ASTE - Earnings call transcript Q4 2018

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Operator

Good day ladies and gentlemen, and welcome to Astec Industry’s Fourth Quarter, 2018 Conference Call. [Operator Instructions]. At this time it is my pleasure to turn the floor over to your host, Vice President and Director of Investor Relations Steve Anderson.

Your line is open sir. Please go ahead.

Steve Anderson

Jess. you thank Hi, welcome quarter Astec December and and for XX, conference the fourth full to morning, Industries the call XXXX. Good year ended

future on In Dorris, mentioned, call Officer; CEO these David established and Jess certain my to to forward-looking Chief by and Act. is are to qualify minute Operating liability Securities Private safe Anderson. of Litigation As Reform harbor are Financial our Officer. name intended and our but performance like are Chief are the statements to I’d Any a subject recently for our statements Also Rick such future turn the guarantees Silvious assumptions. Factors appointed are just and I’ll Interim release Steve discussion morning can our the we filings this SEC. before company that the financial results relate with annual call and over influence others begin today’s in are statements report may of performance uncertainties the risks, and highlighted contain news contained you the to today’s our not that that in our Rick, remind

yourself As factors. you usual, familiarize with we that ask those

introduce this like at I’d to to point, Dorris. Rick So you

Rick Dorris

everyone morning you, Steve. joining speaking very us. I'm to thanks Thank Good be all you and as CEO. for of pleased with today here Astec’s Interim

new Astec. I'm to While new not CEO the I'm role, to

for stepping Most I'm recently years was experience of and the registered the management Prior our as Engineer years. of and you to I've Officer. Since the support the state has for company’s strategic company served with know, our XX seamless this of our been the together subsidiaries I with of of of Group in tremendous we executing our two markets, me been President the many a position, years. Vice the Energy team board customers, Group As rest priorities. I of the Heatec one Chief on leadership focus President how operate, employees President transition. a into has XX with Executive my that Professional given also to the of a enabling understanding This Tennessee. Operating and and the for continue

we efficiency, and year term company's see for our our momentum. speak well, take capital to continued increasing of to businesses to operational the is additional past steps value that With Overall improve strong and and will quarter greatest continue the improving the actions in taken profitability. to business took financial have We goals performing drive decisive have core we reducing to our and we of briefly. like steps the ensure core I'd costs long our support During areas remains we believe those fourth performance the in shareholders. positive to directed some

we working pursue potential pellet have As of the our sale in been collaboratively with a you plant customers know Georgia to plant.

a write-off a board careful quarter. While million the decision sale, team to price and fourth of discussions and in the transaction $XX.X After management made of record a timing are uncertain. we remain sale consideration, the regarding ultimate our the in potential

pellet recover to impact away as potential to sale that any taking have we have action, By eliminated We will results. as try the the fully of much possible plant. through from the this wood future and entering of transitioned XXXX business

pellet into building new wood to road order at point. industry in a were industries began time and a diversify Our efforts when at XXXX low areas in in the the aggregate

and pellet good the we not are associated that plants. wood commissioning the industry with the have frames due a since determined fit and complexity to installation size, We for time fabrication, of

our of provide our expect wind quarter business to Machinery. company This subsidiaries. expect down it Mobile is a a did We we decision We discontinue not from reported made charge fourth operations the and the of in $X.X in this small million returns XXXX. Astec be the subsidiary and in to at also Germany, restructuring we the completed

