8-K/A
ASTEC INDUSTRIES INC (ASTE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): March 3, 2020
ASTEC INDUSTRIES INC
(Exact Name of Registrant as Specified in Charter)
| TN | 001-11595 | 62-0873631 |
|---|---|---|
| (State or Other Jurisdiction<br><br> of Incorporation) | (Commission File Number) | (IRS Employer<br><br> Identification No.) |
1725 SHEPHERD ROAD
CHATTANOOGA, TN 37421
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (423) 899-5898
N/A
\(Former Name or Former Address, if Changed Since Last Report\)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| --- | --- | --- |
| Common Stock | ASTE | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Explanatory Note
This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed by Astec Industries, Inc. on March 3, 2020 regarding its results of operations and financial condition for the fourth quarter and year ended December 31, 2019.
Item 2.02. Results of Operations and Financial Condition
On March 3, 2020, Astec Industries, Inc. (the “Company”) furnished a current report on Form 8-K (the “Original Form 8-K”) that included a press release regarding its financial results and financial condition for the fourth quarter and year ended December 31, 2019. In the Original Form 8-K, the previously announced potential sale of the Company’s GEFCO, Inc. (“GEFCO”) subsidiary resulted in GEFCO’s net assets being accounted for as “assets held for sale” and its net assets were reduced to their estimated fair value based upon early indications of interest from potential purchasers. Currently, the sale of the GEFCO business under the terms and timing contained in the early indications of interest is unlikely. As a result, the value of the GEFCO’s assets is now accounted for as “assets held and used.” The Company’s current plan is to exit the GEFCO oil and gas business and continue to operate and pursue an exit strategy for the GEFCO water and geothermal well business. The related oil and gas inventories on hand at December 31, 2019 have been reduced to their net realizable value considering the Company’s planned exit. Accordingly, the Company issued an updated press release setting fourth its updated and revised results of operations and financial condition for the fourth quarter and year ended December 31, 2019 (the “Updated Press Release”). A copy of the Updated Press Release is attached hereto as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure
On March 4, 2020 the Company held a live audio webcast to discuss its financial results for the fourth quarter and year ended December 31, 2019. In connection with the webcast, the Company furnished to the U.S. Securities and Exchange Commission a slide presentation which was attached as exhibits to the Original Form 8-K. An updated slide presentation is attached to this Report on Form 8-K/A as Exhibit 99.2 and is incorporated by reference to this Item 7.01.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| 99.1 | Updated and Revised Press Release, dated March 17, 2020 issued by the Company |
|---|---|
| 99.2 | Updated and Revised Slide Presentation, dated March 17, 2020 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Astec Industries, Inc.<br><br> <br>(Registrant) | ||
|---|---|---|
| Date: March 17, 2020 | By: | /s/ Rebecca A. Weyenberg |
| Rebecca A. Weyenberg | ||
| Chief Financial Officer |
EXHIBIT INDEX
| 99.1 | Updated and Revised Press Release, dated March 17, 2020 issued by the Company |
|---|---|
| 99.2 | Updated and Revised Slide Presentation, dated March 17, 2020 |
Astec Industries, Inc.
News Release
1725 Shepherd Rd. Chattanooga TN 37421 423.899-5898 astecindustries.com
UPDATED and REVISED ASTEC INDUSTRIES REPORTS FOURTH QUARTER AND FULL YEAR 2019 RESULTS
UPDATED BY ASTEC INDUSTRIES, INC.
CHATTANOOGA, Tenn. (March 17, 2020) – In the press release for the fourth quarter and full year 2019, gross profit, restructuring and impairment charges, income taxes, net income, earnings per share and certain balance sheet items, including inventory, have all been updated to reflect a change in the accounting treatment of our GEFCO business. In the earlier press release, GEFCO’s net assets were treated as “assets held for sale” and its net assets were reduced to their estimated fair value based upon early indications of interest from potential purchasers. Currently, the sale of the GEFCO business under the terms and timing contained in the early indications of interest is unlikely. As a result, the value of the GEFCO’s assets is now accounted for as “assets held and used.” The Company’s current plan is to exit the GEFCO oil and gas business and continue to operate and pursue an exit strategy for the GEFCO water and geothermal well business. The related oil and gas inventories on hand at December 31, 2019 have been reduced to their net realizable value considering the Company’s planned exit.
