ASTE - Earnings call transcript Q2 2018

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Operator

Greetings, and welcome to the Astec Industries' Second Quarter 2018 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to introduce your host Steve Anderson, Vice President and Director of Investor Relations. Steve. ahead go Please

Stephen Anderson

Good for welcome ended the XXXX. Kevin. Industries' June the conference call second morning you, to and Astec XX, Thank quarter that

Kevin Officer; Executive Officer; Also Dorris, Executive Steve Ben As and our Silvious, Rick name Chief President call Operating Brock, Chief today's David are Anderson. and President Vice my said, and on is Ben business our moment, over to call during Chief our financial and quarter. turn results I'll Financial our Officer. In the to then second the to to activity just summarize review a David

established such you others contained Before in I'll guarantees the are Reform certain results Litigation our the uncertainties begin, future Company, and are influence may filings are and financial Safe are we Factors by morning today of qualify Act. liability SEC. Annual contain not performance news statements remind and are risks, the to with that performance relate Private are to discussion statements these our the subject that in intended and that Securities could our to this assumptions. Report at the forward-looking and highlighted for statements Any future of release Harbor

you point, with financial over familiarize ask factors. At the those second this for results As we David to usual I'll that call the our turn yourself to summarize quarter.

David Silvious

us All right. Thanks morning. this you with Steve. each being to And thanks for of

the contract our historically Pellets quarter, the otherwise core record Highland to exit did with we During under Arkansas obligation businesses. a by obscured which our in performance strong an really charge

record. been our third pellets, reported have EPS best Excluding this on quarterly would

is business core Our strong.

even to better. We make underway it have initiatives

$XX.X an of were in sales a in quarter occurred to of XXXX, increase international QX last compared $XXX.X in sales in $XXX.X let's million million the QX in mainly to Russia, increase. million International East, compared of $XX.X or South about in were Canada, West to Net and decrease for the quarter the $XX by in the and were or increase Mexico, America, financial These million sales for decreases million compared So Middle $X.X offset increases talk XXXX X.X% QX the Asia, Indies. million in in year XXXX, The X.X% decrease. details. Australasia.

quarter, Domestic sales in an in XXXX QX sales the to in or the $XXX.X the decreased same were XX.X% sales million compared to QX to XX.X% net international XXXX XXXX decrease of the For XX.X% of sales compared Group, Aggregate XX.X% QX sales quarter XXXX Group, of XXXX increase $XX.X and of sales Group. million. QX the Mining sales. XX.X% $XXX.X million QX Infrastructure year, sales. were a Domestic Energy in and net of last of were International net for compared

the sales and the quarter quarter, XXXX our and of an compared Group in the XX.X% decreased Group. Group the were increased $XX.X XX.X% in for and to Aggregate increased Parts the in compared Mining Infrastructure million of XXXX, of domestic in QX all of in increase increase. QX XXXX, sales sales QX to in groups. XXXX parts $X.X QX or Parts XX.X% $XX.X were quarterly For sales of of and million sales in Energy of million

XXXX that would out year-to-date that quarter the press equal periods the excluding a we impact We to so Foreign with mentioned. XXXX on of second were there I of pellet that positive lower. call last million these including provided in quarter, and numbers you and along all charge been exchange for is the can year rates in attached statements during the release, plant financial this in impact are the follow activity just so sales have if translation had the table sales million. a rates $X.X $X.X to That year,

impacts or plant in quarters, increase. increase Group QX QX pellet $XX.X revenues were occurred XXXX, in of Note pellet of million $XXX.X to those an during million of sales. million in Infrastructure XX.X% excluding and impact the $XXX.X domestic XXXX the sales on second that compared in So full plants of the

year-to-date compared International $XXX.X XXXX, first half mainly million, half first in by in Africa. the and were X.X% $XXX those for decrease. the XX.X% represented half ex- for of compared the $XXX.X XXXX, in in second XXXX, so or the sales America, pellet of compared million an And domestic $XXX.X impacts, to XXXX. XXXX, offset to of to XX.X% $XXX.X for the increase million to the the dollars XX.X%. increases for also in $XXX.X half half basis, for quarter International to million decrease for and million sales million X.X% On Australasia, quarter decrease. Middle and million million make second would Indies, of first $XXX.X second in half of $XX.X The to of increased of in infrastructure quarter or half in in of sales the decreases XXXX. a were for the sales Russia, net decrease $XXX quarter $XX.X compared a million $X.X West international South occurred of the versus sales Asia, This million were sales first sales for compared or of first XX.X% million sales these East, of XXXX, the