Going save per this $X year. million will forward approximately

consolidated also into operation Dillman our Incorporated. Astec have We

to Dillman be factory the and Incorporated. products closely We will Dillman Wisconsin to of the part our facility, offer as Prairie customers, continue known be Chien as will managed but will Du more Astec in Astec

reduced As subsidiaries a XX two we XX. the to these actions of result of from have number

their We net quarter on and down moving inventory also fourth inventory in have the realizable our focused written slow value. to

we outlook away and group and our forward. transition the the business, down infrastructure our Mobile moving wood the pellet Astec are underway, from Dillman consolidation for With in the of optimistic Astec Machinery wind of

level has plant will asphalt Astec of other that America be in two North we the world. already asphalt a improve entry introducing plants new in XXXX competitiveness regions dominant market our share in the and will of

industry Additionally in will the With and innovation for hand results been group segments our the the excited companies from we're to I'll XXXX. for discuss from fourth The markets. group as the the can quarter making new a the always coming new we be shareholders. and that, delivering all to international over be paving their best call committed We're leaders value our whole. it to in equipment and Astec introducing David and XXXX both this products domestic about have in infrastructure and to

David Silvious

run $XX.X X.X%. compared million were Brazil quarter-over-quarter and Those sales and each Australia. The in were in thank here. $XXX.X you in Alright, an to quickly morning. this that's offset for to by for of increase. increase Europe Russia. in QX financial million sales us last $XXX I’ll primarily Canada and sales X.X% net million in in year in thank Africa, results the compared a QX, increases the you the international decreases $XX were through increase occurred International million last of Rick in joining and year, for The quarter

fourth $XXX.X increase. QX million of year, increase quarter the Ag the in were in quarter the a Energy sales compared sales Group Mining decreased X.X% in in and to For Infrastructure and the last Domestic and international our ‘XX Group Group. $XXX.X million

domestic sales in million and quarter in our a in Ag QX decrease compared of Infrastructure the part of and increase sales ’XX Energy $XX.X million the and increased Group sales. were QX Mining Group to Group. X.X% ’XX, $XX.X in the For in Part

quarter two essentially the in increased sales Ag Mining were groups. other in the the flat and and part Group For

had as negative this we’ll a a in impact amounts of Forex is that press $X.X sales to on to million the amounts Attached adjusted discuss reconciling call. release GAAP quarter-over-quarter. glossary reported

were X.X% $XXX sales So compared year, in were for Ag last million other in also in in would the decrease year in in X.X% year-to-date as by and sales outside a million the $XXX billion decreases million sales And and both Domestic in sales of On sales and the Russia. basis sales Brazil, a International as $XXX.X million X.X% sales in Europe and in were increased year, million were sales international QX and offset to billion for $XXX.X increased million part in were of year-over-year. million year-to-date year two adjusted. a increase. groups. decrease this Brazil South adjusted. XX.X% they Southeast Group Asia, Domestic increased QX the $XXX.X an those Mining year-over-year, increase. last This On compared And and quarter ‘XX domestic Africa decreased $XXX.X sales increases for compared compared $XXX.X on $X.XX an Group’s $X.XX $XXX.X of Mining periods, quarter-over-quarter this in X.X% year. year-over-year. sales last and Energy basis the primarily a Part were the increase as increased in is sales year, a the year in decreased QX $XXX.X million international Infrastructure a a $XXX.X Ag adjusted in X.X%. year to last decrease in revenues year-to-date million year, Group. for to million make to to That last to compared infrastructure compared X.X% America

groups. each sales part year in the increased For our of

sales. a negative had impact on year-over-year $XXX,XXX of Forex

million compared of $X.X QX ‘XX was adjusted revenues of ’XX made fourth a ‘XX $XX.X compared ’XX billion $X.XXX quarter fourth ’XX. QX X.X% Domestic increased X.X% and gross or negative ’XX, $XX.X increase were million in XX.X% as for variance a has in year's Fourth an absorption year-over-year in last of compared under The ’XX, of as profit million to was $X.X million. As absorbed for $XXX.X the adjusted. this profit $XXX.X compared both percentage X.X% under sales quarter quarter and negative Infrastructure ’XX to of years, now in Group for to sales million $X.XX billion million, gross compared decrease. the absorbed adjusted QX increase X.X% million a $X.X to was variance in to in