The updated and revised release reads:
ASTEC INDUSTRIES REPORTS FOURTH QUARTER AND FULL YEAR 2019 RESULTS
Fourth Quarter 2019 Highlights (all comparisons are made to the prior year fourth quarter):
| • | Net Sales decreased 10.7% to $283.2M |
|---|---|
| • | Gross profit of 9.7%; adjusted gross profit of 21.2% decreased 280 bps |
| --- | --- |
| • | EPS loss of $0.81; adjusted EPS of $0.36 decreased from $0.61 a year ago |
| --- | --- |
| • | Adjusted EBITDA of $13.7M decreased 51.0%; adjusted EBITDA margin of 4.9% declined 390bps |
| --- | --- |
2019 Highlights (all comparisons are made to the prior year):
| • | Net sales were relatively flat; adjusted net sales decreased 7.8% to $1.15B |
|---|---|
| • | Gross profit of 20.5%; adjusted gross profit of 21.9% decreased 190bps |
| --- | --- |
| • | EPS of $0.98; adjusted EPS of $1.55 decreased from $2.94 a year ago |
| --- | --- |
| • | Adjusted EBITDA of $67.1M decreased 42.3%; adjusted EBITDA margin of 5.8% declined 350bps |
| --- | --- |
| • | Began restructuring initiatives related to strategic pillars for profitable growth – Simplify, Focus and Grow |
| --- | --- |
Fourth Quarter 2019 Results
Fourth quarter net sales of $283.2 million decreased 10.7% compared to $317.0 million for the fourth quarter of 2018. Domestic sales of $209.6 million decreased 15.5% from $248.2 million a year ago, while International sales of $73.6 million increased 7.0% from $68.8 million in the fourth quarter of 2018. Excluding the impact of foreign currency, net sales decreased 10.4%.
Backlog as of December 31, 2019 of $263.7 million decreased by $81.3 million, or 23.6% compared to the backlog of $344.9 million a year ago. Domestic backlog decreased by 25.4% to $194.5 million from $260.7 million in 2018. International backlog of $69.2 million decreased compared to $84.2 million last year. Although we experienced a decline in each segment, weakness was concentrated in the Aggregate and Mining Group as dealers had increased their inventory levels throughout 2018 to meet demand but then began to destock in 2019.
An operating loss of $26.9 million compared to a loss of $69.4 million in the fourth quarter 2018. In relation to the Company’s efforts to simplify the organization, the Company incurred a $1.8 million pre-tax restructuring charge, or $0.06 per diluted share for the fourth quarter. The restructuring items are related to the closure of our German operation, the transfer of the CEI products to Heatec and RexCon and the planned exit of GEFCO’s oil and gas product line. In the fourth quarter of 2019, after considering new management’s revised inventory control and working capital control objectives, the Company’s assessment of the age, quantities on hand, market acceptance of the equipment, the Company’s exit of the GEFCO oil and gas business and other related factors, it was determined that various specific equipment models in each of the Company’s business units and certain other inventories required additions to their net realizable value reserves. The fourth quarter results include a pre-tax inventory write-down of $32.6 million or $1.11 per diluted share. Fourth quarter adjusted operating income of $7.4 million decreased 65.0% compared to $21.2 million a year ago. Adjusted operating margin of 2.6% declined 410 basis points from 6.7% in fourth quarter 2018. Adjusted operating income declined primarily due to the lower volumes. SGA&E expenses declined 4.0% on a dollar basis but increased as a percent of sales 130 basis points to 18.6% from 17.3% in the fourth quarter of 2018 due to the decline in sales.
Adjusted EBITDA of $13.7 million decreased 51.0% compared to $28.0 million a year ago. Adjusted EBITDA margin of 4.9% declined 390 basis points from 8.8% in fourth quarter 2018.
Net loss of $18.4 million or $0.81 per diluted share, compared to a net loss of $47.0 million or $2.08 per diluted share for the fourth quarter of 2018. Excluding unusual items and restructuring charges mentioned above, adjusted net income of $8.3 million decreased 40.8% compared to the same period a year ago. Adjusted EPS of $0.36 decreased 41.0% compared to $0.61 last year.
“Fourth quarter results showed continued softness in North America that was partially offset by an increase in international sales. Despite the temporary headwinds, I am encouraged by the progress we are making towards our strategic initiatives to Simplify, Focus and Grow the organization,” stated Barry Ruffalo, CEO of Astec Industries, Inc. “As noted, we are exiting the GEFCO oil and gas product lines while continuing to operate and pursue an exit plan for the GEFCO water and geothermal well drilling business. This will further simplify the organization. Additionally, we have taken important steps to restructure the Company and streamline business units to increase internal transparency and improve the decision-making process. These collective actions are important in building the foundation for the future success of Astec Industries.”
