by the Company on a periodic basis, and the valuation allowance is adjusted accordingly. In 2025, the valuation allowance on these carryforwards increased by $4.7 million, primarily related to valuation allowances on the deferred tax assets related to NOLs generated by the Company's Brazil and United Kingdom subsidiaries.
The following table represents a rollforward of the deferred tax asset valuation allowance for the years ended December 31, 2025, 2024 and 2023:
| Years Ended December 31, | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Allowance balance, beginning of year | $ | 12.4 | $ | 12.5 | $ | 11.9 | ||||||||||||||
| Provision | 2.1 | 1.3 | 1.8 | |||||||||||||||||
| Reversals | (1.2) | (1.5) | (1.6) | |||||||||||||||||
| Other | 3.8 | 0.1 | 0.4 | |||||||||||||||||
| Allowance balance, end of year | $ | 17.1 | $ | 12.4 | $ | 12.5 | ||||||||||||||
Undistributed foreign earnings are considered to be indefinitely reinvested outside the U.S. as of December 31, 2025. Because those earnings are considered to be indefinitely reinvested, no deferred income taxes have been provided thereon. If the Company were to make a distribution of any portion of those earnings in the form of dividends or otherwise, any such amounts would be subject to withholding taxes payable to various foreign jurisdictions; however, the amounts would not be subject to any additional U.S. income tax. As of December 31, 2025, the cumulative amount of undistributed U.S. GAAP earnings for the Company's foreign subsidiaries was $70.6 million.
The Company files income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. The Company is currently under examination for the years 2013, 2014, 2016, 2017, 2018 and 2019 with taxing authorities in the United States. The Company is no longer subject to U.S. federal income tax examinations by authorities for years prior to 2013. With few exceptions, the Company is no longer subject to state and local or non-U.S. income tax examinations by authorities for years prior to 2021.
The Company has a liability for unrecognized tax benefits of $14.1 million and $16.8 million (excluding accrued interest and penalties) as of December 31, 2025 and 2024, respectively. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in "Interest expense" and "Selling, general and administrative expenses", respectively, in the Consolidated Statements of Operations. The Company did not recognize any tax benefits for interest and penalties related to amounts that were settled for less than previously accrued in 2025 or 2024. The net amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate was $18.9 million as of December 31, 2025, of which $11.5 million and $7.4 million were included in "Other current liabilities" and "Other long-term liabilities", respectively, in the Consolidated Balance Sheets. The net amount of these unrecognized tax benefits was $15.1 million as of December 31, 2024 of which $10.7 million and $9.5 million were included in "Other current liabilities" and "Other long-term liabilities", respectively, partially offset by $5.1 million included in "Deferred income tax assets" in the Consolidated Balance Sheets. Management believes it is reasonably possible that unrecognized tax liabilities will decrease by approximately $11.0 million within the next 12 months.
A reconciliation of the beginning and ending unrecognized tax benefits excluding interest and penalties is as follows:
| Years Ended December 31, | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Balance, beginning of year | $ | 16.8 | $ | 13.0 | $ | 12.0 | ||||||||||||||
| Additions for tax positions taken in current year | 1.1 | 5.2 | 0.9 | |||||||||||||||||
| Additions for tax positions taken in prior period | 0.5 | — | 0.1 | |||||||||||||||||
| Reductions due to lapse of statutes of limitations | (4.3) | (1.4) | — | |||||||||||||||||
| Balance, end of year | $ | 14.1 | $ | 16.8 | $ | 13.0 | ||||||||||||||
Jurisdictions in which the Company operates have enacted local legislation formally adopting the Global Anti-Base Erosion Model Rules ("Pillar Two"), which generally provide for a global minimum corporate tax rate of 15%, as established by the Organization for Economic Co-operation and Development ("OECD") Pillar Two Framework. The effective dates are generally January 1, 2024, and January 1, 2025, for different aspects of the rules and vary by jurisdiction. Pillar Two has not had a material impact on the Company's effective tax rate, consolidated results of operations, financial position or cash flows.
Additional jurisdictions are expected to implement the model rules under local law in the future, with varying effective dates. The Company is continuing to evaluate the potential effect on future periods of the Pillar Two implementation, pending legislative adoption by additional individual countries and the ongoing issuance of additional administrative guidance by the OECD.
On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was enacted into law in the United States. The OBBBA extends or makes permanent many expiring provisions of the 2017 Tax Cuts and Jobs Act and restores favorable tax treatment for certain business provisions. The effects of changes in tax laws are required to be recognized in the period in which the legislation is enacted. As such, the OBBBA had no significant impact on the Company's income tax rate as of December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Mar 17, 2020 | |
| 2018 | Mar 18, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.