period, XXXX XXXX. were in XXXX compared half decrease. or first Mining the compared $XXX.X sales. of $XX.X the to sales were decreased of of half total sales $XXX.X total represented half For for million the then million, half Infrastructure international the increase for Domestic half first to Group. in XX.X% to million first $XXX.X in increase domestic sales year-to-date in $XX the to of Group, of sales Part $XXX.X the of parts XXXX. in the half XXXX, in first or first increased sales half represented in XXXX’s first million, an XX.X% compared Parts Energy the compared X.X% of Year-to-date, XX.X% sales million the XX.X% a first sales sales million and sales parts and the Group, half of Aggregate first XX.X%

second $XX.X impact quarter of for million on quarter the Foreign half XXXX. had halves $XXX.X in Again, And XX.X% first XXXX half $XX.X was XX.X% The of decrease the million variance impact sales an plant or absorption that XXXX, of the of over $XX.X of the first first increase. or million, QX for profit $XXX.X for of absorption of XXXX million. in XXXX for XXXX. XXXX, QX compared XXXX quarter half domestic the XXXX to in were to Group over for XXXX This gross at first And or the QX made the compared the Infrastructure increase activity translation in in $XXX,XXX XX.X%. XX.X% excluding first the to without gross pellet million made a to million of the infrastructure XXXX for a all wood QX for to would were profit exchange in of of $X.X pellets, of pellet first compared and of margin the an in $XXX.X XX.X%. for consolidated gross That’s $XXX.X XXXX percentage absorbed excluding decrease $X.X the quarter excluding million. the pellets, first QX compared of half all compared margin of million the second This compared XXXX, each XXXX. XX% second million the sales activity and to sales during of positive a revenues to was million XXXX, half the make in half of million XX.X% of million XXXX $XXX.X XXXX. also and $XXX.X increased million for X.X% X.X% compared to of Gross for $X.X $XX.X QX

first was the on half of for first wood excluding consolidated to XX%. XXXX, SGA&E That SGA&E half over for half first XX.X% And For first compared of in increase XXXX. percentage expenses. basis The Again, profit half variance the quarter $XXX.X of half compared Infrastructure of the XXXX, XX.X% compared of $XX.X XXXX. would for $XX.X million gross first $X.X million sales to quarter to first XXXX. made $X.X or for XXXX payroll That SGA&E the the pellet XXXX of first first profit employee million the gross percentage points absorbed sales. to XX.X% decrease the and XX.X% $XX.X compared dollar a XXXX. for period, of of to of $XX.X the margin first year-to-date of absorption a XX.X% of the $X.X the was the in in gross million sales, in first the drivers under million half in half, Group, the the is quarter-over-quarter of or or the second XXXX, the for compared the gross make compared half a in XX.X% of absorbed for of XX.X% activity million and XXX to for terms the the half pellets, half was XX.X% million all million as margin benefit-related were XXXX excluding of

third Our acquired of professional in XXXX. Remember million. $X were the fee and quarter that RexCon they added

is the and XXXX XX.X% of of for quarter XX.X% pellets, wood SGA&E of sales in Excluding of XXXX. second net quarter sales second the