of of As in adjusted ‘XX for the consolidated XX% fourth the gross is XX.X% to compared quarter quarter the year. last fourth margin

fourth compared the $XXX.X gross the full the gross a is of XX.X% Infrastructure fourth year-to-date compared adjusted, quarter XX.X% ’XX then the year On compared the to The in margin in to percentage quarter are year. profits for of XX.X% last $XXX.X was for profit million to XX.X% gross ‘XX. Group basis million. As

of Our ‘XX. of of XXXX overhead absorbed million was under overhead full absorption $XX.X $X.X absorbed to variance the under for year compared million in

prior compared sourcing legal million of things and of then for are in some payroll consolidated gross year, experience drivers year The adjusted, increase margin SGA&E know XXX for research to quarter ‘XX. for fees, an XX.X% basis percentage to fees. is for our XX.X% of full we of gross of exhibit the the million project; or points group current XX.X% full the $XX.X As and of accounting for year in the like sales compared to strategic consulting year SGA&E or related development million sales. $X.X costs, compared $XX.X infrastructure or the adjusted for you as of as XX.X% and some the and XXXX. XX.X% was margin XX.X% in The costs; sales ‘XX involved the is a are

year, related the a basis payroll year again. of one SGA&E million only or RexCon compared quarter full acquired SGA&E the sales RexCon of of $XXX.X had increase million we $XXX.X point that’s this consulting $XX.X XX.X% For of year, year Recall a we the that XX.X% XXX in sales Items and driving where to year have or was fees year-over-year or last we first fourth last are million compared the at change costs, year last increase. to so quarter.

restructuring line to and we a a discontinuation the charge subsidiary. travel legal the and and restructuring our that impairment and on related Note professional impairment goodwill German separate charges Some accounting item includes charges that of fees, the some fees had expenses.

the million in income XXXX. And $XX.X the operating operating to loss ‘XX. year $XX quarter of $XX.X million loss income compared operating to of for million million in Our is $XX.X QX for compared was of operating

$XX.X of for compared in benefit for due on to we quarter, recorded especially compared rate rate in statutory quarter income operating to year. than the XXXX a during the lower tax fourth the year-to-date ‘XX. $XX.X the adjusted, The the federal that that million effective million million various XX.X% ’XX, that ‘XX. year XX.X% last basis quarter to to in in ’XX compared fourth the derived of the is of the from The As for ‘XX higher and rate were charges in combine effective the and statutory the quarter with to income tax federal fourth benefits in $XX.X for the fourth is $XX.X rate this ‘XX the versus – fourth XX.X% compared the actual XX.X% the year year-to-date was million tax and quarter operating year

more effective normal XXXX rate to return to the a to expect XX% We XX%.

per $XX.X decrease. $XX.X was compared per million loss income million per of QX EBITDA million adjusted of fourth which $XX share. year to this fourth negative fourth income per the a the $XX a increase to of the in an loss was ’XX, quarter and net increase compared quarter year-to-date On income of earnings share in share basis net of $X.XX On the a this year the last or in that’s year to per of year, share for an of decrease the compared quarter of our net compared of to share, a share last quarter basis, or income was increase full share ’XX, to earnings a to QX $XX.X quarter $X.XX of $X.XX diluted as per per that's the in million million X% $X.XX $XX.X in increase in income, compared loss net diluted for million. compared $X.XX which in in $X.XX $XXX,XXX the that's share. fourth share is income in per the share year net million compared $X.XX in million per to share, compared income a $X.XX $XX.X per ’XX, or decrease per share, And an of the to X.X% diluted then is net Our that's $XX.X net or income that's represented XX.X% in of was $XX.X diluted that diluted ’XX, sales share per increase On per $X.XX income for prior net net $X.X $X.XX prior per basis $X.XX share. loss the XX million full quarter million was $XX.X a QX the that’s was in yearly EBITDA of X% quarter in to million ’XX to of quarter. for million $XX