Full Year 2019 Results
Net sales for 2019 were $1,169.6 million, or relatively flat when compared to 2018. Domestic sales decreased 0.8% to $908.5 million from $915.8 million a year ago, while International sales increased 2.1% to $261.1 million from $255.8 million in 2018. Excluding the impact of foreign currency, net sales increased 0.6%.
Operating income of $25.1 million compares to a loss of $86.4 million in 2018. The Company incurred a total of $35.8 million in pre-tax restructuring charges and inventory write-downs for 2019, or $1.24 per diluted share. Adjusted operating income of $40.9 million decreased 53.4% compared to $87.8 million in 2018. Adjusted operating margin of 3.6% declined 340 basis points from 7.0% in 2018. Adjusted operating income declined primarily because of a reduction in gross margin of 190 basis points to 21.9% from 23.8% in 2018.
Adjusted EBITDA of $67.1 million decreased 42.3% compared to $116.3 million in 2018. Adjusted EBITDA margin of 5.8% declined 350 basis points from 9.3% in 2018.
Net income of $22.3 million or $0.98 per diluted share, compared to a net loss of $60.4 million or $2.64 per diluted share in 2018. Adjusted net income of $35.2 million decreased 47.7% compared to 2018. Adjusted EPS of $1.55 decreased 47.3% compared to $2.94 last year.
The Company identified certain material weaknesses in its internal control over financial reporting. As a result, the Company needs additional time to complete the compilation of information and finalization of its assessment of the effectiveness of internal control over financial reporting for its consolidated financial statements and related disclosures to be filed as part of the 2019 Form 10-K. The Company has filed a Form 12b-25 with the Securities and Exchange Commission in order to extend the due date of its 2019 Annual Report on Form 10-K for 15 days, as permitted by Rule 12b-25 under the Securities Exchange Act.
About Astec Industries, Inc.
Astec Industries, Inc., (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 three primary business segments: road building, (Infrastructure Group); aggregate processing and mining equipment (Aggregate and Mining Group); and a diversified portfolio of equipment used in various industries including energy-related markets (Energy Group).
Forward-Looking Statements
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 (i) restructuring initiatives, (ii) the potential sale of the GEFCO water and geothermal well business, (iii) increases in international demand, and (iv) product demand in North America. 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, 2018.
For Additional Information Contact:
Steve Anderson
Senior Vice President Administration, 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) | ||||
| Dec | Dec | |||
| 2019 | 2018 | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 48,857 | $ | 25,821 |
| Investments | 1,547 | 1,946 | ||
| Receivables and contract assets, net | 124,847 | 133,978 | ||
| Inventories | 294,536 | 355,944 | ||
| Prepaid expenses and other | 36,517 | 43,302 | ||
| Total current assets | 506,304 | 560,991 | ||
| Property and equipment, net | 190,363 | 192,448 | ||
| Other assets | 103,831 | 102,018 | ||
| Total assets | $ | 800,498 | $ | 855,457 |
| Liabilities and equity | ||||
| Current liabilities | ||||
| Accounts payable - trade | $ | 57,162 | $ | 70,614 |
| Other current liabilities | 115,605 | 118,617 | ||
| Total current liabilities | 172,767 | 189,231 | ||
| Long-term debt, less current maturities | 690 | 59,709 | ||
| Non-current liabilities | 24,554 | 21,227 | ||
| Total equity | 602,487 | 585,290 | ||
| Total liabilities and equity | $ | 800,498 | $ | 855,457 |
| Astec Industries, Inc. | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Statements of Operations | ||||||||||||
