ASTE - Astec Reports Second Quarter 2020 Results

August, 05 2020 07:00 AM Astec Industries Inc.

Second Quarter 2020 Highlights (all comparisons are made to the prior year second quarter):

Net Sales decreased 13.0% to $265.3M; Adjusted Net Sales decreased just 6.8% due to $20.0M included in 2019 sale of a wood pellet plant
Gross margin of 22.5% decreased 480 bps; Adjusted Gross margin increased 100 bps
EPS of $0.41 compared to $1.03 a year ago; adjusted EPS of $0.67 increased 81.1%
EBITDA decreased 53.2% to $17.4M; adjusted EBITDA of $25.3M increased 46.9% from $17.2M a year ago; adjusted EBITDA margin of 9.5% increased 350 bps
Announced the closure of our Mequon, Wisconsin facility; in-line with global footprint consolidation strategy

CHATTANOOGA, Tenn., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Astec Industries, Inc. (Nasdaq: ASTE) announced today its financial results for second quarter 2020 ending June 30, 2020.

Second quarter of 2020 net sales of $265.3 million decreased 13.0% compared to $304.8 million for the second quarter of 2019. Domestic sales decreased $24.7 million or 10.0% and international sales decreased $14.8 million or 25.3% due to COVID-19 related business disruptions in the second quarter versus last year. Excluding the impact of foreign currency, net sales decreased 11.4%.

Backlog as of June 30, 2020 of $182.0 million decreased by $64.1 million, or 26.1% compared to the backlog of $246.1 million a year ago driven by lower Materials and Infrastructure Solutions orders, which were down 17.3% and 30.9%, respectively. Domestic backlog decreased by 20.6% to $128.3 million while International backlog decreased by 36.6% to $53.6 million. Lower orders were driven by COVID-19 uncertainties.

Operating income of $10.9 million in the second quarter of 2020 decreased 64.4% compare to $30.5 million in the second quarter 2019. In relation to the company’s efforts to simplify the organization, the company incurred a $7.9 million pre-tax restructuring charge or $0.26 per share net of taxes related to asset impairment, inventory write-down, reduction in labor force and the closing of our Mequon, Wisconsin facility. Second quarter of 2020 adjusted operating income of $18.8 million, increased 77.8% compared to $10.5 million a year ago. Adjusted operating margin of 7.1% increased 340 basis points from 3.7% in second quarter 2019 largely driven by our transformation initiatives put in place beginning in late 2019. SG&A expenses declined 19.0% on a dollar basis driven by reductions in consulting fees, travel and employee expenses.

Adjusted EBITDA of $25.3 million increased 46.9% compared to $17.2 million a year ago. Adjusted EBITDA margin of 9.5% increased 350 basis points from 6.0% in second quarter 2019.

Excluding restructuring charges mentioned above, adjusted net income of $15.3 million increased 81.6% compared to the prior year period, while adjusted EPS of $0.67 increased 81.1% compared to $0.37 for second quarter 2019.

“During the second quarter, we continued to make significant progress against our initiatives to Simply, Focus and Grow our business. In the quarter, we announced the closure of our Mequon, Wisconsin location, which is where we built our Telsmith products. This closure will enable us to leverage our footprint more efficiently as these products are transferred to different Astec facilities,” said Barry Ruffalo, CEO of Astec. “In addition, supporting our Grow strategic pillar, we recently announced the acquisition of two premier full-line concrete batch plant manufacturers, CON-E-CO and BMH, both of which will significantly strengthen our Infrastructure Solutions group and provide our customers with access to the most robust line of concrete products in the infrastructure industry. We continue to look for ways to grow regionally in attractive markets that build upon our strong foundational product lines.”

“Second quarter results also demonstrated traction on our strategic transformation with Adjusted EBITDA and 350 bps expansion in Adjusted EBITDA margin, despite the decrease in net sales, a direct result of the restructuring initiatives taken in 2019 and 2020. While we remain cautious given the global pandemic, we are well positioned to navigate the economic challenges ahead of us with a more efficient and streamlined organizational structure, a strong balance sheet and ample liquidity.”

We have provided a spreadsheet recasting two years of historical segment financials that have been made available under the Investor Relations section of the Astec Industries, Inc. website.

