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 June 30, 2021

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)

Tennessee	62-0873631
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1725 Shepherd Road
Chattanooga, TN	37421
(Address of principal executive offices)	(Zip Code)

(423) 899-5898

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	ASTE	The Nasdaq Stock Market LLC

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 Filer	☒	Accelerated Filer	☐
Non-accelerated filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 2, 2021, there were 22,757,858 shares of Common Stock outstanding.

ASTEC INDUSTRIES, INC.

Index to Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2021

		Page
PART I
Item 1.	Financial Statements (Unaudited)	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
SIGNATURES		29

PART I ‑ FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ASTEC INDUSTRIES, INC.

Consolidated Balance Sheets

(In millions, except share and per share data, unaudited)

	June 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	174.5	$	158.6
Investments	9.3		4.3
Trade receivables and contract assets, net of allowance for credit losses of $2.6 and $1.7, respectively	148.3		115.9
Other receivables	6.0		4.7
Inventories	257.5		249.7
Prepaid and refundable income taxes	15.7		8.8
Prepaid expenses and other assets	18.1		17.5
Assets held for sale	5.1		6.3
Total current assets	634.5		565.8
Property and equipment, net of accumulated depreciation of $245.2 and $237.6, respectively	169.8		172.8
Investments	12.3		13.7
Goodwill	39.0		38.7
Intangible assets, net of accumulated amortization of $33.5 and $31.3, respectively	26.7		31.2
Deferred income tax assets	10.0		15.0
Other long-term assets	10.0		11.0
Total assets	$	902.3	$	848.2
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	0.2	$	0.2
Short-term debt	1.0		1.4
Accounts payable	78.5		52.7
Customer deposits	35.3		34.2
Accrued product warranty	10.5		10.3
Accrued payroll and related liabilities	28.6		20.8
Accrued loss reserves	1.8		3.0
Other current liabilities	51.9		47.7
Total current liabilities	207.8		170.3
Long-term debt	0.4		0.4
Deferred income tax liabilities	0.5		0.5
Other long-term liabilities	34.3		34.0
Total liabilities	243.0		205.2
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock - authorized 4,000,000 shares of $1.00 par value; none issued	—		—
Common stock – authorized 40,000,000 shares of $0.20 par value; issued and outstanding – 22,757,326 as of June 30, 2021 and 22,611,976 as of December 31, 2020	4.6		4.5
Additional paid-in capital	127.8		127.8
Accumulated other comprehensive loss	(30.2)		(33.5)
Company stock held by SERP, at cost	(1.3)		(1.5)
Retained earnings	557.9		545.2
Shareholders' equity:	658.8		642.5
Noncontrolling interest	0.5		0.5
Total equity	659.3		643.0
Total liabilities and equity	$	902.3	$	848.2

    

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

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ASTEC INDUSTRIES, INC.

Consolidated Statements of Operations

(In millions, except share and per share data, unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net sales	$	278.0	$	265.3	$	562.4	$	554.1
Cost of sales	211.0		205.7		426.9		421.1
Gross profit	67.0		59.6		135.5		133.0
Selling, general and administrative expenses	48.0		37.3		99.7		87.0
Research and development expenses	7.0		5.4		13.3		11.9
Restructuring, impairment and other asset charges, net	0.8		6.0		1.5		8.1
Income from operations	11.2		10.9		21.0		26.0
Other income:
Interest expense	(0.2)		(0.2)		(0.4)		(0.2)
Interest income	0.2		0.2		0.3		0.4
Other income, net	0.1		0.3		—		0.3
Income from operations before income taxes	11.3		11.2		20.9		26.5
Income tax provision (benefit)	2.3		1.8		3.2		(3.3)
Net income	9.0		9.4		17.7		29.8
Net (income) loss attributable to noncontrolling interest	—		(0.1)		—		0.1
Net income attributable to controlling interest	$	9.0	$	9.3	$	17.7	$	29.9
Per share data:
Earnings per common share - Basic	$	0.40	$	0.41	$	0.78	$	1.32
Earnings per common share - Diluted	$	0.39	$	0.41	$	0.77	$	1.32
Weighted average shares outstanding - Basic	22,742,162		22,583,976		22,688,339		22,567,402
Weighted average shares outstanding - Diluted	22,917,957		22,711,023		22,905,270		22,714,702

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

2

ASTEC INDUSTRIES, INC.