| (in thousands, except per share data) | ||||||||||||
| (unaudited) | ||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||
| Dec 31 | Dec 31 | Dec 31 | Dec 31 | |||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Net sales | $ | 283,224 | $ | 317,005 | $ | 1,169,613 | $ | 1,171,599 | ||||
| Cost of sales | 255,843 | 318,636 | 930,205 | 1,035,833 | ||||||||
| Gross profit (loss) | 27,381 | (1,631 | ) | 239,408 | 135,766 | |||||||
| Selling, general, administrative & engineering expenses | 52,554 | 54,732 | 211,148 | 209,127 | ||||||||
| Restructuring and asset impairment charges | 1,773 | 13,060 | 3,204 | 13,060 | ||||||||
| Income (loss) from operations | (26,946 | ) | (69,423 | ) | 25,056 | (86,421 | ) | |||||
| Interest expense | (68 | ) | (557 | ) | (1,367 | ) | (1,045 | ) | ||||
| Other | 250 | 11 | 1,629 | 1,783 | ||||||||
| Income (loss) before income taxes | (26,764 | ) | (69,969 | ) | 25,318 | (85,683 | ) | |||||
| Income taxes | (8,409 | ) | (22,932 | ) | 3,012 | (25,234 | ) | |||||
| Net income (loss) attributable to controlling interest | $ | (18,355 | ) | $ | (47,037 | ) | $ | 22,306 | $ | (60,449 | ) | |
| Earnings (loss) per Common Share | ||||||||||||
| Net income (loss) attributable to controlling interest | ||||||||||||
| Basic | $ | (0.81 | ) | $ | (2.08 | ) | $ | 0.99 | $ | (2.64 | ) | |
| Diluted | $ | (0.81 | ) | $ | (2.08 | ) | $ | 0.98 | $ | (2.64 | ) | |
| Weighted average common shares outstanding | ||||||||||||
| Basic | 22,531 | 22,582 | 22,515 | 22,902 | ||||||||
| Diluted | 22,531 | 22,582 | 22,674 | 22,902 |
| Astec Industries, Inc. | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Segment Revenues and Profits (Losses) | ||||||||||||||
| For the three months ended December 31, 2019 and 2018 | ||||||||||||||
| (in thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Aggregate<br><br> <br>and Mining<br><br> <br>Group | Energy<br><br> <br>Group | Corporate | Total | |||||||||||
| 2019 Revenues | 115,671 | 91,981 | 75,170 | 402 | 283,224 | |||||||||
| 2018 Revenues | 124,930 | 116,064 | 76,011 | - | 317,005 | |||||||||
| Change | (9,259 | ) | (24,083 | ) | (841 | ) | 402 | (33,781 | ) | |||||
| Change % | (7.4 | %) | (20.7 | %) | (1.1 | %) | - | (10.7 | %) | |||||
| 2019 Gross Profit | 11,220 | 13,041 | 1,465 | 1,655 | 27,381 | |||||||||
| 2019 Gross Profit % | 9.7 | % | 14.2 | % | 1.9 | % | 411.7 | % | 9.7 | % | ||||
| 2018 Gross Profit (Loss) | (41,462 | ) | 30,347 | 9,375 | 109 | (1,631 | ) | |||||||
| 2018 Gross Profit (Loss) % | (33.2 | %) | 26.1 | % | 12.3 | % | - | (0.5 | %) | |||||
| Change | 52,682 | (17,306 | ) | (7,910 | ) | 1,546 | 29,012 | |||||||
| 2019 Loss | (3,158 | ) | (179 | ) | (11,069 | ) | (4,019 | ) | (18,425 | ) | ||||
| 2018 Profit (Loss) | (69,833 | ) | 10,796 | (13,336 | ) | 22,015 | (50,358 | ) | ||||||
| Change | 66,675 | (10,975 | ) | 2,267 | (26,034 | ) | 31,933 | |||||||
| Change % | 95.5 | % | (101.7 | %) | 17.0 | % | (118.3 | %) | 63.4 | % |
All values are in US Dollars.
| Segment revenues are reported net of intersegment revenues. Segment gross profit (loss) is net of profit on intersegment revenues. A<br> reconciliation of total segment losses to the Company's net loss attributable to controlling interest is as follows (in thousands): | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three months ended December 31 | ||||||||
| 2019 | 2018 | Change | ||||||
| Total loss for all segments | $ | (18,425 | ) | $ | (50,358 | ) | ||
| Recapture of intersegment profit | 64 | 3,263 | ) | |||||
| Net loss attributable to non-controlling interest | 6 | 58 | ) | |||||
| Net loss attributable to controlling interest | $ | (18,355 | ) | $ | (47,037 | ) |
All values are in US Dollars.