COVID-19 Business Continuity and Operations Update
We continue to execute on COVID-19 measures we announced in our April 1, 2020 COVID-19 Business Update and our first quarter 2020 earnings call. These measures were taken in order to ensure the health and wellbeing of our employees, their families and communities in which we operate, while continuing to serve our customers’ critical needs. Below is a COVID-related update by category:

Balance Sheet and Liquidity
The Company remains focused on liquidity and cash preservation. We ended the quarter with a net cash position of $119.8 million with total debt of $1.4 million. The Company has available liquidity in excess of $270.6 million as of June 30, 2020.

Operations
During the second quarter of 2020, we experienced a temporary suspension of operations at two of our facilities, Johannesburg, South Africa, and Omagh, Northern Ireland, in observance of government mandates. These two facilities were closed for approximately one month and both resumed operations during the month of May.

All of our facilities are now operational and able to meet current demand levels. We continue to manufacture our products to building and maintaining the infrastructure used to move goods to market, facilitate the transportation needs of communities and for public health and safety.

Supply Chain
We have not experienced any interruption to our supply chain and are able to source the necessary materials needed to meet our customers’ needs. We are closely monitoring our supply chain and are ready to take proactive actions as needed to mitigate any potential disruptions. We have increased the frequency of communications with our suppliers and customers to ensure business continuity, anticipate, and prepare for any new developments.

Cost Management
We have implemented additional actions to help mitigate the financial and operations impacts of COVID-19, including reducing expenses and conserving cash. These actions include:

Overall headcount reduction of 15% since 2Q19
Suspension of all hiring, except for critical positions
Discretionary spending? reductions
Working capital management to ensure efficient accounts receivable processing with our customers

Mr. Ruffalo continued, “I am very proud of how our team members have embraced and adapted to the COVID-19 situation as an organization and how we have managed through this challenging environment. At the onset of the pandemic, we immediately took proactive measures to ensure the safety and wellbeing of our employees, suppliers and customers, while we continued to execute on our strategy and drive profitable growth in the quarter. We remain well-positioned to navigate the economic challenges ahead of us with our more efficient and streamlined organizational structure, a strong balance sheet and ample liquidity. I am confident that we will come out of the COVID-19 pandemic a stronger and more resilient organization.”

Investor Conference Call and Web Simulcast
Astec will conduct a conference call and live webcast today, August 5^th, 2020, at 10:00 A.M. Eastern Time, to review its second quarter 2020 results as well as current business conditions. The number to call for this interactive teleconference is (877) 407-9210 (at least 10 minutes prior to the scheduled time for the call). International callers should dial (201) 689-8049. You may also access a live webcast of the call by visiting www.webcaster4.com/Webcast/Page/2146/36087. You will need to give your name and company affiliation and reference Astec Industries. An archived webcast will be available for ninety days at www.astecindustries.com.

A replay of the conference call will be available through August 19, 2020 by dialing (877) 481-4010 or (919) 882-2331 for international callers, Conference ID # 36087. A transcript of the conference call will be made available under the Investor Relations section of the Astec Industries, Inc. website within five business days after the call.

About Astec
Astec, (www.astecindustries.com), is a manufacturer of specialized equipment for asphalt road building, aggregate processing and concrete production. Astec’s manufacturing operations are divided into two primary business segments: Infrastructure Solutions that includes road building, asphalt and concrete plant, thermal and storage solutions; and Materials Solutions that include our aggregate processing and mining equipment.

Forward-Looking Statements
The information contained in this presentation and discussion contains “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the future performance of the Company, including statements about the effects on the Company from (i) restructuring initiatives, (ii) changes in the business segments (iii) the effect of changes in backlog (iv) the acquisition of CON-E-CO and BMH, (v) the closure of our Mequon, Wisconsin location and associated efficiencies, (vi) the impact of the COVID-19 pandemic on the global demand for the Company’s products, and (vii) the impacts of the COVID-19 pandemic on the Company’s financial condition and business operations. These forward-looking statements reflect management’s expectations and are based upon currently available information, and the Company undertakes no obligation to update or revise such statements. These statements are not guarantees of performance and are inherently subject to risks and uncertainties, many of which cannot be predicted or anticipated. Future events and actual results, financial or otherwise, could differ materially from those expressed in or implied by the forward-looking statements. Important factors that could cause future events or actual results to differ materially include: general uncertainty in the economy, oil, gas and liquid asphalt prices, rising steel prices, decreased funding for highway projects, the relative strength/weakness of the dollar to foreign currencies, production capacity, general business conditions in the industry, demand for the Company’s products, seasonality and cyclicality in operating results, seasonality of sales volumes or lower than expected sales volumes, lower than expected margins on custom equipment orders, competitive activity, tax rates and the impact of future legislation thereon, and those other factors listed from time to time in the Company’s reports filed with the Securities and Exchange Commission, including but not limited to the Company’s annual report on Form 10-K for the year ended December 31, 2019.

