First Quarter 2021 Highlights (all comparisons are made to the prior year first quarter):
- Net Sales decreased 1.5% to $284.4 million
- Gross Profit Margin of 24.1% decreased 130 bps
- Net Income decreased 57.8% to $8.7 million; Adjusted Net Income of $9.3 million decreased 57.9% from $22.1 million
- Diluted EPS of $0.38 compared to $0.91; Adjusted EPS of $0.41 decreased from $0.97, which included $0.42 NOL tax benefit from CARES Act in prior year
CHATTANOOGA, Tenn. (May 5, 2021) – Astec Industries, Inc. (Nasdaq: ASTE) announced today its financial results for the first quarter of 2021.
First quarter of 2021 net sales of $284.4 million decreased 1.5% compared to $288.8 million for the first quarter of 2020. Domestic sales decreased $8.2 million or 3.5% due mainly to a used inventory reduction initiative in the first quarter of 2020. The sale of used inventory decreased $4.8 million or 55.8% in the first quarter versus last year. International sales increased $3.8 million or 6.9%.
Backlog as of March 31, 2021 of $420.8 million increased $175.4 million, or 71.5% compared to the backlog of $245.4 million a year ago. Domestic backlog increased by 74.4% to $322.9 million while international backlog increased by 62.6% to $97.9 million.
Operating profit of $9.8 million in the first quarter of 2021 decreased 35.1% compared to operating profit of $15.1 million in the first quarter 2020. First quarter of 2021 adjusted operating income of $10.5 million, decreased 39.0% compared to $17.2 million a year ago. Adjusted operating margin of 3.7% decreased 230 basis points from 6.0% in first quarter 2020 due to unfavorable product mix in Infrastructure Solutions and under absorption in Materials Solutions. Unfavorable product mix was driven by certain international product sales with lower than normal margins as compared to domestic sales, primarily due to logistics costs. Efforts to build our global supply chain are expected to improve the international margins as we grow this part of the business. The under absorption was primarily related to the movement of production from our Mequon site to other Astec sites. Operating expenses were relatively flat at $58.7 million on a year over year basis. A $3.6 million increase in dues and subscriptions, primarily technology related, was partially offset by a $1.9 million COVID-related reduction in travel expenses.
The income tax rate for the quarter was 9.4% and the adjusted income tax rate was 9.7%. The low income tax rate was primarily due to benefits from the booking of stock compensation and state tax deductions associated with management fee allocations.
Net income of $8.7 million decreased 57.8% compared to the prior year quarter, while diluted EPS decreased to $0.38, or 58.2%. Adjusted net income of $9.3 million decreased 57.9% compared to the prior year period, while Adjusted EPS of $0.41 decreased 57.7% compared to $0.97 for the first quarter of 2020.
Adjusted EBITDA of $18.0 million decreased 24.1% compared to $23.7 million a year ago. Adjusted EBITDA margin of 6.3% decreased 190 basis points from 8.2% in first quarter of 2020 largely driven by strategic sales, lower factory absorption and investments in technology.
"The sale of new equipment and parts were up slightly for the quarter, however those increases were offset by a year-over-year decline in used equipment sales. In the prior year, we executed our plan to reduce used inventory," said Barry Ruffalo, CEO of Astec. "During the fourth quarter of 2020 we began the process of moving the manufacturing of our Mequon site products to other Astec sites. This temporarily impacted our ability to get some products and parts through our facilities. The decision to relocate these products is in line with our long-term strategy to Simplify, Focus and Grow the business to unlock stakeholder value." Mr. Ruffalo went on to say, "We appear to be in the early stages of a positive economic cycle supported by investment in global infrastructure. Many of our customers have projects on their books for the rest of 2021 and some into 2022. As a result, we are pleased with the significant increase in our backlog."
COVID-19 Continuity and Business Operations Update
Our top priority continues to be protecting our employees and their families, our customers and suppliers and our operations from any adverse impacts by taking precautionary measures as directed by health authorities and local governments. Business operations have been fully operational during the first quarter of 2021.
We continue to execute on COVID-19 measures in order to ensure the health and well-being of our employees, their families and communities in which we operate, while continuing to serve our customers' critical needs.
Closure of Tacoma Facility - In January 2021, we announced plans to close our Tacoma facility in order to simplify and consolidate operations. We expect the Tacoma facility to cease operations in the fourth quarter of 2021. Manufacturing and marketing of Tacoma product lines are expected to be transferred to other Astec facilities in late 2021.
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.
Supply Chain - We have experienced only minor interruptions to our supply chain however we are not immune to supply chain disruptions caused by the recent surge in world demand. 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 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.
"In 2020, we continued to execute our plan to transform our company despite the headwinds of the COVID-19 pandemic. Thus far in 2021, we have experienced a ramp up in demand, accompanied by commodity inflation and a tight labor market. We continued to position our business to adjust to these evolving market dynamics, while continuing to execute our transformation strategy. The effort put in by the team over the last 20 months to build a strong foundation throughout our company will pay dividends to our customers, employees and shareholders over the long run. While we are still in the early innings of our transformation, we are pleased that we drove change at a good pace in an effort to place ourselves in the best position to leverage what we earn from the market. We remain excited about our future and continue to see near-term and long-term opportunities in the Rock-to-Road value chain we serve," said Mr. Ruffalo.
Investor Conference Call and Web Simulcast
Astec will conduct a conference call and live webcast today, May 5, 2021, at 10:00 A.M. Eastern Time, to review its first quarter 2021 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/2146/40763. 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 May 19, 2021 by dialing (877) 481-4010 or (919) 882-2331 for international callers, Conference ID # 40763. 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.