income increase compared range. an for the of basis $XX.X the in in excluding operating a of to of million. for license XX.X%. income $XXX,XXX to $XX.X income and in half $X.X by of half XX.X% interest of pellet quarter the to in million loss period fee the half of of the the in this was investment $XX.X operating were second is for compared in decrease insurance for compare income was million in SGA&E included federal primarily $XX.X that reduction for impact, quarter quarter of the year rate attributable million rate, captive was million charge of the a We XXXX, QX first with million for income was quarter first the of in of the travel tax year, net million income was million decrease million payroll And operating made first second half, of and first XXXX. $X.X recorded impact excluding the last you mixture to XXXX, was Jobs possibly to half by Again, or share of $XX consolidated of per XX.X% added Other and and million. to of million million $X.XX to QX so of the $XXX.X expenses, and the or XXXX, of the $XX.X to for XXXX, operating versus interest, Cuts Recall million of half. of wood XXXX. loss a at million The pellets, first And was XX.X% XXXX a first our corporate the controlling decrease half income along sales. of quarter compared was And decrease $X company of $XX.X compared a was QX low-teens the the is $XX.X for the for in of That half the in for year-to-date SGA&E was to pellet Professional XXXX, XX% increases income quarter. half in tax in EPS. impact in do an of million wood we XXXX the a XX% second second in first XXXX. of in in $XX.X the a RexCon, million that expenses. loss that of of $X.XX ConExpo the loss XXX sales pellets. per of second of that $X.X increase half-versus-half, or and driven first and XX.X% XX.X% offset Operating of SGA&E as diluted basic and period. year-to-date compared net of the the sales, points pellet million ex plant quarter, rate had $X or XXXX, wood and basis the $XX.X Tax effective quarter XXXX an increase. XXXX half of half, earnings that’s XX.X% million $X.XX a and of compared of our the $XX.X the the compared full-year $XX.X of income first had the XX.X% the quarter-over-quarter the the first XXXX, to the income Act in was for second decrease $XX.X first of sales, for the For sales XXXX increase the XX.X% without net be tax million. compared quarter to employee-related again, we QX share $XXX,XXX compared of rate the The to operating for expect million or in $XX.X of XXXX percent fees tax XXXX, million the on increases first expenses for plant when to first the compared half $XX.X net Net XX.X% income

of ex-pellet compared the of first versus to XXXX make pellets, million share quarter million first decrease diluted EBITDA increase. sales Total In $X.X $XX.X Again, compared for million or million XX.X% half per XXXX, half basis second XX.X% for of of for of income sales to million million, quarter of million pellets increase. compared year-to-date compared was first a to then of the for of $X.X in would XXXX sales an half, loss $XX.X XXXX $X.XX was million would $X.XX $XX.X $X.X the of a or an of of million million was $XX.X net in X.X% of first million $X.X of XXXX, for in wood $XX.X the was or $XXX.X backlog the year $XX.X increase of negative the $X.XX in decrease in quarter $XX.X of earnings share $XX.X XX.X% EBITDA That XXXX XXXX, share of sales XXXX XX was of QX prior XXXX an XXXX half per half the in our or XXXX the net which earnings XXXX, of ex-pellets. first half XX.X% the second the or excluding XXXX, pellets year. compared compared or in million in $XX.X XXXX, quarter was increase. first million half negative of a earnings was for X.X% of EBITDA the $XX.X first increase was $X.XX to of XX% or first compared half, EBITDA first to XX.X% make of loss was decrease Again, RexCon and second without XXXX is or sales XXXX, at income adjusted QX to half Without first or second for and half XX.X%. was June the million QX For decrease. in And to $XX.X first XXXX, net [$X.XX] represented share. $XX.X million compared last June of quarter $XXX.X per million a call positive income of $XX.X. wood $X.XX or acquired million million which at the share EBITDA net of to increase EBITDA compared XX.X% or XX, million. $X.XX a that increase of year-to-date $XX.X million made $XX.X the million a XX.X% second EBITDA earnings quarter in a diluted the to a that the XXXX per ex-pellets of of $XX.X second $XX.X was $X.XX $XX.X of per increase XXXX of decrease in to of share half per XX.X% increase income the compared sales, of quarter of

last at this the compared Domestic June XX $XX a $X.X million of year $XX.X at XXXX June at of $XXX.X or was million compared million or same decrease $XX.X XX.X%. decrease XX.X% million and to XXXX, of increase. International was So to backlog XX $XX.X at backlog XX% million. to June $XXX.X year point million of

backlog XXXX time, to $X.X X.X% Excluding decrease year $XXX.X million June both are backlogs our or of June million. increase backlog pellet periods. ex-pellets at XX, a last sheet of an the Onto this million compared of plant XXXX was $XXX.X $XXX.X balance receivables making million of the highlights, at increase $X.X

period $XXX.X year, XX this increase. are million $XX.X increase to compared outstanding And year, June XX.X, was inventory a of at to at $XXX.X last RexCon compared that of million days our XX.X XX is June million last the June year, Our at this at million XX. year. $X.X same

