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Astec Industries Inc.$46.74$.491.06%

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 Astec Industries Reports Second Quarter 2018 Results
   Tuesday, July 24, 2018 6:30:00 AM ET

Announces Exit from Highland Contract and Defines Future Wood Pellet Plant Strategy

Commences Strategic Sourcing Review to Reduce Costs

Board Reviewing Capital Allocation

Investor Conference Call Time Changed to Be Held at 8:30 A.M. Eastern Time Today

CHATTANOOGA, Tenn., July 24, 2018 (GLOBE NEWSWIRE) -- Astec Industries, Inc. (Nasdaq:ASTE) today reported results for its second quarter ended June 30, 2018.

Net sales for the second quarter of 2018 were $272.5 million compared to $301.9 million for the second quarter of 2017, a 9.7% decrease. Domestic sales decreased 14.1% to $203.4 million for the second quarter of 2018 from $236.9 million for the second quarter of 2017. International sales increased 6.4% to $69.1 million for the second quarter of 2018 from $65.0 million for the second quarter of 2017.

The net loss for the second quarter of 2018 was $40.7 million or $1.76 per share, compared to earnings of $14.4 million or $0.62 per diluted share for the second quarter of 2017, a decrease in earnings per share of 143.5%.

Net sales for the first half of 2018 were $598.0 million compared to $620.3 million for the first half of 2017, a decrease of 3.6%. Domestic sales decreased 3.5% to $473.5 million for the first half of 2018 from $490.4 million for the first half of 2017.  International sales decreased 4.1% to $124.5 million for the first half of 2018 from $129.9 million for the first half of 2017.

The net loss for the first half of 2018 was $20.4 million or $0.89 per share, compared to earnings of $29.5 million or $1.27 per diluted share for the first half of 2017, a decrease in earnings per share of 170.0%.

The following financial information for the second quarter and first half of 2018 and 2017 excludes all of the impact of wood pellet plant activity on the Company’s results during those periods, including the charge related to exiting the Highland contract: 
   
Net sales for the second quarter of 2018 were $347.0 million compared to $297.8 million for the second quarter of 2017, an increase of $49.2 million or 16.5%.  Domestic sales increased 19.4% to $277.9 million for the second quarter of 2018 from $232.8 million for the second quarter of 2017.

Earnings for the second quarter of 2018 were $24.0 million or $1.03 per diluted share, compared to $17.7 million or $0.76 per diluted share for the second quarter of 2017, an increase in earnings per share of 35.5%.

Net sales for the first half of 2018 were $672.8 million compared to $604.5 million for the first half of 2017, an increase of $68.3 million or 11.3%.  Domestic sales increased 15.5% to $548.2 for the first half of 2018 from $474.6 million for the first half of 2017. 

Earnings for the first half of 2018 were $46.9 million or $2.02 per diluted share, compared to $32.4 million or $1.40 per diluted share for the first half of 2017, an increase in earnings per share of 45.4%.

Commenting on the quarterly results, Benjamin G. Brock, Chief Executive Officer, stated, “Our core business continues to perform well.  Our EPS, ex-pellet plant impact, was $1.03 per share which is our third best ever quarterly EPS.  Our backlog remains historically strong.  Our domestic customers continue to experience strong end-markets and are optimistic for the rest of this year and 2019, which has us optimistic on our outlook as a whole.”

The Company’s backlog at June 30, 2018 was $302.9 million, a decrease of $57.6 million or 16.0% compared to the June 30, 2017 backlog of $360.5 million.  Domestic backlog decreased 23.3% to $217.9 million at June 30, 2018 from $284.1 million at June 30, 2017. The international backlog at June 30, 2018 was $85.0 million compared to $76.4 million at June 30, 2017, an increase of 11.3%.  Excluding all wood pellet plant backlogs, the Company’s June 30, 2018 backlog increased $7.5 million or 2.5% compared to June 30, 2017.  Prior year backlogs have been recast to include the backlog of RexCon, Inc., acquired during the third quarter of 2017.  

Consolidated financial information for the second quarter and six months ended June 30, 2018 and additional information related to segment revenues and profits are attached as addenda to this press release.

