Astec Reports Second Quarter 2021 Results

Second Quarter 2021 Highlights (all comparisons are made to the prior year second quarter):

  • Net Sales increased 4.8% to $278.0 million
  • Gross Profit Margin of 24.1% increased 160 bps
  • Net Income decreased 3.2% to $9.0 million; Adjusted Net Income of $11.2 million decreased 26.3% from $15.2 million
  • Diluted EPS of $0.39 compared to $0.41; Adjusted EPS of $0.49 decreased from $0.67
  • Record Backlog of $436.1 million

CHATTANOOGA, Tenn., Aug. 04, 2021 (GLOBE NEWSWIRE) -- Astec Industries, Inc. (Nasdaq: ASTE) announced today its financial results for the second quarter of 2021.

Second quarter of 2021 net sales of $278.0 million increased 4.8% compared to $265.3 million for the second quarter of 2020 supported by net incremental sales from acquisitions. Domestic sales decreased $20.3 million or 9.2% due mainly to lower volumes driven by customer readiness to accept deliveries, labor shortages and component availability. International sales increased $33.0 million or 75.7% primarily due to increased activity in Europe, Canada, Mexico and Australia.

Backlog as of June 30, 2021 of $436.1 million increased $254.2 million, or 139.7% compared to the backlog of $181.9 million a year ago. Domestic backlog increased by 164.1% to $338.8 million while international backlog increased by 81.5% to $97.3 million.

Operating profit of $11.2 million in the second quarter of 2021 increased 2.8% compared to operating profit of $10.9 million in the second quarter of 2020. Second quarter of 2021 adjusted operating income of $14.1 million, decreased 25.0% compared to $18.8 million a year ago. Adjusted operating margin of 5.1% decreased 200 basis points from 7.1% in second quarter 2020 primarily due to inflation and our centralization and infrastructure efforts offset by manufacturing efficiencies.

The income tax rate for the quarter was 20.4% compared to 16.1% the prior year primarily due to a shift in the distribution of earnings in the global jurisdictions in which we operate.

Net income of $9.0 million decreased 3.2% compared to the prior year quarter, while diluted EPS decreased to $0.39, or 4.9%. Adjusted net income of $11.2 million decreased 26.3% compared to the prior year period, while Adjusted EPS of $0.49 decreased 26.9% compared to $0.67 for the second quarter of 2020. Adjusted EPS excludes $0.10 of incremental costs, net of tax, driven by our transformation program, footprint rationalization and asset impairment, partially offset by a net gain on the sale of property.

EBITDA of $18.8 million increased $1.4 million, or 8.0%, compared to the prior year EBITDA of $17.4 million. Adjusted EBITDA of $21.7 million decreased 14.2% compared to $25.3 million a year ago. Adjusted EBITDA margin decreased 170 basis points from 9.5% in the second quarter of 2020 largely driven by inflation and our centralization and infrastructure efforts offset by manufacturing efficiencies.

"We posted a solid second quarter as we continued to see strong demand for Astec products as demonstrated by our record backlog," said Barry Ruffalo, Chief Executive Officer of Astec. "The Astec team continues to execute our strategy to Simplify, Focus and Grow the business. Our operational excellence initiatives helped mitigate the impact of an inflationary environment and challenging labor market. We remain confident in our ability to unlock additional shareholder value and achieve our long-term financial metrics."

Business Operations Update

COVID-19 - Our top priority continues to be protecting our employees and their families, our customers and suppliers and our operations from adverse impacts by taking precautionary measures as directed by health authorities and local governments. We continue to exercise diligence to ensure the health and well-being of our employees, their families and the communities in which we operate, while serving the needs of our customers. Business operations have been fully operational during the second quarter of 2021.

Supply Chain - We actively manage our global supply chain for constraints and volatility however, we are not immune to disruptions caused by the recent surge in global demand. Potential labor shortages at our vendors and logistics partners have increased lead times for certain components used in our manufacturing process. We have increased the frequency of communications with our suppliers and customers in an effort to ensure business continuity as well as anticipate and prepare for any new developments.

Steel - Steel is a major component of our equipment. Steel prices began increasing in the latter part of 2020. We have experienced further increases in steel pricing entering 2021 and anticipate continued increases throughout 2021. We continue to utilize strategies that include forward-looking contracts and advanced steel purchases to ensure supply and minimize the impact of price volatility.