number or million negative compared year ’XX; sales. of million $XX.X was the that X.X% represented a the of in EBITDA basis For sales as X% $XX.X of to EBITDA of year-to-date negative

as XX of million basis X.X% in million $XXX.X million for the quarter year-to-date is QX X.X% year-over-year EBITDA decrease ’XX, EBITDA million on to quarter. $XXX.X or compared of December in And X.X% a EBITDA in sales, of basis the that’s of sales million our $XXX or or compared adjusted sales end $XXX.X ‘XX to of fourth total $XX.X backlog a adjusted. as an or sales that for a increase X.X% was was of compared EBITDA The ‘XX of that's million Now of $XX.X X.X% XX.X%. at ‘XX at

but of excluded ‘XX was – of the an and million Domestic domestic ’XX, excluding X.X% million, million plant $XXX.X to $XXX.X X.X%. backlog at pellet $XXX.X XX.X% end number a domestic December excluding at out of at backlogs making backlog ‘XX number, in in the ‘XX number it at already ‘XX was it's the number compared to pellet of of that of as would million ‘XX of backlog and end number make the it the end at the that ‘XX number $XX.X of ‘XX ‘XX ‘XX backlog plants Excluding a the compared ’XX, the million, the $XXX.X increase. the $XX.X International end end increase million the makes makes decrease adjusted.

on Forex had a backlog, negative impact year-over-year. $X.X million

a at million Moving balance the end on end our ’XX of the million of $XXX to $XXX increase. at at were sheet, the receivables to ’XX, million compared $XX

last to outstanding at were Our days XX.X compared at XX.X of the end year.

at We Our terms terms $XXX.X $XX.X the at year in XX/XX existed balance cash compared cash facility million million year for year, the credit and and is that $XX.X at $XXX the at $XXX.X of end million we on inventory we're million to last and ’XX. million on this X.X sheet. owe equivalents have our X.X compared to domestic full

XXXX it amend $XX.X all of leaving that and Letters facility a expand $XXX to year of credit of its $XX at maturity to credit and are same. the XX/XX, elements end to of to outstanding availability we million borrowing million. end did million remained the credit Subsequent extend facility our other

finance million. million $X.X to building the of have Capital million and their debt capital Brazil, for and in expenditures for year company expenditures. quarter for that Capital in $XX the around and ‘XX were expenditures million ’XX, forecasting We ‘XX inventory. were $XX.X they and their for full $X.X used

full the to for of back million million my depreciation fourth concludes the million. $X.X Our details, I'll ‘XX $XX of depreciation are for forecasting year financial prepared to and the it $XX.X Rick compared we XXXX remarks and ‘XX Dorris. That is for turn over on quarter of approximately

Rick Dorris

speak the have few several past Show We I’ll in they and expect I of from weeks. are hearing good have XXXX. large about busy, that World backlog visited attended our customers in XXXX. briefly with our year good David. you, customers We're recently Thank Asphalt for outlook the a and

XXXX, XXXX than Even discussions U.S. Given in feel the with our We're this customers, spending. half place stable the have good half recent second on order infrastructure and Highway infrastructure this discussed appear is states until as way activity, end of fund to mechanisms current Trump as much the year, and in expire optimistic needed of to projects. the of work be not increase to of to federal the first the current spending willing Congress more to increase Bill a the before being tax gas September President backlog for highway together of we year. Federal and cautiously half our about a though does

capitalize last on also strong The strategic sheet on we the saving solid our in-markets, have is customers Our a sourcing year help operational have us began work. deliver private year. components materials, sector this to To track and on raw significant logistics we've and taken efforts balance performance. we good steps several improve to current

provide Our help performance The quality inventory and operational for sales continuing customers and better programs better shareholders. cash reduced control our us scheduling, planning operational from procedures programs excellence and training better release inventory. will are and will a provide and

international Our plan Latin better how initiatives our office Chile us new a international improve will recently proceeding international to operation. and serve customers and new opportunities XXXX is our to We're sales. international will and Santiago, America. We and in sales increase also ongoing in allow opened serve about excited our service our sales