Wood Pellet Plant Business Update

During the second quarter, after careful consideration in partnership with Highland, its wood pellet plant customer in Arkansas, the Company and Highland decided it was in both parties’ best interest to restructure the Company’s obligations related to Highland’s wood pellet plant and exit the Company’s obligations regarding the plant.  The decision was driven by unresolved issues, which inhibited the plant’s ability to meet contractual provisions by the date required by the Company’s sales contract with Highland. Under the terms of the agreement to exit the contract, which was effective on July 20, 2018, the Company agreed to pay $68 million in cash in the aggregate over the course of the next 120 days and forgive approximately $7 million in receivables.  In exchange, Highland agreed to release the Company from all contractual obligations related to the Arkansas wood pellet plant.  The Company will remain available for onsite and telephonic technical advice.

In connection with the agreement to exit the contract with Highland, and in consideration of the historical impact of the wood pellet business on the Company’s overall results, the Company has redefined its wood pellet plant strategy to limit its participation in the wood pellet plant market to offering proven technology for sale as an equipment supplier, not as an Engineer, Procure, Construct (EPC) organization or a participating lender on wood pellet plant projects.  The Company will continue to offer for sale after-market parts and service support for wood pellet plants.

Commencing Strategic Sourcing Review to Reduce Costs and Board Review of Capital Allocation Strategy

The Company recently retained Maine Pointe, a globally recognized operations consulting firm, to assist management in conducting a comprehensive strategic sourcing review. Maine Pointe will coordinate with the Company’s Director of Procurement and recently hired VP of Operational Excellence to streamline procurement operations to improve the quality of the Company’s products and services while reducing costs. Also, as a function of a comprehensive strategic plan review, the Company’s management team and Board of Directors are evaluating the Company’s capital allocation strategy to ensure capital is directed to the areas that will drive the greatest value for shareholders.

Commenting on the wood pellet plant business and other strategic initiatives, Mr. Brock stated, “The Board and management team are taking a number of steps that we believe will support our long-term goals of increasing operational efficiency, reducing costs and improving profitability. We are pleased that our core businesses continue to perform well, as demonstrated by our historically strong backlog and we are focused on achieving our core business profitability targets for 2018. In order to further capitalize on the strengths of our core businesses, we have exited our contractual obligations with regard to the Highland wood pellet plant and have redefined our wood pellet plant business. At the same time, we are engaging in a strategic sourcing review to streamline our procurement process. As we optimize our cost structure, our Board is also considering capital allocation options.  All of these actions are designed to position the Company well for 2019 and beyond.”

Investor Conference Call and Web Simulcast

Astec will conduct a conference call today, July 24, 2018, at 8:30 A.M. Eastern Time, to review its second quarter and six-month results as well as current business conditions. The number to call for this interactive teleconference is (877) 407-9210. International callers should dial (201) 689-8049.   Please reference Astec Industries.

The Company will also provide an online Web simulcast and rebroadcast of the conference call. The live broadcast of Astec’s conference call will be available online at the Company’s website: www.astecindustries.com/conferencecalls . An archived webcast will be available for 90 days at www.astecindustries.com .

A replay of the conference call will be available through August 7, 2018 by dialing (877) 481-4010, or (919) 882-2331 for international callers, Replay ID #34217. A transcription of the conference call will be made available under the Investor Relations section of the Astec Industries, Inc. website within 5 business days after the call.

Astec Industries, Inc. is a manufacturer of specialized equipment for asphalt road building; aggregate processing; oil, gas and water well drilling; wood processing and concrete production.  Astec’s manufacturing operations are divided into three primary business segments: road building, wood pellet production and related equipment (Infrastructure Group); aggregate processing and mining equipment (Aggregate and Mining Group); and equipment for the extraction and production of fuels, biomass production, concrete production and water drilling equipment (Energy Group). 

The information contained in this press release 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 the exit of the Highland wood pellet plant contract, the changes to the Company’s wood pellet plant strategy and the strategic sourcing and capital allocation review.  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, 2017.  



