UPDATED and REVISED ASTEC INDUSTRIES REPORTS FOURTH QUARTER AND FULL YEAR 2019 RESULTS
March 17, 2020 - 5:17 PM EDT
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UPDATED and REVISED ASTEC INDUSTRIES REPORTS FOURTH QUARTER AND FULL YEAR 2019 RESULTS
UPDATED BY ASTEC INDUSTRIES, INC.
CHATTANOOGA, Tenn., March 17, 2020 (GLOBE NEWSWIRE) -- 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
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)
Infrastructure Group
Aggregate and Mining Group
Energy 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
%
Segment revenues are reported net of intersegment revenues. Segment gross profit (loss) is net of profit on intersegment
revenues. A 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
)
$
31,933
Recapture of intersegment profit
64
3,263
(3,199
)
Net loss attributable to non-controlling interest
6
58
(52
)
Net loss attributable to controlling interest
$
(18,355
)
$
(47,037
)
$
28,682
Astec Industries, Inc.
Segment Revenues and Profits (Losses)
For the year ended December 31, 2019 and 2018
(in thousands)
(unaudited)
Infrastructure Group
Aggregate and Mining Group
Energy 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
%
Segment revenues are reported net of intersegment revenues. Segment gross profit (loss) is net of profit on intersegment
revenues. A 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
)
$
83,846
Recapture of intersegment profit
1,162
2,090
(928
)
Net loss attributable to non-controlling interest
132
295
(163
)
Net income (loss) attributable to controlling interest
$
22,306
$
(60,449
)
$
82,755
Astec Industries, Inc.
Backlog by Segment
December 31, 2019 and 2018
(in thousands)
(unaudited)
Infrastructure Group
Aggregate and Mining Group
Energy 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
%)
Glossary
In its earnings release, Astec refers to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. Non-GAAP financial measures should be considered in addition to, and not in lieu of, GAAP financial measures. Nonetheless, this non-GAAP information can be useful in understanding the Company's operating results and the performance of its core businesses.
The amounts described below are unaudited, reported in thousands of U.S. Dollars (Except Share data), and as of or for the periods indicated.