Labor - In certain manufacturing locations, we have experienced a shortage of necessary production personnel and increasing labor costs to attract staff in our manufacturing operations. This resulted in a variety of challenges in running our operations efficiently as well as meeting manufacturing demand. We are focused on adjusting our production schedules and manufacturing workload distribution, outsourcing components, implementing efficiency improvements and are actively modifying our recruitment process and compensation and benefits to attract and retain production personnel in our manufacturing facilities.

Highway Funding - Federal funding provides a significant portion of all highway, street, roadway and parking construction in the United States. We believe federal funding influences the purchasing decisions of our customers, who are typically more amenable to making capital equipment purchases with long-term federal legislation in place. Federal transportation funding under the Fixing America's Surface Transportation Act ("FAST Act"), which was set to expire on September 30, 2020, was temporarily extended for one year through September 30, 2021. We believe a multi-year highway program (such as the FAST Act) will have the greatest positive impact on the road construction industry and allow our customers to plan and execute longer term projects.

Simplify, Focus and Grow Strategic Transformation ("SFG") - We continue to execute on our strategic transformation initiative focused on implementing new business strategies and a new operating structure. This transformation was launched in late 2019 and is concentrated on aligning our operations under the OneASTEC business model with the strategic pillars of Simplify, Focus and Grow. SFG is an ongoing, multi-year program with the primary goals of optimizing our manufacturing footprint and centralizing our business into common platforms and operating models to reduce complexity and cost, improve productivity and embed continuous improvement in our processes. These efforts are considered critical to enabling us to operate competitively and supporting future growth, which are expected to broadly benefit our customers, partners, employees and shareholders.

During 2019 and 2020 we consolidated certain of our sites as a key part of these initiatives. We have one additional site consolidation underway in 2021. Site consolidation costs including headcount reductions, inventory movement and facility shut-down costs are included in "Restructuring, Impairment and Other Asset Charges, Net" in the Consolidated Statements of Operations.

In addition, in late 2020 we launched a multi-year phased implementation of a standardized enterprise resource planning ("ERP") system across our global organization, which will replace much of our existing disparate core financial systems. The upgraded ERP will initially convert our internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms. This new ERP system will provide for standardized processes and integrated technology solutions that enable us to better leverage automation and process efficiency. An implementation of this scale is a major financial undertaking and will require substantial time and attention of management and key employees. Costs incurred, during the three and six months ended June 30, 2021, were $2.1 million and $5.3 million, respectively, which represent costs directly associated with the SFG initiative and which cannot be capitalized in accordance with U.S. GAAP. These costs are included in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

Investor Conference Call and Webcast

Astec will conduct a conference call and live webcast today, August 4, 2021, at 8:30 A.M. Eastern Time, to review its second quarter 2021 results as well as current business conditions. The number to call for this interactive teleconference is (844) 602-0380 (at least 10 minutes prior to the scheduled time for the call). International callers should dial (862) 298-0970. You may also access a live webcast of the call by visiting www.webcaster4.com/Webcast/Page/2146/42126. You will need to give your name and company affiliation and reference Astec Industries. An archived webcast will be available for 90 days at www.astecindustries.com. The supplemental presentation slides are available on the Astec Industries, Inc. website by visiting https://www.astecindustries.com/investor-relations/analyst-information/presentations.html.

A replay of the conference call will be available through August 18, 2021 by dialing (877) 481-4010 or (919) 882-2331 for international callers, Conference ID # 42126. 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 plants, thermal and storage solutions; and Materials Solutions that include our aggregate processing and mining equipment.

Safe Harbor Statements under the Private Securities Litigation Reform Act of 1995

This News Release contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations, operating improvements, businesses in which we operate and the United States and global economies. Statements in News Release that are not historical are hereby identified as "forward-looking statements" and may be indicated by words or phrases such as "anticipates," "supports," "plans," "projects," "expects," "believes," "should," "would," "could," "hope," "forecast," "management is of the opinion," use of the future tense and similar words or phrases. These forward-looking statements are based largely on management's expectations, which are subject to a number of known and unknown risks, uncertainties and other factors discussed and described in our most recent Annual Report on Form 10-K, including those risks described in Part I, Item 1A. Risk Factors thereof, and in other reports filed subsequently by us with the Securities and Exchange Commission, which may cause actual results, financial or otherwise, to be materially different from those anticipated, expressed or implied by the forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements to reflect future events or circumstances, except as required by law.