For Additional Information Contact:

Benjamin G. Brock 
President and Chief Executive Officer 
Phone: (423) 867-4210 
Fax: (423) 867-4127 
E-mail: bbrock@astecindustries.com

or

David C. Silvious 
Vice President and Chief Financial Officer 
Phone: (423) 899-5898 
Fax: (423) 899-4456 
E-mail: dsilvious@astecindustries.com

or

Stephen C. Anderson 
Vice President, Director of Investor Relations & Corporate Secretary 
Phone: (423) 899-5898 
Fax: (423) 899-4456 
E-mail: sanderson@astecindustries.com

     
Astec Industries, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands)  
(unaudited)  
   
 June 30June 30  
 2018 2017  
Assets    
Current assets    
Cash and cash equivalents$  65,206 $  52,107   
Investments   1,972    2,031   
Receivables, net   144,205    149,306   
Inventories   394,789    381,323   
Prepaid expenses and other   36,044    26,320   
Total current assets   642,216    611,087   
Property and equipment, net   185,455    182,205   
Other assets   96,165    85,693   
Total assets$  923,836 $  878,985   
Liabilities and equity    
Current liabilities    
Accounts payable - trade$  64,702 $  65,188   
Other current liabilities   177,978    110,670   
Total current liabilities   242,680    175,858   
Non-current liabilities   24,175    24,818   
Total equity   656,981    678,309   
Total liabilities and equity$  923,836 $  878,985   
     
     
Astec Industries, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
   
 Three Months EndedSix Months Ended
 June 30June 30
  2018  2017  2018  2017
Net sales$  272,528 $  301,909 $  597,981 $  620,310
Cost of sales   271,420    236,385    518,868    479,014
Gross profit   1,108    65,524    79,113    141,296
Selling, general, administrative & engineering expenses   51,263    44,220    103,341    97,342
Income (loss) from operations   (50,155)   21,304    (24,228)   43,954
Interest expense   168    185    318    450
Other   1,146    322    1,658    874
Income (loss) before income taxes   (49,177)   21,441    (22,888)   44,378
Income tax expense (benefit)   (8,503)   7,021    (2,481)   14,838
Net income (loss) attributable to controlling interest $  (40,674)$  14,420 $  (20,407)$  29,540
     
     
Earnings (loss) per Common Share    
Net income (loss) attributable to controlling interest    
  Basic$  (1.76)$  0.63 $  (0.89)$  1.28
  Diluted$  (1.76)$  0.62 $  (0.89)$  1.27
     
     
Weighted average common shares outstanding    
  Basic   23,061    23,026    23,053    23,020
  Diluted   23,061    23,183    23,053    23,179
     

 

Astec Industries, Inc.  
Segment Revenues and Profit (Loss)  
For the three months ended June 30, 2018 and 2017  
(in thousands)  
(unaudited)  
 Infrastructure
Group
Aggregate and Mining
Group
Energy
Group
CorporateTotal  
2018 Revenues  83,202    116,297    73,029    -    272,528   
2017 Revenues  143,106    107,118    51,685    -    301,909   
Change $  (59,904)    9,179    21,344    -    (29,381)   
Change %(41.9%)  8.6%  41.3%    -  (9.7%)   
        
2018 Gross Profit (Loss)  (47,817)    29,042    19,808    75   1,108   
2018 Gross Profit %(57.5%)  25.0%  27.1%    -  0.4%   
2017 Gross Profit  26,820    25,791    12,864    49   65,524   
2017 Gross Profit %18.7%  24.1%  24.9%    -  21.7%   
Change  (74,637)    3,251    6,944    26   (64,416)   
        
2018 Profit (Loss)  (62,734)    12,548    8,477    596   (41,113)   
2017 Profit (Loss)  9,893    11,367    3,165    (10,260)   14,165   
Change $  (72,627)    1,181    5,312    10,856   (55,278)   
Change %(734.1%)  10.4%  167.8%  105.8% (390.2%)   
        
        
Segment revenues are reported net of intersegment revenues.  Segment gross profit (loss) is net of profit on intersegment   
revenues.  A reconciliation of total segment profit (loss) to the Company's net income (loss) attributable to controlling interest is as follows (in thousands): 
        
  Three months ended June 30   
   2018  2017 Change $   
Total profit (loss) for all segments$  (41,113)$  14,165 $  (55,278)   
Recapture of intersegment profit   345    194    151    
Net loss attributable to non-controlling interest   94    61    33    
Net income (loss) attributable to controlling interest $  (40,674)$  14,420 $  (55,094)   
        