Consolidated Statements of Comprehensive Income (Loss)

(In millions, unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	9.0	$	9.4	$	17.7	$	29.8
Other comprehensive income (loss):
Foreign currency translation adjustments	4.1		0.4		3.3		(8.8)
Other comprehensive income (loss)	4.1		0.4		3.3		(8.8)
Comprehensive income	13.1		9.8		21.0		21.0
Comprehensive loss attributable to noncontrolling interest	0.1		—		—		0.2
Comprehensive income attributable to controlling interest	$	13.2	$	9.8	$	21.0	$	21.2

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)

	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net income	$	17.7	$	29.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	10.0		10.6
Amortization	5.1		2.0
Provision for credit losses	0.7		0.8
Provision for warranties	4.9		5.1
Deferred compensation expense	0.3		0.2
Share-based compensation	2.9		3.0
Deferred tax provision	5.4		13.4
Gain on disposition of property and equipment	(0.3)		(0.6)
Asset impairment charges	0.2		4.4
Distributions to SERP participants	(1.1)		(0.4)
Change in operating assets and liabilities, excluding the effects of acquisitions:
Purchase of trading securities, net	(3.1)		—
Receivables and other contract assets	(32.9)		5.4
Inventories	(7.4)		31.4
Prepaid expenses	(0.1)		5.2
Other assets	(0.5)		(2.5)
Accounts payable	25.5		(7.7)
Accrued loss reserves	(0.4)		(0.1)
Accrued payroll and related expenses	7.8		(2.9)
Other accrued liabilities	6.6		3.6
Accrued product warranty	(4.7)		(4.5)
Customer deposits	0.9		(20.1)
Income taxes payable/prepaid	(7.0)		10.6
Other	—		(1.8)
Net cash provided by operating activities	30.5		84.9
Cash flows from investing activities:
Acquisitions, net of cash acquired	0.1		—
Price adjustment on prior sale of subsidiary	(1.1)		—
Expenditures for property and equipment	(7.2)		(7.4)
Proceeds from sale of property and equipment	1.5		2.0
Purchase of investments	(0.6)		(0.6)
Sale of investments	0.5		0.4
Net cash used by investing activities	(6.8)		(5.6)

(Continued)

4

ASTEC INDUSTRIES, INC.

Consolidated Statements of Cash Flows (Continued)

(In millions, unaudited)

	Six Months Ended June 30,
	2021		2020
Cash flows from financing activities:
Payment of dividends	(5.0)		(5.0)
Borrowings under bank loans	2.3		0.8
Repayment of bank loans	(2.7)		(1.0)
Sale of Company stock by SERP, net	0.5		0.1
Withholding tax paid upon vesting of share-based compensation awards	(3.2)		(0.6)
Net cash used by financing activities	(8.1)		(5.7)
Effect of exchange rates on cash	0.3		(2.7)
Increase in cash and cash equivalents	15.9		70.9
Cash and cash equivalents, beginning of period	158.6		48.9
Cash and cash equivalents, end of period	$	174.5	$	119.8
Supplemental Cash Flow Information
Cash paid during the year for:
Interest, net of capitalized interest	$	0.1	$	0.2
Income taxes paid (refunded)	$	5.7	$	(20.5)
Supplemental disclosures of non-cash items
Non-cash investing activities:
Capital expenditures in accounts payable	$	0.2	$	0.7
Non-cash financing activities:
Additions to right-of-use assets and lease liabilities	$	1.3	$	0.1
Liability award converted to equity	$	—	$	0.8

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

5

ASTEC INDUSTRIES, INC.