| Astec Industries, Inc. | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Segment Revenues and Profits (Losses) | ||||||||||||||
| For the year ended December 31, 2019 and 2018 | ||||||||||||||
| (in thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Aggregate<br><br> <br>and Mining<br><br> <br>Group | Energy<br><br> <br>Group | Corporate | Total | |||||||||||
| 2019 Revenues | 492,118 | 404,971 | 272,122 | 402 | 1,169,613 | |||||||||
| 2018 Revenues | 442,289 | 453,164 | 276,146 | - | 1,171,599 | |||||||||
| Change | 49,829 | (48,193 | ) | (4,024 | ) | 402 | (1,986 | ) | ||||||
| Change % | 11.3 | % | (10.6 | %) | (1.5 | %) | - | (0.2 | %) | |||||
| 2019 Gross Profit | 105,012 | 84,917 | 47,673 | 1,806 | 239,408 | |||||||||
| 2019 Gross Profit % | 21.3 | % | 21.0 | % | 17.5 | % | 449.3 | % | 20.5 | % | ||||
| 2018 Gross Profit (Loss) | (37,357 | ) | 112,972 | 59,751 | 400 | 135,766 | ||||||||
| 2018 Gross Profit (Loss) % | (8.4 | %) | 24.9 | % | 21.6 | % | - | 11.6 | % | |||||
| Change | 142,369 | (28,055 | ) | (12,078 | ) | 1,406 | 103,642 | |||||||
| 2019 Profit (Loss) | 36,106 | 22,790 | 556 | (38,440 | ) | 21,012 | ||||||||
| 2018 Profit (Loss) | (112,954 | ) | 45,464 | 3,070 | 1,586 | (62,834 | ) | |||||||
| Change | 149,060 | (22,674 | ) | (2,514 | ) | (40,026 | ) | 83,846 | ||||||
| Change % | 132.0 | % | (49.9 | %) | (81.9 | %) | (2523.7 | %) | 133.4 | % |
All values are in US Dollars.
| Segment revenues are reported net of intersegment revenues. Segment gross profit (loss) is net of profit on intersegment revenues. A<br> reconciliation of total segment profits (losses) to the Company's net income (loss) attributable to controlling interest is as follows (in thousands): | |||||||
|---|---|---|---|---|---|---|---|
| Twelve months ended December 31 | |||||||
| 2019 | 2018 | Change | |||||
| Total profit (loss) for all segments | $ | 21,012 | $ | (62,834 | ) | ||
| Recapture of intersegment profit | 1,162 | 2,090 | ) | ||||
| Net loss attributable to non-controlling interest | 132 | 295 | ) | ||||
| Net income (loss) attributable to controlling interest | $ | 22,306 | $ | (60,449 | ) |
All values are in US Dollars.
| Astec Industries, Inc. | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Backlog by Segment | |||||||||||
| December 31, 2019 and 2018 | |||||||||||
| (in thousands) | |||||||||||
| (unaudited) | |||||||||||
| Aggregate<br><br> <br>and Mining<br><br> Group | Energy<br><br> <br>Group | Total | |||||||||
| 2019 Backlog | 139,081 | 74,127 | 50,497 | 263,705 | |||||||
| 2018 Backlog | 149,437 | 130,691 | 64,834 | 344,962 | |||||||
| Change | (10,356 | ) | (56,564 | ) | (14,337 | ) | (81,257 | ) | |||
| Change % | (6.9 | %) | (43.3 | %) | (22.1 | %) | (23.6 | %) |
All values are in US Dollars.
| Glossary | ||||||||
|---|---|---|---|---|---|---|---|---|
| In its earnings release, Astec refers to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. These<br> 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,<br> 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),<br> and as of or for the periods indicated. | ||||||||
| Q4 2019 GAAP to Non-GAAP Reconciliation Table | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| As Reported<br><br> <br>(GAAP) | Restructuring and<br><br> <br>Unusual Charges | As Adjusted<br><br> <br>(Non-GAAP) | ||||||
| Consolidated | ||||||||
| Net Sales | $ | 283,224 | $ | - | $ | 283,224 | ||
| GP | 27,381 | 32,605 | 59,986 | |||||
| GP% | 9.7 | % | 21.2 | % | ||||
| Op Income (Loss) | (26,946 | ) | 34,378 | 7,432 | ||||
| Income Tax (Benefit) Expense | (8,409 | ) | 7,760 | (649 | ) | |||
| Net Income (Loss) | (18,355 | ) | 26,618 | 8,263 | ||||
| EPS | (0.81 | ) | 1.17 | 0.36 | ||||