For Additional Information Contact:
Steve Anderson
Senior Vice President of Administration and Investor Relations, Secretary
Phone: (423) 899-5898
Fax: (423) 899-4456
E-mail: sanderson@astecindustries.com













Astec Industries Inc.

Condensed Consolidated Statements of Income

(In millions, except share and per share amounts; unaudited)

















Three Months Ended

Year To Date





June 30,

June 30,






2020



2019



2020



2019


Net sales
$
265.3


$
304.8


$
554.1


$
630.6


Cost of sales

205.7



221.5



420.5



470.4


Gross profit

59.6



83.3



133.6



160.2














Operating expenses:









Selling, general and administrative

42.7



52.8



98.9



110.9



Restructuring and asset impairment charges

6.0



0.0



8.7



0.6




Total operating expenses

48.7



52.8



107.6



111.5


Operating income

10.9



30.5



26.0



48.7














Other income (expense):









Interest expense

(0.1
)


(0.5
)


(0.2
)


(1.1
)


Miscellaneous, net

0.3



0.4



0.8



0.8


Income before income taxes

11.1



30.4



26.6



48.4


Provision (benefit) from income taxes

1.8



7.0



(3.3
)


10.7


Net income attributable to controlling interest
$
9.3


$
23.4


$
29.9


$
37.7














Earnings per common share









Basic
$
0.41


$
1.04


$
1.33


$
1.67



Diluted

0.41



1.03



1.32



1.66














Weighted-average shares outstanding









Basic

22,584



22,509



22,567



22,503



Diluted

22,711



22,667



22,715



22,656









































EPS *
$
0.41


$
1.03


$
1.32


$
1.66





Restructuring and unusual

0.35



(0.88
)


0.39



(0.86
)




Goodwill impairment





0.07







Provision of income taxes

(0.09
)


0.22



(0.11
)


0.22





Adjusted EPS *
$
0.67


$
0.37


$
1.67


$
1.02





























* Diluted EPS






















Astec Industries Inc.
Segment Revenues and Profits
(In thousands; unaudited)














































Three Months Ended June 30


Year To Date Ended June 30





Infrastructure Solutions

Material Solutions

Corporate

Total


Infrastructure Solutions

Material Solutions

Corporate

Total






















2020 Revenues
$
181,851


$
83,448



--


$
265,299



$
384,469


$
169,678






$
554,147


2019 Revenues

197,965



106,837



--



304,802




417,214



213,368







630,582


Change $

(16,114
)


(23,389
)


--



(39,503
)



(32,745
)


(43,690
)






(76,435
)

Change %

(8.1
%)


(21.9
%)




(13.0
%)



(7.8
%)


(20.5
%)




(12.1
%)






















2020 Gross profit

38,289



21,214



112



59,615




91,213



42,219



204



133,636


2020 Gross profit %

21.1
%


25.4
%




22.5
%



23.7
%


24.9
%




24.1
%

2019 Gross profit

57,743



25,493



81



83,317




109,053



51,038



76



160,167


2019 Gross profit %

29.2
%


23.9
%




27.3
%



26.1
%


23.9
%




25.4
%

Change %

(19,454
)


(4,279
)


31



(23,702
)



(17,840
)


(8,819
)


128



(26,531
)






















2020 Profit / (loss)

14,215



8,469



(13,604
)


9,080




31,435



14,504



(16,528
)


29,411


2019 Profit / (loss)

26,926



8,489



(12,563
)


22,852




44,996



17,166



(25,471
)


36,691


Change $

(12,711
)


(20
)


(1,041
)


(13,772
)



(13,561
)


(2,662
)


8,943



(7,280
)

Change %

(47.2
%)


(0.2
%)


(8.3
%)


(60.3
%)



(30.1
%)


(15.5
%)


(35.1
%)


(19.8
%)











































Segment revenues are reported net of intersegment revenues. Segment gross profit is net of profit on intersegment






revenues. A reconciliation of total segment profits to the Company's net income attributable to controlling interest is as follows (in thousands):



















































Three Months Ended June 30,




Year To Date Ended June 30,








2020



2019


Change $





2020



2019


Change $

Total profit for all segments


$
9,080


$
22,852


$
(13,772
)




$
29,411


$
36,691


$
(7,280
)

Recapture of intersegment profit



226



509



(283
)





378



888



(510
)

Net loss attributable to non-controlling interest


(48
)


16



(64
)





113



72



41


Net income attributable to controlling interest

$
9,258


$
23,377


$
(14,119
)




$
29,902


$
37,651


$
(7,749
)









Astec Industries Inc.