Consolidated Statements of Equity

(In millions, unaudited)

	Common Stock	Common Stock Amount		Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		Company Shares Held by SERP		Retained Earnings		Non-controlling Interest		Total Equity
Balance, December 31, 2020	22,611,976	$	4.5	$	127.8	$	(33.5)	$	(1.5)	$	545.2	$	0.5	$	643.0
Net income	—	—		—		—		—		8.7		—		8.7
Other comprehensive loss	—	—		—		(0.7)		—		—		(0.1)		(0.8)
Dividends ($0.11 per share)	—	—		—		—		—		(2.5)		—		(2.5)
Share-based compensation	—	—		1.4		—		—		—		—		1.4
Issuance of common stock under incentive plan	103,541	—		—		—		—		—		—		—
Withholding tax paid upon equity award vesting	—	—		(3.0)		—		—		—		—		(3.0)
SERP transactions, net	—	—		0.1		—		0.1		—		—		0.2
Balance, March 31, 2021	22,715,517	$	4.5	$	126.3	$	(34.2)	$	(1.4)	$	551.4	$	0.4	$	647.0
Net income	—	—		—		—		—		9.0		—		9.0
Other comprehensive income	—	—		—		4.0		—		—		0.1		4.1
Dividends ($0.11 per share)	—	—		—		—		—		(2.5)		—		(2.5)
Share-based compensation	—	—		1.5		—		—		—		—		1.5
Issuance of common stock under incentive plan	41,809	0.1		—		—		—		—		—		0.1
Withholding tax paid upon equity award vesting	—	—		(0.2)		—		—		—		—		(0.2)
SERP transactions, net	—	—		0.2		—		0.1		—		—		0.3
Balance, June 30, 2021	22,757,326	$	4.6	$	127.8	$	(30.2)	$	(1.3)	$	557.9	$	0.5	$	659.3

	Common Stock	Common Stock Amount		Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		Company Shares Held by SERP		Retained Earnings		Non-controlling Interest		Total Equity
Balance, December 31, 2019	22,551,183	$	4.5	$	122.6	$	(31.8)	$	(1.7)	$	508.3	$	0.5	$	602.4
Net income	—	—		—		—		—		20.6		(0.2)		20.4
Other comprehensive loss	—	—		—		(9.2)		—		—		—		(9.2)
Dividends ($0.11 per share)	—	—		—		—		—		(2.5)		—		(2.5)
Share-based compensation	—	—		1.1		—		—		—		—		1.1
Conversion of liability awards to equity	—	—		0.8		—		—		—		—		0.8
Issuance of common stock under incentive plan	32,663	—		—		—		—		—		—		—
Withholding tax paid upon equity award vesting	—	—		(0.5)		—		—		—		—		(0.5)
Balance, March 31, 2020	22,583,846	$	4.5	$	124.0	$	(41.0)	$	(1.7)	$	526.4	$	0.3	$	612.5
Net income	—	—		—		—		—		9.3		0.1		9.4
Other comprehensive income (loss)	—	—		—		0.5		—		—		(0.1)		0.4
Dividends ($0.11 per share)	—	—		—		—		—		(2.5)		—		(2.5)
Share-based compensation	—	—		1.9		—		—		—		—		1.9
Issuance of common stock under incentive plan	19,136	—		—		—		—		—		—		—
Withholding tax paid upon equity award vesting	—	—		(0.1)		—		—		—		—		(0.1)
SERP transactions, net	—	—		—		—		0.1		—		—		0.1
Balance, June 30, 2020	22,602,982	$	4.5	$	125.8	$	(40.5)	$	(1.6)	$	533.2	$	0.3	$	621.7

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

6

ASTEC INDUSTRIES, INC.

Notes To Unaudited Consolidated Financial Statements

Note 1. Basis of Presentation and Significant Accounting Policies

Description of Business

Astec Industries, Inc. ("Astec" or the "Company") is a Tennessee corporation which was incorporated in 1972. The Company designs, engineers, manufactures 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) - 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 category consists primarily of the parent company and Astec Insurance Company ("Astec Insurance" or the "captive"), a captive insurance company, which do not meet the requirements for separate disclosure as an operating segment or inclusion in one of the other reporting segments. Management evaluates performance and allocates resources to the operating segments based on profit or loss from operations before United States ("U.S.") federal income taxes, state deferred taxes and corporate overhead and, thus, these costs are included in the Corporate category.