Non-GAAP Financial Measures

In an effort to provide investors with additional information regarding the Company's results, the Company refers to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures which management believes provides useful information to investors. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management of the Company does not intend these items to be considered in isolation or as a substitute for the related GAAP measures. Nonetheless, this non-GAAP information can be useful in understanding the Company's operating results and the performance of its core business. Management of the Company uses both GAAP and non-GAAP financial measures to establish internal budgets and targets and to evaluate the Company's financial performance against such budgets and targets. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in the appendix to this News Release.

Beginning with the announcement of results for the second quarter of 2021, the Company will exclude certain costs associated with the Simplify, Focus and Grow ("SFG") initiative from the presentation of Adjusted net income attributable to controlling interest, Adjusted EPS and Adjusted EBITDA. The Company has adopted this change to remove the effect of implementation related costs that are not representative of ongoing operations. Exhibit 99.2 of Form 8-K filed with the Securities and Exchange Commission provides information related to this change for the quarter ended March 31, 2021 and the year-to-date impact to the six months ended June 30, 2021.

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


Astec Industries Inc.
Condensed Consolidated Statements of Operations
(In millions, except shares in thousands and per share amounts; 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 
         
Operating expenses:        
Selling, general, administrative and engineering 55.0  42.7  113.0  98.9 
Restructuring, impairment and other asset charges, net 0.8  6.0  1.5  8.1 
Total operating expenses 55.8  48.7  114.5  107.0 
Operating income 11.2  10.9  21.0  26.0 
         
Other income:        
Interest expense (0.2) (0.2) (0.4) (0.2)
Other income, net 0.3  0.5  0.3  0.7 
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 
         
Earnings per common share        
Basic $0.40  $0.41  $0.78  $1.32 
Diluted 0.39  0.41  0.77  1.32 
         
Weighted average shares outstanding        
Basic 22,742  22,584  22,688  22,567 
Diluted 22,918  22,711  22,905  22,715 
         
Diluted EPS $0.39  $0.41  $0.77  $1.32 
Transformation program 0.09    0.23   
Facility closures and reduction in force (a) 0.04  0.23  0.07  0.27 
Asset impairment 0.01  0.12  0.01  0.19 
Gain on sale of property and equipment, net (0.01)   (0.01) (0.03)
Income taxes (0.03) (0.09) (0.07) (0.11)
Adjusted EPS $0.49  $0.67  $1.00  $1.64 
         
(a) Facility closures and reduction in force above include the impact of a rounding adjustment


Astec Industries Inc.
Segment Net Sales and Profits
(In millions; unaudited)

  Three Months Ended June 30, Six Months Ended June 30,
  Infrastructure
Solutions
 Materials
Solutions
 Corporate Total Infrastructure
Solutions
 Materials
Solutions
 Corporate Total
                 
2021 Net sales $180.2   $97.8  $   $278.0   $381.7   $180.7  $   $562.4  
2020 Net sales 181.9   83.4     265.3   384.5   169.6     554.1  
Change $ (1.7)  14.4     12.7   (2.8)  11.1     8.3  
Change % (0.9)% 17.3%  % 4.8 % (0.7)% 6.5%  % 1.5 %
                 
2021 Gross profit 39.6   27.4     67.0   88.1   47.4     135.5  
2021 Gross profit % 22.0 % 28.0%  % 24.1 % 23.1 % 26.2%  % 24.1 %
2020 Gross profit 38.3   21.2  0.1   59.6   90.6   42.2  0.2   133.0  
2020 Gross profit % 21.1 % 25.4% N/M   22.5 % 23.6 % 24.9% N/M   24.0 %
Change $ 1.3   6.2  (0.1)  7.4   (2.5)  5.2  (0.2)  2.5  
                 
2021 Profit / (loss) 11.8   12.8  (15.9)  8.7   32.8   19.3  (34.7)  17.4  
2020 Profit / (loss) 14.2   8.5  (13.6)  9.1   31.4   14.5  (16.5)  29.4  
Change $ (2.4)  4.3  (2.3)  (0.4)  1.4   4.8  (18.2)  (12.0) 
Change % (16.9)% 50.6% (16.9)% (4.4)% 4.5 % 33.1% (110.3)% (40.8)%

N/M = Not Meaningful

Segment net sales are reported net of intersegment sales. Segment gross profit is net of profit on intersegment sales. A reconciliation of total segment profits to the Company's net income attributable to controlling interest is as follows (in millions; unaudited):