and facility. time. X.X on at turns year year credit million owe in Our million And of sheet. we our this this on last at nothing enter $XX.X cash balance domestic XX June and cash We $XXX have, the equivalents XXXX

million of quarter first XXXX quarter $X.X in of my and for million and forecasting the we're $XX Depreciation of the I'll outstanding prepared total million have are expenditures Our around on availability still are CapEx. concludes we’re letters is $X.X financial of turn full-year, XXXX around $XX.X and back million for $XX.X the for our for we remarks depreciation. borrowing $X.X for in Brazil. full-year of for $X.X is credit the currently to the of Anderson. of making over first debt Steve half in million it and XXXX details. million, $X.X XXXX Capital million, second forecasting the million half That million, $XX

Stephen Anderson

you, the David. some regarding quarter's time, our will quarter. and some for second this commentary operations At Thank provide Ben Ben? the third surrounding expectations comments

Benjamin Brock

and Steve, joining our today. you everyone on call you, thank for us to Thank

discuss a release wood pellet morning, well As report were core the overall. results. to we pleased perform we business in on overall some our business the commentary to I this first, I'll minutes. But Company's continues commented provide few to in the want

last share top represents This levels expectations EPS our ex ever EPS noted, versus share Company. as our per exceeded pellets, our a and was three of $X.XX As one David $X.XX year. per

XX.X% which mainly impacted was the for this XX.X%, the XXXX. versus the XX% our EBITDA pellets of year, ex first margin was which mix. improved whole versus by improved X.XX% quarter product EBITDA, Gross for remains to in Our of was quarter

We we delivering turns focused remain on are turns in margin XX% focused and increasing fourth [X.XX] still X achieve to target. this this believe year, will the to XXXX. gross We by on from able be turns quarter our plus

remains very Our which XX, was good. at up and $XXX.X historically XXXX June X% million, backlog is

Group Our as the on work. clarity. Infrastructure are Group remove from backlog hard quoting experiencing consultation with and activity, order backlog plant was auditor, XX.X%. lower our strong external pellet intake we The customers Georgia for wood down our focusing After the our levels work that maintains

the Group activity as to Mining backlog mainly Group States. the United in good strong intake, up XX.X%, and Aggregate due Our was order economic experienced

backlog up Group customers in for as was intake gas. oil Group industries good Energy the Our construction, very products XX.X%, serving industrial, experienced of order and the

Our in domestic decrease backlog year-over-year. Group was as our reason and main international down domestic backlog in The earlier. our up backlog was the for was Infrastructure explained

activity due government, in infrastructure for to customers. infrastructure in state Our very Bill place, majority good steady domestic spending our Highway good, quote and sector primarily long-term current work local private remains levels of the the

to Our international was increase in backlog increased mainly America. due Latin activity

experience do which subsidiary and wood the and quoting oil, Energy sales second during the contributed chippers Astec activity Changing infrastructure, group. to quarter. the quarter the continue targeted chemical Brasil during remained Our activity. food grinders for Group. to consistent good the industries, at backlog to We increased products of experienced also in subjects Sales increased

these quoting built activity Group, in Our the plants concrete and are plants. good is Energy for

our outlook on optimistic are Energy the in We Group.

now, R&D our XXXX. and in reminder, Groups, earnings Group. our up quote in focused asphalt and crushing continuing industrial Mining activity quote for infrastructure. remain versus rate screening a release the for however, versus key and development mix industries, equipment sales remain new Infrastructure we are parts business, the optimistic of gas Aggregate as activity to Energy sales, sales. projects, our spots equipment improve international plant our a been oil, quote and have and typical improving orders do the Infrastructure rates on on hot in were part customers activity. Parts and aggregate in Year-to-date, heating focused improving sales product high From at in As on a year. activity, quoting we sales system of and levels and down Group, chemical Group chippers wood the are to parts XXXX concrete last more Group, to Bright grinders, Due continues all construction in last

define pellet plant decision Turning exit wood to strategy. pellet to wood and Arkansas agreements our our

to call, with As in new last our the the track would our June, are on to of the tight In our regards allow ran we with customer. to required test obligations we mentioned customer. to the issues test not meet we our mechanical to reliability but earnings running our for fulfill that into timing obligations regards us