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Astec and its subsidiaries and have been prepared by the Company, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). The Company prepares its financial statements in accordance with 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. GAAP have been condensed or omitted pursuant to the SEC rules and regulations governing interim financial statements. However, the Company believes that the disclosures made in the unaudited consolidated financial statements and related notes are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. All intercompany balances and transactions between the Company and its affiliates have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and assumptions include inventory obsolescence costs, warranty costs, inventory net realizable value, self-insurance loss reserves, employee benefit programs 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. The COVID-19 pandemic has resulted in uncertainties in the Company's business, which may result in actual results differing from those estimates. As a result, the Company's accounting estimates and assumptions may change over time in response to COVID-19. Such changes could result in future impairments of goodwill, intangibles, long-lived assets and investment securities and incremental credit losses on receivables, among other issues. On an ongoing basis, the Company evaluates these assumptions, judgments and estimates. Actual results may differ from these estimates.

In the opinion of management, the consolidated financial statements contain all adjustments necessary for a fair statement of the results of operations and comprehensive income (loss) for the three and six months ended June 30, 2021 and 2020, the financial position as of June 30, 2021 and December 31, 2020 and the cash flows for the six months ended June 30, 2021 and 2020, and except as otherwise discussed herein, such adjustments consist only of those of a normal recurring nature. The interim results are not necessarily indicative of results that may be achieved in a full reporting year.

All dollar amounts, except share and per share amounts, are in millions of dollars unless otherwise indicated.

Reclassifications and Adjustments

Certain reclassifications in amounts previously reported have been made to conform to current presentation including the reclassification of $0.6 million net gain on sale of fixed assets from "Cost of sales" to "Restructuring, impairment and other asset charges, net" for the six months ended June 30, 2020.

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In addition, the Company recorded a $1.5 million out-of-period expense during the first quarter of 2021 in "Selling, general and administrative expenses" for certain vendor hosted software licensing fees for contract costs incurred in the fourth quarter of 2020.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update 2019-12, "Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes", which eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted this new standard effective January 1, 2021. The adoption of this standard had an immaterial impact on the Company's financial position, results of operations or cash flows.

Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material impact on the Company.

Note 2. Acquisitions

CON-E-CO Acquisition - The Company entered into a Stock Purchase Agreement, dated as of July 20, 2020, by and between Oshkosh Corporation for the purchase of the CON-E-CO concrete equipment company in Nebraska. The purchase price was $13.8 million, after adjustments, and was paid in cash. The Company's allocation of the purchase price, net of the adjustments in the first and second quarters of 2021 discussed below, resulted in the recognition of $4.3 million of intangible assets primarily consisting of customer relationships (8 year life) and trade name (3 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 proportion of intangible assets acquired in relation to tangible assets. The acquisition provides the Company with a broader line of concrete batch plant manufacturing, which will strengthen the Infrastructure Solutions segment. Results of operations have been consolidated from the date of acquisition.

In the first quarter of 2021, the Company recorded a $0.4 million adjustment related to a refined valuation of deferred tax liabilities, which was offset in intangible assets. In the second quarter of 2021, the Company recorded a $0.3 million adjustment related to right-of-use lease assets, which was offset in accounts payable and other.

The following table summarizes the final allocations of the total purchase price:

(in millions)	Amount
Accounts receivable	$	2.3
Inventories	8.1
Other assets	6.3
Intangible assets	4.3
Total assets acquired	$	21.0
Accounts payable and other	(4.4)
Advance customer deposits	(2.8)
Total liabilities assumed	(7.2)
Total purchase price	$	13.8

BMH Systems Acquisition - The Company entered into a Share Purchase Agreement, dated as of August 3, 2020, by and between BMH Systems Corporation ("St. Bruno") for the purchase of the concrete equipment company in Quebec, Canada. The purchase price was $15.6 million, after adjustments, and was paid in cash. The Company's allocation of the purchase price resulted in the recognition of $6.3 million of goodwill and $5.7 million of other intangible assets primarily consisting of customer relationships (9 year life) and of trade name (15 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 proportion of intangible assets acquired in relation to tangible assets. The acquisition provides the Company with a broader line of concrete batch plant manufacturing, which will strengthen the Infrastructure Solutions segment. Results of operations have been consolidated from the date of acquisition. The goodwill is not expected to be deductible for income tax purposes.