  Three Months Ended June 30, Six Months Ended June 30,
  2021 2020 Change $ 2021 2020 Change $
Total profit for all segments $8.7  $9.1  $(0.4) $17.4  $29.4  $(12.0)
Recapture of intersegment profit 0.3  0.3    0.3  0.4  (0.1)
Net (income) loss attributable to noncontrolling interest   (0.1) 0.1    0.1  (0.1)
Net income attributable to controlling interest $9.0  $9.3  $(0.3) $17.7  $29.9  $(12.2)


Astec Industries Inc.
Condensed Consolidated Balance Sheets
(In millions; unaudited)

 June 30, 2021 December 31, 2020
Assets   
Current assets:   
Cash and cash equivalents$174.5  $158.6 
Investments9.3  4.3 
Trade receivables and contract assets, net148.3  115.9 
Inventories, net257.5  249.7 
Other current assets44.9  37.3 
Total current assets634.5  565.8 
Property, plant and equipment, net169.8  172.8 
Other long-term assets98.0  109.6 
Total assets$902.3  $848.2 
    
Liabilities   
Current liabilities:   
Accounts payable$78.5  $52.7 
Other current liabilities129.3  117.6 
Total current liabilities207.8  170.3 
Long-term debt0.4  0.4 
Other long-term liabilities34.8  34.5 
Total equity659.3  643.0 
Total liabilities and equity$902.3  $848.2 


Astec Industries Inc.
Condensed 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:   
Depreciation10.0  10.6 
Amortization5.1  2.0 
Provision for credit losses0.7  0.8 
Provision for warranties4.9  5.1 
Deferred compensation expense0.3  0.2 
Share-based compensation2.9  3.0 
Deferred tax provision5.4  13.4 
Gain on disposition of property and equipment(0.3) (0.6)
Asset impairment charges0.2  4.4 
Distributions to SERP participants(1.1) (0.4)
Change in operating assets and liabilities, excluding the effects of acquisitions:   
(Purchase) sale 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 payable25.5  (7.7)
Accrued loss reserves(0.4) (0.1)
Accrued payroll and related expenses7.8  (2.9)
Other accrued liabilities6.6  3.6 
Accrued product warranty(4.7) (4.5)
Customer deposits0.9  (20.1)
Income taxes payable/prepaid(7.0) 10.6 
Other  (1.8)
Net cash provided by operating activities30.5  84.9 
Cash flows from investing activities:   
Acquisitions, net of cash acquired0.1   
Price adjustment on prior sale of subsidiary(1.1)  
Expenditures for property and equipment(7.2) (7.4)
Proceeds from sale of property and equipment1.5  2.0 
Purchase of investments(0.6) (0.6)
Sale of investments0.5  0.4 
Net cash used by investing activities(6.8) (5.6)
Cash flows from financing activities:   
Payment of dividends(5.0) (5.0)
Borrowings under bank loans2.3  0.8 
Repayment of bank loans(2.7) (1.0)
Sale of Company stock by SERP, net0.5  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 cash0.3  (2.7)
Increase in cash and cash equivalents15.9  70.9 
Cash and cash equivalents, beginning of period158.6  48.9 
Cash and cash equivalents, end of period$174.5  $119.8 


Appendix

2Q 2021 GAAP to Non-GAAP Reconciliation Table
 As Reported
(GAAP)
 Restructuring,
Impairment,
and Other
Charges, Net
 Transformation
Program
 As Adjusted
(Non-GAAP)
Consolidated       
Net sales$278.0  $  $  $278.0 
GP67.0      67.0 
GP%24.1 %     24.1 %
Operating income11.2  0.8  2.1  14.1 
Income taxes2.3  0.2  0.5  3.0 
Net income attributable to controlling interest9.0  0.6  1.6  11.2 
Diluted EPS0.39  0.03  0.07  0.49 
        
Infrastructure Solutions       
Net sales180.2      180.2 
GP39.6      39.6 
GP%22.0 %     22.0 %
        
Materials Solutions       
Net sales97.8      97.8 
GP27.4      27.4 
GP%28.0 %     28.0 %
        
2Q YTD 2021 GAAP to Non-GAAP Reconciliation Table
 As Reported
(GAAP)
 Restructuring,
Impairment,
and Other
Charges, Net
 Transformation
Program
 As Adjusted
(Non-GAAP)
Consolidated       
Net sales$562.4  $  $  $562.4 
GP135.5      135.5 
GP%24.1 %     24.1 %
Operating income21.0  1.5  5.3  27.8 
Income taxes3.2  0.3  1.3  4.8 
Net income attributable to controlling interest17.7  1.2  4.0  22.9 
Diluted EPS0.77  0.05  0.18  1.00 
        
