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. (August 4, 2021) – 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.