| EBITDA | (20,630 | ) | 34,378 | 13,748 | ||||
| Free Cash Flow | 22,870 | 1,892 | 24,762 | |||||
| Infrastructure | ||||||||
| Net Sales | 115,671 | - | 115,671 | |||||
| GP | 11,220 | 12,098 | 23,318 | |||||
| GP% | 9.7 | % | 20.2 | % | ||||
| EBITDA | (2,656 | ) | 12,479 | 9,823 | ||||
| Aggregate and Mining | ||||||||
| Net Sales | 91,981 | - | 91,981 | |||||
| GP | 13,041 | 4,260 | 17,301 | |||||
| GP% | 14.2 | % | 18.8 | % | ||||
| EBITDA | 97 | 4,511 | 4,608 | |||||
| Energy | ||||||||
| Net Sales | 75,170 | - | 75,170 | |||||
| GP | 1,465 | 16,247 | 17,712 | |||||
| GP% | 1.9 | % | 23.6 | % | ||||
| EBITDA | (9,180 | ) | 17,388 | 8,208 |
| Q4 2018 GAAP to Non-GAAP Reconciliation Table | ||||||||
|---|---|---|---|---|---|---|---|---|
| As Reported<br><br> <br>(GAAP) | Restructuring and<br><br> <br>Unusual Charges | As Adjusted<br><br> <br>(Non-GAAP) | ||||||
| Consolidated | ||||||||
| Net Sales | $ | 317,005 | $ | - | $ | 317,005 | ||
| GP | (1,631 | ) | 77,574 | 75,943 | ||||
| GP% | (0.5 | %) | 24.0 | % | ||||
| Op Income (Loss) | (69,423 | ) | 90,634 | 21,211 | ||||
| Income Tax (Benefit) Expense | (22,932 | ) | 29,628 | 6,696 | ||||
| Net Income (Loss) | (47,037 | ) | 61,005 | 13,968 | ||||
| EPS | (2.08 | ) | 2.69 | 0.61 | ||||
| EBITDA | (62,603 | ) | 90,634 | 28,031 | ||||
| Infrastructure | ||||||||
| Net Sales | 124,930 | - | 124,930 | |||||
| GP | (41,462 | ) | 69,792 | 28,330 | ||||
| GP% | (33.2 | %) | 22.7 | % | ||||
| EBITDA | (63,515 | ) | 71,663 | 8,148 | ||||
| Aggregate and Mining | ||||||||
| Net Sales | 116,064 | - | 116,064 | |||||
| GP | 30,347 | 294 | 30,641 | |||||
| GP% | 26.1 | % | 26.4 | % | ||||
| EBITDA | 13,224 | 294 | 13,518 | |||||
| Energy | ||||||||
| Net Sales | 76,011 | - | 76,011 | |||||
| GP | 9,375 | 7,487 | 16,862 | |||||
| GP% | 12.3 | % | 22.2 | % | ||||
| EBITDA | (11,708 | ) | 18,677 | 6,969 |
| FYE 2019 GAAP to Non-GAAP Reconciliation Table | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| As Reported<br><br> <br>(GAAP) | Restructuring and<br><br> <br>Unusual Charges | As Adjusted<br><br> <br>(Non-GAAP) | |||||||
| Consolidated | |||||||||
| Net Sales | $ | 1,169,613 | $ | (20,000 | ) | $ | 1,149,613 | ||
| Domestic Sales | 908,466 | (20,000 | ) | 888,466 | |||||
| International Sales | 261,147 | - | 261,147 | ||||||
| GP | 239,408 | 12,630 | 252,038 | ||||||
| GP% | 20.5 | % | 21.9 | % | |||||
| Op Income | 25,056 | 15,833 | 40,889 | ||||||
| Income Tax (Benefit) Expense | 3,012 | 2,938 | 5,950 | ||||||
| Net Income | 22,306 | 12,895 | 35,201 | ||||||
| EPS | 0.98 | 0.57 | 1.55 | ||||||
| EBITDA | 51,306 | 15,833 | 67,139 | ||||||
| Free Cash Flow | 90,278 | (14,380 | ) | 75,898 | |||||
| FYE 2018 GAAP to Non-GAAP Reconciliation Table | |||||||||
| As Reported<br><br> <br>(GAAP) | Restructuring and<br><br> <br>Unusual Charges | As Adjusted<br><br> <br>(Non-GAAP) | |||||||
| Consolidated | |||||||||
| Net Sales | $ | 1,171,599 | $ | 74,778 | $ | 1,246,377 | |||
| Domestic Sales | 915,814 | 74,778 | 990,592 | ||||||
| International Sales | 255,785 | - | 255,785 | ||||||
| GP | 135,766 | 161,185 | 296,951 | ||||||
| GP% | 11.6 | % | 23.8 | % | |||||
| Op Income (Loss) | (86,421 | ) | 174,245 | 87,824 | |||||
| Income Tax (Benefit) Expense | (25,234 | ) | 46,502 | 21,268 | |||||
| Net Income (Loss) | (60,449 | ) | 127,744 | 67,295 | |||||
| EPS | (2.64 | ) | 5.58 | 2.94 | |||||
| EBITDA | (57,897 | ) | 174,245 | 116,348 |
4Q19 Earnings Presentation MARCH 16, 2020
Safe Harbor 2 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) the potential sale of the GEFCO business, (iii) increases in international demand, and (iv) product demand in North America. 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, 2018.