Infrastructure Solutions       
Net sales381.7      381.7 
GP88.1      88.1 
GP%23.1 %     23.1 %
        
Materials Solutions       
Net sales180.7      180.7 
GP47.4      47.4 
GP%26.2 %     26.2 %


2Q 2020 GAAP to Non-GAAP Reconciliation Table
 As Reported
(GAAP)
 Restructuring,
Impairment,
and Other
Charges, Net
 As Adjusted
(Non-GAAP)
Consolidated     
Net sales$265.3   $  $265.3  
GP59.6   1.9  61.5  
GP%22.5 %   23.2 %
Operating income10.9   7.9  18.8  
Income taxes1.8   2.0  3.8  
Net income attributable to controlling interest9.3   5.9  15.2  
Diluted EPS0.41   0.26  0.67  
      
Infrastructure Solutions     
Net sales181.9     181.9  
GP38.3   1.9  40.2  
GP%21.1 %   22.1 %
      
Materials Solutions     
Net sales83.4     83.4  
GP21.2     21.2  
GP%25.4 %   25.4 %
      
2Q YTD 2020 GAAP to Non-GAAP Reconciliation Table
 As Reported
(GAAP)
 Restructuring,
Impairment,
and Other
Charges, Net
 As Adjusted
(Non-GAAP)
Consolidated     
Net sales$554.1   $  $554.1  
GP133.0   1.9  134.9  
GP%24.0 %   24.3 %
Operating income26.0   10.0  36.0  
Income taxes(3.3)  2.6  (0.7) 
Net income attributable to controlling interest29.9   7.4  37.3  
Diluted EPS1.32   0.32  1.64  
      
Infrastructure Solutions     
Net sales384.5     384.5  
GP90.6   1.9  92.5  
GP%23.6 %   24.1 %
      
Materials Solutions     
Net sales169.6     169.6  
GP42.2     42.2  
GP%24.9 %   24.9 %


Astec Industries Inc.
GAAP vs Non-GAAP Adjusted EPS Reconciliations
(In millions, except per share amounts; unaudited)

  Three Months Ended June 30, Six Months Ended June 30,
  2021 2020 2021 2020
Net income attributable to controlling interest $9.0  $9.3  $17.7  $29.9 
Adjustments:        
Transformation program 2.1    5.3   
Facility closures and reduction in force 0.8  5.1  1.6  6.2 
Asset impairment 0.2  2.8  0.2  4.4 
Gain on sale of property and equipment, net (0.2)   (0.3) (0.6)
Income taxes (0.7) (2.0) (1.6) (2.6)
Adjusted net income attributable to controlling interest $11.2  $15.2  $22.9  $37.3 
         
Diluted EPS $0.39  $0.41  $0.77  $1.32 
Adjustments:        
Transformation program 0.09    0.23   
Facility closures and reduction in force (a) 0.04  0.23  0.07  0.27 
Asset impairment 0.01  0.12  0.01  0.19 
Gain on sale of property and equipment, net (0.01)   (0.01) (0.03)
Income taxes (0.03) (0.09) (0.07) (0.11)
Adjusted EPS $0.49  $0.67  $1.00  $1.64 
         
(a) Facility closures and reduction in force above include the impact of a rounding adjustment


Astec Industries Inc.
EBITDA and Adjusted EBITDA Reconciliations
(In millions; 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  
         
Net income attributable to controlling interest $9.0   $9.3  $17.7   $29.9  
Interest expense (income), net      0.1   (0.2) 
Depreciation and amortization 7.5   6.3  15.1   12.6  
Provision (benefit) from income taxes 2.3   1.8  3.2   (3.3) 
EBITDA 18.8   17.4  36.1   39.0  
EBITDA margin 6.8 % 6.6% 6.4 % 7.0 %
         
Adjustments:        
Transformation program 2.1     5.3     
Facility closures and reduction in force 0.8   5.1  1.6   6.2  
Asset impairment 0.2   2.8  0.2   4.4  
Gain on sale of property and equipment, net (0.2)    (0.3)  (0.6) 
Adjusted EBITDA $21.7   $25.3  $42.9   $49.0  
Adjusted EBITDA margin 7.8 % 9.5% 7.6 % 8.8 %

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