GlobeNewswire Inc | Aug 5, 2020 07:00AM EDT

August 05, 2020

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 companys 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 LiquidityThe 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.

OperationsDuring 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 ChainWe 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 ManagementWe 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 5th, 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 AstecAstec, (www.astecindustries.com), is a manufacturer of specialized equipment for asphalt road building, aggregate processing and concrete production. Astecs 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 StatementsThe 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 Companys products, and (vii) the impacts of the COVID-19 pandemic on the Companys financial condition and business operations. These forward-looking statements reflect managements 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 Companys 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 Companys reports filed with the Securities and Exchange Commission, including but not limited to the Companys 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 42.7 52.8 98.9 110.9 administrative Restructuring and asset 6.0 0.0 8.7 0.6 impairment charges Total operating 48.7 52.8 107.6 111.5 expensesOperating 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 1.8 7.0 (3.3 ) 10.7 income taxesNet income attributable to $ 9.3 $ 23.4 $ 29.9 $ 37.7 controlling interest 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 0.35 (0.88 ) 0.39 (0.86 ) unusual Goodwillimpairment 0.07 Provision of income (0.09 ) 0.22 (0.11 ) 0.22 taxes 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 Material Corporate Total Infrastructure Material Corporate Total Solutions Solutions Solutions Solutions 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 38,289 21,214 112 59,615 91,213 42,219 204 133,636 profit2020 Gross 21.1 % 25.4 % 22.5 % 23.7 % 24.9 % 24.1 % profit %2019 Gross 57,743 25,493 81 83,317 109,053 51,038 76 160,167 profit2019 Gross 29.2 % 23.9 % 27.3 % 26.1 % 23.9 % 25.4 % profit %Change % (19,454 ) (4,279 ) 31 (23,702 ) (17,840 ) (8,819 ) 128 (26,531 ) 2020 Profit / 14,215 8,469 (13,604 ) 9,080 31,435 14,504 (16,528 ) 29,411 (loss)2019 Profit / 26,926 8,489 (12,563 ) 22,852 44,996 17,166 (25,471 ) 36,691 (loss)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 intersegmentrevenues. 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 profitfor all $ 9,080 $ 22,852 $ (13,772 ) $ 29,411 $ 36,691 $ (7,280 ) segmentsRecapture ofintersegment 226 509 (283 ) 378 888 (510 ) profitNet loss attributable to (48 ) 16 (64 ) 113 72 41 non-controlling interestNet income attributable to $ 9,258 $ 23,377 $ (14,119 ) $ 29,902 $ 37,651 $ (7,749 ) controlling interest

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 (730 ) 176 assets Assetimpairment charge 4,146 -- Distributions to SERP participants (434 ) (1,007 )Change in operating assets and liabilities: Sale (purchase) of trading (9 ) 50 securities, net 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 (2,869 ) (2,807 ) expenses Accrued product warranty (4,538 ) (5,287 ) Customer deposits (20,053 ) (13,025 ) Prepaid and income taxes payable, 10,622 7,669 net 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 (565 ) (160 )stock unitsNet 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

AppendixIn its earnings release, Astec refers to various GAAP (U.S. generally acceptedaccounting principles) and non-GAAP financial measures. These non-GAAP measuresmay not be comparable to similarly titled measures being disclosed by othercompanies. Non-GAAP financial measures should be considered in addition to, andnot in lieu of, GAAP financial measures. Nonetheless, this non-GAAP informationcan be useful in understanding the Company's operating results and theperformance 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 10,860 7,900 18,760 Operating 26,003 10,612 36,615 income incomeProvision Provision(benefit) from 1,868 1,906 3,774 (benefit) from (3,275 ) 2,543 (732 )income taxes income taxesNet income Net incomeattributable 9,258 5,994 15,252 attributable 29,902 8,069 37,971 to controlling to controllinginterest interestEPS 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 Infrastructure Solutions SolutionsNet 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 Materials Solutions SolutionsNet 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 30,481 (19,932 ) 10,549 Operating 48,660 (19,420 ) 29,240 income incomeProvision Provision(benefit) from 7,008 (4,953 ) 2,055 (benefit) from 10,789 (4,955 ) 5,834 income taxes income taxesNet income Net incomeattributable 23,377 (14,979 ) 8,398 attributable 37,651 (14,465 ) 23,186 to controlling to controllinginterest interestEPS 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 Infrastructure Solutions SolutionsNet 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 Materials Solutions SolutionsNet 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 incomeattributable to $ 9,258 $ 23,377 $ 29,902 $ 37,651 controllinginterestPlus:Restructuring 7,900 (19,932 ) $ 8,966 $ (19,420 ) and unusualPlus: Goodwill -- -- $ 1,646 impairmentLess: Provisionfrom income (1,906 ) 4,953 $ (2,543 ) $ 4,955 taxesAdjusted netincomeattributable to $ 15,252 $ 8,398 $ 37,971 $ 23,186 controllinginterest Diluted EPS $ 0.41 $ 1.03 $ 1.32 $ 1.66 Plus:Restructuring 0.35 (0.88 ) 0.39 (0.86 ) and unusualPlus: Goodwill -- -- 0.07 -- impairmentLess: Provisionfrom income (0.09 ) 0.22 (0.11 ) 0.22 taxesAdjusted EPS $ 0.67 $ 0.37 $ 1.67 $ 1.02