Astec overview & 4Q19 Highlights Barry Ruffalo | President & CEO
4 2019 Highlights KEY STATISTICS1 Founded 1972 Headquarters Chattanooga, TN Employees ~3,900 Global Locations 25 in 8 Countries Market-cap $947M Product Categories 100+ Design, Manufacture and Provide Innovative, Productive, Reliable, Eco-friendlyand Safe Equipment to Drive Value for Customers and Shareholders By Segment By Geography 2019 REVENUE MIX | ~$1.15B2 1 As of 12/31/19; 2 Ex-pellets.
5 4Q19 Financial Performance Note: All comparisons are YoY, unless otherwise stated. 1 See Appendix for GAAP to Non-GAAP reconciliation table. 2 Calculated by dividing LTM Adjusted FCF by Adjusted Net Income. INCOME STATEMENT BALANCE SHEET AND CASH FLOW Revenues decreased 10.7% to $283.2MAdj. Gross Profit1 decreased 280 bps to 21.2%Adj. EBITDA1 decreased 51.0% to $13.7MAdj. EBITDA1 margin decreased 390 bps to 4.9%Adj. EPS1 decreased 41.0% to $0.36 Adj. FCF of $24.8MAdj. FCF Conversion2 of 300%Cash position $48.9MDividends of $2.5M or $0.11 per share
6 2019 Financial Performance Note: All comparisons are YoY, unless otherwise stated. 1 See Appendix for GAAP to Non-GAAP reconciliation table. 2 Calculated by dividing LTM Adjusted FCF by Adjusted Net Income. INCOME STATEMENT BALANCE SHEET AND CASH FLOW Adj. Revenues decreased 7.8% to $1.15BAdj. Gross Profit decreased 190 bps to 21.9%Adj. EBITDA1 decreased 42.3% to $67.1MAdj. EBITDA1 margin decreased 350 bps to 5.8%Adj. EPS1 decreased 47.2% to $1.55 YTD Adj. FCF of $75.9MYTD Adj. FCF Conversion2 of 216%Cash position $48.9MDividends of $9.9M or $0.44 per share
Total company & Segment financial results Becky Weyenberg | Chief financial Officer
8 4Q19 Financial Results ($M, except per share data) 1 See Appendix for GAAP to Non-GAAP reconciliation table. Equipment sales decreased $48.9M or 21.4%Parts sales increased $6.9M or 9.5%Domestic sales decreased $38.5M or 15.5%International sales increased $4.8M or 6.9%Excluding the impact of foreign currency, sales decreased 10.4% Order intake decreased in oil and gas due to sustained low oil pricesRoad building orders decreased due to lower dealer activityOrder intake normalized in aggregates following a peak in Q4 2018 Adjusted EBITDA decreased due to decreased gross profit primarily driven by an increase in under-absorbed Mfg. overheads of $4.0MAdj. EBITDA margin of 4.9% decreased 390 bpsSGA&E decreased 4.0% driven by lower commissions, consulting fees and payroll $1.8M of restructuring costsAdjusted net effective tax rate for the quarter was (8.5%)Adjusted effective tax rate for the year was 14.5%
9 Infrastructure | 4Q19 Financial Performance ($M) Revenues decrease driven by weakness in domestic equipment, partially offset by increase in partsEquipment sales decreased $9.7M or 11.7% Parts sales increased $2.8M or 9.0%Domestic sales decreased $9.6M or 9.0% Road building orders decreased due to lower dealer activity and a softer US market Infrastructure gross profit impacted by an increase in under absorption of $3.2MAdjusted gross profit of 20.2% decreased 250 bps Adjusted EBITDA of $9.8M excludes $12.5M of unusual itemsAdjusted EBITDA margin of 8.5% increased 200 bpsBenefit from $4.1M drop in SGA&E due to reduced commissions and consulting fees
10 Aggregate & Mining | 4Q19 Financial Performance ($M) Revenues decreased in aggregate equipment due primarily to lower dealer activityEquipment sales were down $28.7M or 34.1%Parts sales were up $1.3M or 4.6%International sales decreased $2.8M or 6.7%Domestic sales decreased $21.3M or 28.6% Order intake normalized in aggregates following a peak in Q4 2018 Gross profit impacted by increase of $0.9M in under absorptionAdjusted gross profit of 18.8% decreased 760 bps Adjusted EBITDA margin of 5.0% decreased 660 bps due to gross profit compressionBenefit from $4.3M drop in SGA&E due to reduced commissions, payroll and consulting fees