our agreements all obligations worked customer our original in Given with we test, the with all come with of to and our great the satisfies regards agreement agreements to to customer. customer position the to our regards partnership an reliability that with with

significant, on company better obligations will is we While business the our announced project – to our Today's wood way help the while continue it believe of best our charge parts to a finalize shareholders. us this on and offer continue remain as in running Referencing and sale as pellet and plant interest is well agreements service for focus charge remain our in plant core $XX we aftermarket offer Georgia, proven for the the and onsite our the in potential only. as wood is plant We in in suppliers our the wood confident loan equipment million over customer delivered long-term. industries pellet place. pellet equipment first to our plants pellet in to

loan is the reminder, due a in December. As

with We prospects contemplated. be are place could the for at of in working Georgia is are as plant if sale a customer multiple by we December, not NDAs with collaboratively least and this in before. potential the being this plant, plant sold believe

with This along and work team expertise supplier equipment updates we in Procurement earnings allocation in and engaged for on third we our announced will other has gains initiative our they to Pointe, call. update Maine operations. closely Director evaluate of Pointe have consulting July Changing the subjects quarter progress review. review our firm we to Maine and procurement on our globally providing opportunities strategic a strategy. capital sourcing started to on today, undertake Moving recognized including this to forward industry, conduct Operational team, a industrial to our with our VP strategic an our of review look particular X, to Excellence,

As directed working shareholders. strategy for allocation our to areas also evaluating with that value drive our cost company's the the structure, to greatest are capital in ensure capital we the working optimize we're board is will

the Looking revenue XXXX. expect we XXXX, quarter quarter revenue share third in our quarter from the regards to of earnings higher second $X.XX per our per we quarter in With third be believe our ahead of to the slightly earnings quarter of as reported. XXXX ex-pellets XXXX, earnings will to third than third share be much improved

of our For optimistic remain outlook. on the whole XXXX, we business core

Our improved current are is an core we net this our to year, we up the for business versus XXXX. year the core XXXX XX% showing outlook even but gains for our still versus last for income with be better have year opportunities to X% Ex-pellets customers. full-year revenues company ex-pellets of in an

comments the and already Anderson. turn focusing Steve our while Excellence. Operational be products your of and producing support it I'll ahead. quality is customers on you for do higher our to call the we than ends focus Thank over again as on we move us. front on quarter my taking to for for Our time That back even now in what's

Stephen Anderson

in and an any to if to At jump effort free entertain have to into you three All that’s our then two to right. we'll queue glad get initiate Thank afterwards questions. to you questions everyone, the ask Operator we call. be feel you, to this the would In Kevin, to limit the to queue. Turn over it Ben. back point, yourselves

Operator

first Our is Instructions] from today question [Operator Stanley you. from Thank coming Stifel. Elliott

live. now is line Your

Stanley Elliott

the quarter. conversations them? allocation of you trying did for of morning question. an discussions any you talk they do thank taking on historically institutional Quick had role one group with has about been what in what or bigger the ownership and Have activist take filings in sourcing impact question Hey to guys. piece? capital a my Good have with you're Can and the had see you the some

Benjamin Brock

Ben. is Hi Stanley. This

we We lot listen of discuss. shareholders shareholders. have they're lot to and And talk to shareholders. a have lot We of requested to a of when a communications, we

well. interviewed year, we brought in do three talked reference about on then got to what we our with used. to to consultants. we so strategic Then came process, project. working new year, this we waited Early of we last we people the thought on moving Board, With hired that the the With met we strategic him help about space initiative and VP who back. the we're a became In with lot regards companies do sourcing We it that company. different choice late A us up forward done as as see so We – going. on consultant our sourcing Operational Maine to about excited of consultants. they the with actually they've while of Excellence, Pointe for the us can our have that, that.

quarter kind a it in the Stifel actually where our bit We on are call. for on little so we're excited we excited presentation, Conference that and to report announce to of back alluded third have at to our

Stanley Elliott

seeing? talk typically, in happen right to the core that Can we'll that little sounds is you about Perfect. And then, of backlogs the think a wouldn't any built my seasonally, tracking from you're why reason that environment like going bit yes, there forward? pricing And business it's here. expectations. the see kind Is guess