Condensed Consolidated Balance Sheets

(In millions; unaudited)













June 30,

June 30,






2020


2019

Assets




Current assets:





Cash and cash equivalents
$
119.8

$
24.9


Investments

2.9


1.2


Receivables, net

118.7


139.2


Inventories, net

263.2


360.9


Other current assets

25.8


31.3



Total current assets

530.4


557.5

Property, plant and equipment, net

177.8


191.9

Other long-term assets

85.6


99.2

Total assets
$
793.8

$
848.6









Liabilities




Current liabilities:





Accounts payable
$
48.2

$
70.3


Other current liabilities

95.8


103.6



Total current liabilities

144.0


173.9

Long-term debt

0.4


28.9

Other long-term liabilities

27.6


25.2

Total equity

621.8


620.6

Total liabilities and equity
$
793.8

$
848.6








Astec Industries Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)











Three Months Ended




June 30,





2020



2019

Cash flows from operating activities:



Net income
$
29,788


$
37,579

Adjustments to reconcile net income to net cash provided




by operating activities:




Depreciation and amortization

12,601



13,139


Provision for doubtful accounts

780



806


Provision for warranties

5,137



4,496


Deferred compensation expense

193



144


Stock-based compensation

2,987



1,739


Deferred income tax provision

13,428



8,412


(Gain) loss on disposition of fixed assets

(730
)


176


Asset impairment charge

4,146



--

Distributions to SERP participants

(434
)


(1,007
)
Change in operating assets and liabilities:




Sale (purchase) of trading securities, net

(9
)


50


Trade and other receivables

5,445



(6,719
)

Inventories

31,365



(5,240
)

Prepaid expenses and other assets

2,681



911


Accounts payable

(7,714
)


(2,006
)

Accrued payroll and related expenses

(2,869
)


(2,807
)

Accrued product warranty

(4,538
)


(5,287
)

Customer deposits

(20,053
)


(13,025
)

Prepaid and income taxes payable, net

10,622



7,669


Other

2,015



3,841

Net cash provided by operating activities

84,841



42,871

Cash flows from investing activities:



Expenditures for property and equipment

(7,407
)


(8,657
)
Proceeds from sale of property and equipment

1,987



136

Other

(205
)


433

Net cash used by investing activities

(5,625
)


(8,088
)
Cash flows from financing activities:



Payment of dividends

(4,971
)


(4,956
)
Bank loan repayments, net

(188
)


(31,014
)
Sale of Company shares held by SERP

125



222

Withholding tax paid upon vesting of restricted stock units

(565
)


(160
)
Net cash used by financing activities

(5,599
)


(35,908
)
Effect of exchange rates on cash

(2,677
)


209

Net change in cash and cash equivalents

70,940



(916
)
Cash and cash equivalents, beginning of period

48,857



25,821

Cash and cash equivalents at end of period
$
119,797


$
24,905

Appendix
In its earnings release, Astec refers to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. Non-GAAP financial measures should be considered in addition to, and not in lieu of, GAAP financial measures. Nonetheless, this non-GAAP information can be useful in understanding the Company's operating results and the performance of its core businesses.
The amounts described below are unaudited, reported in thousands of U.S. Dollars (Except Share data), and as of or for the periods indicated.









2Q20 GAAP to Non-GAAP Reconciliation Table

YTD2Q20 GAAP to Non-GAAP Reconciliation Table










As Reported
Restructuring
As Adjusted


As Reported
Restructuring
As Adjusted

(GAAP)
Charges
(Non-GAAP)


(GAAP)
Charges
(Non-GAAP)
Consolidated




Consolidated



Net sales
$
265,299

$
-

$
265,299


Net sales
$
554,147

$
-

$
554,147

GP

59,615


1,908


61,523


GP

133,636


1,908


135,544

GP%

22.5
%


23.2
%

GP%

24.1
%


24.5
%
Operating income

10,860


7,900


18,760


Operating income

26,003


10,612


36,615

Provision (benefit) from income taxes

1,868


1,906


3,774


Provision (benefit) from income taxes

(3,275
)