XX% quarter and first and XXXX, and percent; EPS believe sales X% first increase of margins quarter of between operating margin will versus the with XXXX to of between of For the X% gross $X.XX. $X.XX X% we XX% our X% to

XX%, X.X% $X of X% and and margins full believe versus For between sales XX.X% X% the between gross of EPS XXXX with increase $X.XX. operating between to and and we X% year XXXX, will margins

the to our Director working to permanent to necessary. executive am the Board with I’ve identify the a close, search and like CEO long on for announced the CEO committed update today. board the provide as that to I an process, to the is I’d respect role. in capacity candidates With search new mention the CEO communicated Before leading leading Board Astec and I firm as process internal search evaluate

as will We this updates on appropriate. process provide

by their us advance we again ongoing improving forward employees and turn joining focus just seeing I’d an over focused years hard independent the believe currently stronger year, expertise her and and are making the work. today. we have optimization Board In international deep to everyone's the of come. company our to consulting past for and experience a its of directors inventory appointment confident greatly will and this our three I’m together place, shareholder Additionally new Mary future. products, priorities, well for the morning this CEO as we the firm. Textron excellence. and exit boards. as number driving fresh previously building Steve. now creating to as serves strongly encouraged initiative Howell our you Border an served what procurement operational as Board while will is in commitment like and deliver businesses experience. on has and financial of us value. benefit the from thank that At served newest knowledge we we for highest insights, years Director. in execution back Group, the the profitability Mary the public summary, call as officer company of We changes I'd in materials The With Howell strategic on the Astec Thank Strategy added XX many position for and extensive year that Mary’s and operational She to to enable and announced to results construction accomplish on from can Astec like also management focusing has all look industries. underperforming quality as committed bringing for are to

Steve Anderson

be into if would thank you Jess comments. Alright move we’d questions, for you poll Q&A. Rick, the glad for to those

Operator

go Certainly, thank Mig you. Instructions]. We’ll first Dobre [Operator to with Baird.

Peter Ziel

is This Peter for Ziel morning. good Mig Dobre. on Hi,

Rick Dorris

Good morning.

Peter Ziel

morning. Good

so particular, order good So is maybe quarter beginning on backlog the just maybe the late quarter, quarter the year-over-year the October part starting I infrastructure talk fourth in like of about that there the the that’s a down Could through in demand there XXXX some in back of call, Infrastructure carrying that the how with after in and activity quarter. in was flat comment you third in cadence and maybe just looks particular? flowed into but it maybe think

Rick Dorris

were equipment started bit was rain some they orders little due to projects reverse up. delayed the that so were some get the trying of last seeing Okay. trend done completing we year had on end were busy mobile to those much and catch delayed mainly of some to in and the delay They There trying orders. quarter. quarter, the at that the in But the fourth a weather, contractors

Peter Ziel

where the Okay, to for that? guess see into out so you I I a to maybe X% bit and growth going guess it to the sounds do year full maybe relative rate like year relative infrastructure the shaking better X% company,

Rick Dorris

Infrastructure right same in should range. that be

Peter Ziel

double of of X% range know the two to a then again can’t ‘XX Ag years, Okay, continue fact digit the can order to you alright. outgrow years but couple kind I good Can above the, And in and comps, go growth, come or Mining on back more activity which maybe of does shifting forever. be and this average had and understood maybe you X% obviously company this that suppose comping year? the the that to then

David Silvious

good we seeing for ’XX and this expect aggregate and – some year in good have year The has a We been good. another Aggregate orders is so Mining will good; Aggregate to, Domestically year. Mining. be mining for little to another expect increase them outlook that are we

Peter Ziel

of through cadence maybe can gross should the of through think about or the Okay how and margin that the lastly, coming we ’XX, sourcing mentioned be and there any of that you things component progression is you the and also just mats then in some strategic just raw year? provide kind on quantification will the

Rick Dorris

increase we is the have year be said that end to to the sourcing. expect of savings to from of in that by our XX% We the the that due gross strategic we’ll up have a margins portion and past good

Peter Ziel

there. it leave I’ll it. appreciate I Okay.