Benjamin Brock

competitive. I still environment we The customers. right have as Obviously, now shrewd contractors, mean, pricing is buyers

by large, price it most seems the been increased prices And mentioned quarter places. in during hold. able calls, like and steel first did, we to our prior However, as the of have in with those we increase,

Our customers do buy steel, as we've mentioned before, that and they cost. understand

contains of increases. those price vendors that are and things steel, we many push that working The through other purchased to

nice a the year help a into been on thing, and of as increase. with did still that of latter it's some big effort ahead inventory inflation real next for our taking job we've move in way opportunities, year the our part and in of a think into is steel the think a some but this things reason of advantage part sourcing strategic doing But I we’d very inventory buy. offsetting We is I of increase some of that, us regards raw. we buy Part to those things. will so

Stanley Elliott

you of luck. much thank Guys, Perfect. and very best

Benjamin Brock

you. Thank

Operator

Thank you.

Mig question W. Robert Dobre Baird. next from coming Our is from

Your line is now live.

Mircea Dobre

if Good you have we have start Infrastructure humor I want want morning, bunch but everyone. me I understand the with A here. I actually as charge I here, lot an the Group. that maybe kind apples-to-apples, revenue taken. to you'll hope questions. of of it, moving of back add parts a we

you've taken that out backlog You also said of Hazlehurst.

correct. looks for me orders it something and year-over-year So hope that of basis, maybe the comfort my math at play? I if your maybe an some this what's the volatility, you orders the progressing, too, If if how we were up market maybe like first quarter. being That and us apples-to-apples seeing is to can going in XX% terms tune we're of why on foremost, give is surrounding to – here case, adjusting in you in that's end the down, would,

Benjamin Brock

traditional Sure. side. a This bit Ben. infrastructure like a little the on Hi It Mig. is feels summer

yesterday, [indiscernible] so we experiencing, our about very the with managers really feeling with one I talked companies is quote have plans, quote that's talk of the Group. think a the optimism busy. good week work, They're big about sales how next Group Infrastructure very lot of customers optimistic so their and to feel the Multiple is. I've of They're good, what ones levels customers, about feeling are are that good. we're of good. The I've our very good customers good Our one Infrastructure year. on feeling They levels. talked backlog this

Mircea Dobre

has arguably that of so. we you’re too not U.S. stronger the -- on, much that over gotten market sort so thinking have even or speaking, you front? competitor sensing that something there might the year past in Obviously, on are know the That's I'm be shifts. a there reading Okay, any share competitive in into going

Benjamin Brock

No. The bigger. market is

comfortable share [ph], them, we with present comfortable numbers, when is we're share. our held share. We market obviously their market market see versus very very Our and what compare they with and our we're

Mircea Dobre

half? $XXX instance, look year-to-date, your Then if again, revenues, there the modeling front your looking per adjusted back been us understand because year are too, do million, you obviously, of on because now you average, a revenue million. for half back what of here front the backlog, the for has half see. is backlog running I charge, and in I'm I half the this is about think in versus $XXX we million infrastructure had quarter only Can year, the say about XXXX? orders revenues progression How lumpy help the at aspect $XXX at of

Benjamin Brock

Mig could very be and good little think for infrastructure a fourth feel quarter bit. quarter. third I feel off the about the comfortable We

still be will I overall, than last So better it year's. think

Mircea Dobre

saying the be you’re Is and going fourth the So to year-over-year? in it quarter? up you’re third

Benjamin Brock

Combined two quarters will be up for the year.

Mircea Dobre

revenue include from Hazlehurst not? that Does recognition or

Benjamin Brock

will ex-pellets. be That

Mircea Dobre

be would ex-pellets? That

Benjamin Brock

Yes.