11 Energy | 4Q19 Financial Performance ($M) Equipment sales were down $10.7M or 17.3%Parts sales were up $2.6M or 20.3%International sales increased $6.8M or 77.0%Domestic sales decreased $7.7M or 11.4% Order intake decreased in oil and gas due to sustained low oil prices Adjusted gross profit of 23.6% increased 140 bps Adjusted EBITDA margin of 10.9% increased 170 bpsBenefit from $0.5M drop in SGA&E due to reduced consulting fees
12 Focused on Maintaining a Strong Balance Sheet Focused on Maintaining a Strong Balance Sheet KEY HIGHLIGHTSOverall strength of the balance sheet provides the financial flexibility to accomplish long-term strategic initiativesInventory turnover improved to 2.6x from 2.5x a year ago Cash position improved by 89.2%Total liquidity available of $190.5M ($M) 12/31/19 12/31/18 Cash and Cash Equivalents $ 48.9 $ 25.8 Total Current Assets $ 506.3 $ 561.0 Total Assets $ 800.5 $ 855.5 Total Current Liabilities $ 172.8 $ 189.2 Total Debt $ 2.0 $ 60.1 Total Liabilities and Equity $ 800.5 $ 855.5 SUMMARY BALANCE SHEET
13 Disciplined Capital Deployment Framework Continually evaluate strategy to ensure a balanced approach Use of Cash Over Last 3 Years~$150M Reinvestments Acquisitions Returns to Shareholders Internal investments meeting return objectives of >14% ROIC Future acquisitions to align with growth strategy and meet financial criteria Dividend of $0.11 per share$150M repurchase program authorizedRepurchased $24M in 2018
Aligned Strategy for Profitable Growth 14 FOCUS SIMPLIFY GROW Leveraging global footprint and scale while maintaining strong customer relationships Reduce organizational structure complexityConsolidate and rationalize footprint and product portfolioOptimize supply chain by leveraging size and scale of business Strengthen customer-centric approach by providing a holistic set of solutionsDrive commercial excellence Embrace and streamline operational excellence processes Enhance accountability through a performance-based culture with aligned KPIs and incentives Reinvigorate innovation with a new product development approachLeverage technology and digital connectivity to enhance customer experienceCapitalize on global growth opportunitiesAllocate capital effectively to drive greatest shareholder value
Transformation Progress 15 Changed from subsidiary structure to align by product groupsRefreshed executive leadership team and board membersExecuted Astec Strategic Procurement initiative consolidating supply chainAssessing 1Q20 re-segmentation to streamline reporting structure SIMPLIFY Hired SVP of Operational Excellence and Chief Information OfficerAligned financial metrics to management incentivesImplementing Enterprise Data Analytic Platform system to consolidate reportingInstill operational excellence across organizationOptimize product portfolio FOCUS Hired SVP of InnovationEnhance customer engagement Global expansionProfitable GrowthMargin Improvement GROW 2020 - 2021+ 2019 - 2021 2019 - 2020
Company Targets 16 Long-term Goals Revenue Growth 5% - 10% EBITDA Margin > 12% EPS Growth > 10% FCF Conversion1 > 100% Net Income ROIC > 14% Create Value for Shareholders Alignment to Incentive Plan Stand through Cycles 1 Calculated by dividing LTM Adjusted FCF by Adjusted Net Income.
Q&A
18 Contact Information STEVE ANDERSONSVP of Administration, Investor Relations & Corporate SecretaryPhone: 423-553-5934Email: sanderson@astecindustries.com
Appendix
20 Income Statement
21 Balance Sheet
22 Q4 GAAP to Non-GAAP Reconciliation Table
23 FY GAAP to Non-GAAP Reconciliation Table