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. (August 5, 2020) – 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 company’s 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 Simplify, 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 Liquidity
The 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.
During 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.
We 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.
We 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.