Mircea Dobre

Highland, part have have if the as Hazlehurst take Related to Hazlehurst, why you charge for the charge if not the well? Hazlehurst for taken you taken of backlog,

Benjamin Brock

in We on mean, place that. have agreements do don't we Hazlehurst, really to I so – and need we

Mircea Dobre

why that? do you But you feel auditor backlog need if from to your to don't it need like does take the

Benjamin Brock

all of for backlog clarity to us. the That’s

Mircea Dobre

you degree Okay, so that of to in – still XXXX Hazlehurst? confidence, you a of state fourth reasonable the revenue recognize can quarter from expect with

Benjamin Brock

I plant. we at not. breakeven. have as is could pull then, It do. before If forward we've – it prospects is knows who do time, it yes, does sails which before, multiple said mean, or looking the that this At We

Mircea Dobre

to in little structure about thinking you're questions, that Understood. One, bit way consulting general look a this you're at in done. group about and understand to Two sourcing. ask more I the the I'm and I cost want bringing

Company, do at out of percentage well, have going I'm stands of about when perhaps little they think just decentralized as sales is looking how this model addressing operating more it And from Are is benchmarking, own cost? that's your to maybe that away structure peers. is my pure SG&A the you to Just a as a sort seen something evolving past in manufacturing role efficient? than towards what the a that we've higher cost or me that in

Benjamin Brock

in sourcing. past some is Excellence against our do group the At focused We current solely on We years in line. of did a SG&A TSR VP look us help peers the could back five strategic our potentially is to that. all Maine that have time, Operational in the Pointe of

Mircea Dobre

to line. it But, Board as Is reviewing are reevaluating capital not the I I Last sure is understand down been in dividends that entirely that in frankly, the that are see. are means what What this. sort Is the buyback strategy? I'm that it haven't the table that some or starting on seen on consider to we you the deployment. share question your M&A that you’re past? options right now?

Benjamin Brock

buybacks, business M&A Those for we back also things considering. Board all Ben. Mig, and dividends, the be opportunities in have things four options the will mentioned: gains investments the are that There's where main companies. at really this is that stock you

Mircea Dobre

questions. you Thank right. All taking for the

Benjamin Brock

Thank you.

Operator

question coming Global from from Seaport Securities. Shlisky is next Our Mike

is line Your now live.

Michael Shlisky

morning, guys. Good Hey.

Benjamin Brock

Good morning.

Michael Shlisky

you’re can us time that Is start to Is So for is with settlement to what question just and return think you of the get cost you the now. upfront to the you in there want some fine cost can in to is a really that maybe outline kind engaging on goal that off frame? with. actually cost

Benjamin Brock

it phase. upfront Hi second the the Mike. This of is is very Ben. and anticipates two cost That here would actually a phases. The price small be

or they on dive people of a guarantee of Lots have However, in or deep their or guarantee got against examples X:X now, move double-digits lot fees if better. X. on divisions phase move doing a first they against they you against of that Phase and because are the do. one, to typically that They've they fee they with return do right what of a

on the line color more but the the bottom with to So third help in about really we're effort. opportunity our call, excited quarter that

Michael Shlisky

to you Did So the generally then or [exceeded take the third of a they sense by these long how like plan? plants have ever be tell quarter success]? good you’ll implemented

Benjamin Brock

in all day good or certainly implementation of Typical savings range. percentage X, get And, but good phase,XX-month them. a it gets number Cushing

the will more third on quarter. clarity that for So have

Michael Shlisky

Okay. supply Then there incoming either fleets It’s short or very products have are that said, of deliveries capacity. issue that I any the and for an also tight during outgoing? want a been there, of Has to obtaining components shipping the environment right components truck just ask about tech is hard-to-find now are in quarter. out sort your shipping And secondly,

Benjamin Brock

weeks everything of On our our any the last all �� issues. have equipment side, – issues in we've quarter. okay We had outsource shipping But had really we of where we to had and were reviews even we get the out and the shipping divisions of at with core on we not few then, really we the the what using. as end try we've been

Michael Shlisky

Okay.

are certain is components? finding As hard right it to or far now the intact as supply that find chain, pretty you

Benjamin Brock

Corporate fortunate We so do, do of good so run lot we've a with works that. into when been pretty do on far, for that We our us. Director we on issues, have teams. Procurement, So talk a purchasing when we and

Michael Shlisky

be sure that will And I’m risk is finally the this or is be any for not not idea on general just to sold. is or the price work. just there it the If to supposed the great Okay. seller? sales for may plant that profitable pellet me, not may sold, the is Astec a how is if plant this

Benjamin Brock

us. – is, is idea The hurt that a would be not that would it

is to the come we are it. goal So on – okay out

Michael Shlisky

that [indiscernible] of is kind you is But with of price, Astec guaranteed? or if great it any there a

Benjamin Brock

is on to really I’d question. office so any that would that have And there speculating our We from buyers. answer to value be plans, the be. I the don’t potential

but So, plant opportunity you sure. we that think okay is never, I sell say really the where for to were never there

Michael Shlisky

Thanks it. Got Ben. Perfect.