        
Astec Industries, Inc.  
Segment Revenues and Profit (Loss)  
For the six months ended June 30, 2018 and 2017  
(in thousands)  
(unaudited)  
 Infrastructure
Group
Aggregate and Mining
Group
Energy
Group
CorporateTotal  
2018 Revenues  230,296    235,364    132,321    -    597,981   
2017 Revenues  308,349    207,731    104,230    -    620,310   
Change $  (78,053)    27,633    28,091    -    (22,329)   
Change %(25.3%)  13.3%  27.0%    -  (3.6%)   
        
2018 Gross Profit (Loss)  (14,536)    58,331    35,095    223   79,113   
2018 Gross Profit %(6.3%)  24.8%  26.5%    -  13.2%   
2017 Gross Profit  64,621    50,814    25,751    110   141,296   
2017 Gross Profit %21.0%  24.5%  24.7%    -  22.8%   
Change  (79,157)    7,517    9,344    113   (62,183)   
        
2018 Profit (Loss)  (47,882)    25,658    13,088    (10,652)   (19,788)   
2017 Profit (Loss)  28,073    19,795    5,894    (24,689)   29,073   
Change $  (75,955)    5,863    7,194    14,037   (48,861)   
Change %(270.6%)  29.6%  122.1%  56.9% (168.1%)   
        
        
Segment revenues are reported net of intersegment revenues.  Segment gross profit (loss) is net of profit on intersegment   
revenues.  A reconciliation of total segment profit (loss) to the Company's net income (loss) attributable to controlling interest is as follows (in thousands): 
        
  Six months ended June 30   
   2018  2017 Change $   
Total profit (loss) for all segments$  (19,788)$  29,073 $  (48,861)   
Recapture (elimination) of intersegment profit   (764)   366    (1,130)   
Net loss attributable to non-controlling interest   145    101    44    
Net income (loss) attributable to controlling interest $  (20,407)$  29,540 $  (49,947)   
        
        
Astec Industries, Inc.   
Backlog by Segment   
June 30, 2018 and 2017   
(in thousands)   
(unaudited)   
 Infrastructure
Group
Aggregate and Mining GroupEnergy
Group
Total   
2018 Backlog  105,888    128,342    68,662    302,892    
2017 Backlog  216,797    92,366    51,380    360,543    
Change $  (110,909)    35,976    17,282    (57,651)    
Change %(51.2%)  38.9%  33.6%  (16.0%)    
        


Astec Industries, Inc.
Actual and Ex-Wood Pellet Results for the Second Quarter and First Half Ended June 30, 2018 and 2017
Unaudited Proforma Non-GAAP
(in millions except per share amounts)
        
Second QuarterQ2 2018 as
Reported
Q2 2018 
Ex-Pellets
Q2 2017 as
Reported
Q2 2017 
Ex-Pellets
Ex-Pellets
2018 vs 2017
 % Change
Net Sales  272.5   347.0   301.9   297.8   49.2 16.5% 
GM%0.4% 23.6% 21.7% 23.6%    
Op Income (Loss)  (50.2)   30.7   21.3   26.2   4.5 17.2% 
Net Income (Loss)  (40.7)   24.0   14.4   17.7   6.3 35.6% 
Per Share Earnings (Loss)  (1.76)   1.03   0.62   0.76   0.27 35.5% 
EBITDA  (42.4)   38.5   27.8   32.7   5.8 17.7% 
EBITDA % (15.6%) 11.1% 9.2% 11.0%    
        
First HalfYTD 2018 as
Reported
YTD 2018 
Ex-Pellets
YTD 2017 as
Reported
YTD 2017 
Ex-Pellets
Ex-Pellets
2018 vs 2017
 % Change
Net Sales  598.0   672.8   620.3   604.5   68.3 11.3%
GM%13.2% 24.3% 22.8% 24.1%    
Op Income (Loss)  (24.2)   60.1   44.0   48.3   11.8 24.4%
Net Income (Loss)  (20.4)   46.9   29.5   32.4   14.5 44.8%
Per Share Earnings (Loss)  (0.89)   2.02   1.27   1.40   0.62 44.3%
EBITDA  (9.2)   75.1   57.3   61.6   13.5 21.9%
EBITDA % (1.5%) 11.2% 9.2% 10.2%    
        


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Source: Astec Industries, Inc.


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