8

In the first quarter of 2021, a working capital adjustment was made that resulted in the decrease of goodwill of $0.1 million.

The following table summarizes the final allocations of the total purchase price:

(in millions)	Amount
Cash	$	1.2
Accounts receivable and contract assets	6.4
Inventories	2.0
Goodwill	6.3
Other assets	3.8
Intangible assets	5.7
Total assets acquired	$	25.4
Total liabilities assumed	(9.8)
Total purchase price	$	15.6

Proforma financial information is not included since not significant.

Note 3. Inventories

Inventories are valued at the lower of cost (first-in, first-out) or net realizable value, which requires the Company to make specific estimates, assumptions and judgments in determining the amount, if any, of reductions in the valuation of inventories to their net realizable values.

Inventories consist of the following:

(in millions)	June 30, 2021		December 31, 2020
Raw materials and parts	$	175.1	$	154.6
Work-in-process	60.2		57.3
Finished goods	18.7		34.0
Used equipment	3.5		3.8
Total	$	257.5	$	249.7

Note 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 and marketable equity securities held in the Company's deferred compensation programs. The Company's deferred compensation programs include a non-qualified Supplemental Executive Retirement Plan ("SERP") 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 owns the assets and the related offsetting liability for disbursement until such time as a participant makes a qualifying withdrawal, which is recorded in "Other long-term liabilities" in the Consolidated Balance Sheets. The Company's subsidiaries also occasionally enter into foreign currency exchange contracts to mitigate exposure to fluctuations in currency exchange rates.

The carrying amount of cash and cash equivalents, trade receivables and contract assets, other receivables, accounts payable, short-term debt and long-term debt approximates their fair value because of their short-term nature and/or interest rates associated with the instruments. Investments are carried at their fair value based on quoted market prices for identical or similar assets or, where no quoted prices exist, other observable inputs for the asset. The fair values of foreign currency exchange contracts are based on quotations from various banks for similar instruments using models with market based inputs.

Financial assets and liabilities are categorized based upon the level of judgment associated with the inputs used to measure their fair

9

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.

As indicated in the tables below, the Company has determined that all of its financial assets and liabilities as of June 30, 2021 and December 31, 2020 are Level 1 and Level 2 in the fair value hierarchy as defined above:

	June 30, 2021
(in millions)	Level 1		Level 2		Total
Financial assets:
Trading equity securities:
Deferred compensation programs money market fund	$	0.2	$	—	$	0.2
Deferred compensation programs mutual funds	5.4		—		5.4
Preferred stocks	0.3		—		0.3
Equity funds	3.8		—		3.8
Trading debt securities:
Corporate bonds	3.6		—		3.6
Municipal bonds	—		0.2		0.2
Floating rate notes	0.4		—		0.4
U.S. government securities	1.4		—		1.4
Asset-backed securities	—		1.3		1.3
Other	3.9		1.1		5.0
Derivative financial instruments	—		0.1		0.1
Total financial assets	$	19.0	$	2.7	$	21.7
Financial liabilities:
Deferred compensation programs liabilities	$	—	$	7.7	$	7.7
Total financial liabilities	$	—	$	7.7	$	7.7

10

	December 31, 2020
(in millions)	Level 1		Level 2		Total
Financial assets:
Trading equity securities:
Deferred compensation programs money market fund	$	0.2	$	—	$	0.2
Deferred compensation programs mutual funds	4.8		—		4.8
Preferred stocks	0.3		—		0.3
Equity funds	1.7		—		1.7
Trading debt securities:
Corporate bonds	4.8		—		4.8
Municipal bonds	—		0.9		0.9
Floating rate notes	0.4		—		0.4
U.S. government securities	1.8		—		1.8
Asset-backed securities	—		2.1		2.1
Other	—		1.0		1.0
Derivative financial instruments	—		0.1		0.1
Total financial assets	$	14.0	$	4.1	$	18.1
Financial liabilities:
Derivative financial instruments	$	—	$	0.5	$	0.5
Deferred compensation programs liabilities	—		7.3		7.3
Total financial liabilities	$	—	$	7.8