Benjamin Brock

you. Thank

Operator

from coming next Larry Maria from today Blair. Our question William Instructions] is [Operator De

Your line is alive. now

Larry De Maria

to and plants. With morning. Good thanks. in Hazlehurst other regards liabilities plant the pellet Hi,

warrant, into gives you Georgia? you in other that considering and look strong any confidents outcome that the potentially guys besides to – this, to and there the are good the operation plant enough obvious Hazlehurst what performance for liabilities obviously are Just of issues

Benjamin Brock

an running It’s The Europe. in in plant Ben. is this Right, order Georgia is for running.

that in in to of pellets. quality the it producing show high-quality pellets they've the very highest told users the some them We're to of condition, able received. end that pellets find We’re be running

our So is today. its confidence running – is performance in

Larry De Maria

And one with? then running have Bob, why major so will this and the other issues well wouldn't be

Benjamin Brock

Well, larger an as to fee plant X you recall, plants, different plant different plant heater Hazlehurst designs, they’re designs. evolution, X different is

not exact. they’re So but close

in timing we the liability So thing face bigger at Highland, of then and what that test and versus agreements there. the was the

Larry De Maria

going supplier. Okay it a supplier? equipment and in said component just other going of to this What equipment business who EPC, you’re want exactly You're your does or technology exactly to mean? to take and supply going What technology do to you and going on in stay that people the does mean proven forward? be

Benjamin Brock

equipment supply we Larry are will they What component. only you say is proven and

it you a be we plant We sell but to not though equipment running. It's supplier, ran going as To of at really catastrophic issue. EPC, they at we're going timing get accepting are full not is that well-built lines course and have So not run actively like along do And are to is If normal supplier. reliability. a plant, components We if Highland, plant Construct a we a versus pellet is plants ones, be Engineer are plants, were system, and for an out asphalt full we ready would someone equipment supplier, of Procure equipment. But customer, are plant on plant. industry the it the it's plant would complementary proven terms in not we even a If as didn't equipment we best we wanted the going financier wood an plant of an really the third-party supplier, sell then we in timing because an quoting and option a the full equipment supply run. conditions the for pellet and us will is industry what for there. had just Contractor. to a would into for

Larry De Maria

in anything shouldn’t therefore And the than model? Hazlehurst have other we

Benjamin Brock

That is correct.

Larry De Maria

and might they why industry. that to there and positively. go orders an capacity trying changes The don’t week. we to out inflection get guess to understand excess I now? have I until just fact It surprisingly said actually I on ramp that year? customer infrastructure think get is in wait know And weak. this inflection side, buy And imply you Okay. stuff was but orders you wasn’t next the so to do has orders the were then when that is share business, up really one have we

Benjamin Brock

is is that all is personally, and were happen side, ways, really and and said, already we’re quote second I’m in tell can know it’s talking comfortable on and some working to – and I’m we active will although busier the one I've first that just what that’s Fourth, quarter had. I you traditional I customers that I I with summer like the focuses a their and work know they’re and saying it feels

fourth, again moving that seeing start second you’ll first think quarter I and So ahead.

Larry De Maria

Is that’s orders or that sales? for for

Benjamin Brock

Orders sales. and

Larry De Maria

Okay.

thank you. Okay,

Benjamin Brock

Q&A of End Thank you.

Operator

reached call the back the the Thank end you. closing of We I’d like session. management comments. turn over to for our further question-and-answer to

Stephen Anderson

conference We and Kevin. participation your second in Astec. you our call, you, for in appreciate interest quarter Thank thank your

release news will be replay within available archived section call indicates, today's the our days. A of website Investor A transcript days. will available the industries an has webcast being the be be will recorded. As XXXX. conference call for seven available August And Relations for next through conference under XX, the XX Astec

call. today. you earlier in the have our release sent good news contained that is all information that concludes and of out All was week. Thank This a

Astec Industries (ASTE) 24 Jul 182018 Q2 Earnings call transcript