2,543


(732
)
Net income attributable to controlling interest

9,258


5,994


15,252


Net income attributable to controlling interest

29,902


8,069


37,971

EPS

0.41


0.26


0.67


EPS

1.32


0.35


1.67

EBITDA

17,365


7,900


25,265


EBITDA

38,913


10,612


49,525



















Infrastructure Solutions




Infrastructure Solutions



Net sales

181,851


-


181,851


Net sales

384,469


-


384,469

GP

38,289


1,908


40,197


GP

91,213


1,908


93,121

GP%

21.1
%


22.1
%

GP%

23.7
%


24.2
%
EBITDA

18,980


3,611


22,591


EBITDA

41,221


6,290


47,511










Materials Solutions




Materials Solutions



Net sales

83,448


-


83,448


Net sales

169,678


-


169,678

GP

21,214


-


21,214


GP

42,219


-


42,219

GP%

25.4
%


25.4
%

GP%

24.9
%


24.9
%
EBITDA

10,562


1,550


12,112


EBITDA

18,922


1,582


20,504



















2Q19 GAAP to Non-GAAP Reconciliation Table

YTD 2Q19 GAAP to Non-GAAP Reconciliation Table

As Reported
Restructuring
As Adjusted


As Reported
Restructuring
As Adjusted

(GAAP)
Charges
(Non-GAAP)


(GAAP)
Charges
(Non-GAAP)
Consolidated




Consolidated



Net sales
$
304,802

$
(20,000
)
$
284,802


Net sales
$
630,582

$
(20,000
)
$
610,582

GP

83,317


(19,974
)

63,343


GP

160,167


(19,974
)

140,193

GP%

27.3
%


22.2
%

GP%

25.4
%


23.0
%
Operating income

30,481


(19,932
)

10,549


Operating income

48,660


(19,420
)

29,240

Provision (benefit) from income taxes

7,008


(4,953
)

2,055


Provision (benefit) from income taxes

10,789


(4,955
)

5,834

Net income attributable to controlling interest

23,377


(14,979
)

8,398


Net income attributable to controlling interest

37,651


(14,465
)

23,186

EPS

1.03


(0.66
)

0.37


EPS

1.66


(0.64
)

1.02

EBITDA

37,128


(19,932
)

17,196


EBITDA

62,067


(19,421
)

42,646









(14,465
)

Infrastructure Solutions




Infrastructure Solutions



Net sales

197,965


(20,000
)

177,965


Net sales

417,214


(20,000
)

397,214

GP

57,743


(19,974
)

37,769


GP

109,053


(19,974
)

89,079

GP%

29.2
%


21.2
%

GP%

26.1
%


22.4
%
EBITDA

32,431


(19,932
)

12,499


EBITDA

55,575


(19,420
)

36,155










Materials Solutions




Materials Solutions



Net sales

106,837


-


106,837


Net sales

213,368


-


213,368

GP

25,493


-


25,493


GP

51,038


-


51,038

GP%

23.9
%


23.9
%

GP%

23.9
%


23.9
%
EBITDA

11,315


-


11,315


EBITDA

22,499


-


22,499













Astec Industries Inc.

GAAP vs Non-GAAP Adj. ESP Reconciliations

(In thousands, except share and per share amounts; unaudited)

















Three Months Ended

Year To Date Ended





June 30,

June 30,






2020



2019



2020



2019


Net income attributable to controlling interest
$
9,258


$
23,377


$
29,902


$
37,651


Plus: Restructuring and unusual

7,900



(19,932
)

$
8,966


$
(19,420
)

Plus: Goodwill impairment

--



--


$
1,646




Less: Provision from income taxes

(1,906
)


4,953


$
(2,543
)

$
4,955


Adjusted net income attributable to controlling interest
$
15,252


$
8,398


$
37,971


$
23,186






































Diluted EPS
$
0.41


$
1.03


$
1.32


$
1.66


Plus: Restructuring and unusual

0.35



(0.88
)


0.39



(0.86
)

Plus: Goodwill impairment

--



--



0.07



--


Less: Provision from income taxes

(0.09
)


0.22



(0.11
)


0.22


Adjusted EPS
$
0.67


$
0.37


$
1.67


$
1.02

Company Name:	Astec Industries Inc.
Stock Symbol:	ASTE
Market:	NASDAQ
Website:	astecindustries.com

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