Rick Dorris

Thanks.

David Silvious

Thank you.

Operator

line We’ll with next open. Elliott Stanley your Stifel. move Instructions]. Stanley [Operator is to

Stanley Elliott

talk Thank change have pretty there. big little support you you could quick, up running curious what to not taking just in but about deal, bit? from much Did that. a obviously sort of it the leverage. Real I Was little net creep could guys about the position. a a a a about for bit mean questions. is cash Sorry it And stay you you of too, it philosophy and some are on to was if then look how projects, help that that thoughts about, forward. directly kind going that you a had repurchased shares you thinking us like

Rick Dorris

What part question, of was first the the Stanley?

David Silvious

Leverage.

leverage that was We Holland to that, on payment. prior did then in the we share do that buybacks debt or with them and settled $XX So for we and some had earlier XXXX was then during cash million that we you with settle that year. may recall XXXX mid-mid-year a to but that were free

at authorized some $XXX of did level are million about and a million XXXX. during We do we to tune $XX the

Stanley Elliott

about you. Difficult] thank [Technical of kind And then thinking Okay,

Rick Dorris

restate. we you hear if this. don’t connectivity got problem, can can’t we you I a Stanley, Sorry but know on

Stanley Elliott

identify [Technical now from I’m number businesses did Yeah, think going this this right weren’t through Difficulty]. quite you you going is strategic XX to calling on. the so this like actually things fit. other exercise divisions. I hear when that But maybe and of about or and operation businesses were and thinking you Is I’d said many Europe right, the the probably one

Rick Dorris

Dillman had is question now not accurate. Inc. of maybe we it XX companies, and are the XX. in lines as can back been operation; part question. expectations. have did our if this you German subsidiary discontinued is return We we part meet Astec was our along this correct But of previously restate and the Stanley, operated getting of jump to not I’ll point up your

stock very much at the our is our the we ongoing to on to companies value, do owned an has Inc will be continue continue company to Dillman The Dillman. to to important Astec so return and look to that shareholder basis thresholds meet ongoing product available an process. provide customers our at and

David Silvious

better that overall utilize that increase that thus have know corporations. at also at. capacity, capacity We're help across can facilities us needs also will we and from work ways think more extra our you looking that a looking We're facility transferring capacity we

Stanley Elliott

of could what Is there on maybe any to footprint you of perspective. sort high lines, level a combine anything along way guestimate from those kind

David Silvious

what work. we're trying shifting that's by do Well, basically to

are We where feasible. one we from shifting really looking facility looking another are at not wise, footprint at but combining to facility work its

Stanley Elliott

and sorry much for very you thank difficulties. the technical and Perfect,

David Silvious

No Stanley. problem problem. No

Operator

there Anderson, appear to I'll further the questions call Mr. at be time. back And no gentleman, this turn you. to

Steve Anderson

Alright, participation you the Astec. thank We today Jess. thank and on call everyone's your appreciate in interest for you

sent all available today. Industries under that the next Investor and days As has release been through of Relations within your available XXXX contained section webcast earlier replay recorded. be call information transcript our of an the will days. we today's Astec release will news the out be website seven be states the XX, XX and of call A for for reference A archived is in Match news will available the

we thank week! at Have and So conclude again. you will call good all point this a

Operator

you. today’s your participation. for does This conclude teleconference. We you Thank thank

day! this your time disconnect at lines great may You a and have

Astec Industries (ASTE) 1 Mar 192018 Q4 Earnings call transcript