embracing innovation delivering productivity · in astec's markets. these forward-looking...
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EMBRACING INNOVATION DELIVERING PRODUCTIVITY
SIDOTI CONFERENCE | INVESTOR PRESENTATION
SEPTEMBER 2019
This presentation and discussion may contain forward-looking statements regarding the future
performance of the Company, including representations about the Company's future financial
performance, market conditions, the long-term growth prospects of the Company and its
markets, opportunities for market share gains and acquisitions and performance of companies
in Astec's markets. These forward-looking statements reflect management’s beliefs and
assumptions. They are not guarantees of performance and are therefore subject to risks and
uncertainties. The information in this presentation is not an update or reaffirmation of
previously disclosed information. Future events and actual results could differ materially from
those expressed in or implied by the forward-looking statements. Factors that could cause
future events or actual results to differ materially from the Company’s expectations include
uncertainty in the economy, rising oil and liquid asphalt prices, rising interest rates, changes in
highway funding availability, the timing of large contracts, production capacity, changes in size
and mix of backlog, seasonality and cyclicality in operating results, seasonality of sales
volumes, demand for the Company's products, competitive activity and those other factors
listed from time to time in the Company’s reports filed with the SEC.
Safe Harbor
2
Key Messages
1
Leadership positions
within attractive niche
markets in industries
benefitting from long-
term secular trends
including population
growth, urbanization
and aging
infrastructure
2
Industry-leading
reputation for
innovation, high-
quality products and
superior customer
service
3
Recurring, high-
margin aftermarket
revenue driven by a
large global installed
base
4
Financial strength to
execute our strategic
priorities to improve
productivity and drive
long-term earnings
growth
5
Refreshed Board
members supporting
new experienced
leadership team to
drive long-term
shareholder value
creation
3
Values Deeply Embedded within Organization
MISSION STATEMENT
OUR CORE VALUESTo grow and prosper by
designing, manufacturing
and selling the most
innovative, productive,
reliable and safe equipment
for the industries we serve,
coupled with unparalleled
customer service
Safety, quality and productivity as
means to ensure success
Continuous devotion to meeting
the needs of our customers
Honesty and integrity in all
aspects of business
Respect for all individuals
Preserving entrepreneurial spirit
and innovation
4
5
Astec Industries at a Glance (NASDAQ: ASTE)
KEY STATISTICS1
Founded 1972
Headquarters Chattanooga, TN
Employees2 ~4,100
Global Locations 26 in 6 Countries
Market-cap2 $732.4M
Product Categories 100+
Design, Manufacture and Provide Innovative, Productive, Reliable, Eco-friendly
and Safe Equipment to Drive Value for Customers and Shareholders
1 As of 12/31/18 unless otherwise noted; 2 As of 9/16/19; 3 Ex-pellets.
42%
36%
22%
2018 REVENUE MIX
Infrastructure Aggregate & Mining Energy
~$1.2B3
Infrastructure Segment Overview
6
$517M42% of 2018 Total Revenue
6.4% CAGRAdj. Sales Growth ’15-’18
30Product Categories
2Countries of Operation
KEY STATISTICS
DESIGN MANUFACTURE INSTALL
Engineer the Most Advanced and Innovative Asphalt Mixing and Related Products
to Help Customers Maximize Performance and Safety
PRODUCT PORTFOLIO
Portable, Relocatable and Stationary Asphalt Mixing Facilities and Related
Components ● Variety of Pavers ● Paver Screeds ● Milling Machines
● Material Transfer Vehicles ● Soil Stabilizers
APPLICATIONS
Asphalt Mixing ● Asphalt Recycling ● Soil Remediation ● Materials Transfer
● Aggregates Processing ● Commercial Paving
KEY BRANDS
Aggregate & Mining Segment Overview
7
$453M36% of 2018 Total Revenue
6.9% CAGRSales Growth ’15-’18
49Product Categories
5Countries of Operation
KEY STATISTICS
DESIGN MANUFACTURE MARKET
Provide Innovative Solutions for Material Handling, Mining, Quarry, Recycling,
Construction and Demolition Industries
PRODUCT PORTFOLIO
Rock Crushers ● Vibrating Screens ● Conveyors ● Rock Breaker Systems
● Washing and Classifying Equipment ● Feeders
APPLICATIONS
Quarry Operations ● Bulk Materials Handling Systems
● Recycle Processing ● Underground Mining
KEY BRANDS
Energy Segment Overview
8
$276M22% of 2018 Total Revenue
14.6% CAGRSales Growth ’15-’18
35Product Categories
6Countries of Operation
KEY STATISTICS
DESIGN MANUFACTURE MARKET
A Diversified Portfolio of Highly Efficient Equipment Used in Heating, Storage,
Biomass and Concrete Applications
PRODUCT PORTFOLIO
Heaters ● Burners ● Storage Equipment and Related Parts
● Woodchippers and Grinders ● Pump Trailers ● Concrete Plants
● Commercial and Industrial Burners ● Combustion Control Systems
APPLICATIONS
Asphalt Storage ● Construction ● Heating and Blending ● Water Well
Industries ● Food and Beverage ● Lumber ● Oil and Gas
KEY BRANDS
AGING INFRASTRUCTURE
URBANIZATION
GLOBAL POPULATION GROWTH
• World population projected to reach 9.7 billion by 2050
• Federal funding is expected to remain stable
• Fast Act renewal vote expected September 2020; bipartisan support for increased federal infrastructure spend
• More than half of U.S. states have indexes in place to increase infrastructure spending
• Aggregate and Mining experienced favorable commodity prices, global stability, offset by softer demand for heavy construction equipment in 1H19
• Diverse product portfolio to mitigate fluctuating oil prices
9
Well Positioned for Macro Trends
Source: United Nations Department of Economics and Social Affairs - Population Division, FMI, AIA, BMI, Wall Street Equity Research.
SECULAR DRIVERS
Key Observations as Newly Appointed CEO
EXCELLENT FOUNDATION TO CREATE SHAREHOLDER VALUE
FOUNDATIONAL
COMPANY STRENGTHS
• People
• Customer Focus
• Innovation
• Market Position
• Global Footprint
• Long-term Market Drivers
• Balance Sheet
KEY, STRATEGIC
OPPORTUNITY AREAS
• Decentralized Structure
• Technology
• Operational Excellence
• Global Expansion
• Profitable Growth
Enhancing Governance and Shareholder Value
11
IMPROVING PROFITABILITY GOVERNANCE SHAREHOLDER RETURNS
✓ Improving gross margin and
overhead costs
✓ Maintain appropriate levels of
SGA&E, consistent with peers
✓ Exited wood pellet business
in 2018
✓ Strategic sourcing review
completed in 2Q19; expect one-
time cash benefit of $25M and
ongoing gross margin
improvement
✓ Board refreshment to ensure
right mix of industry expertise
✓ 3Q18: Appointed three new
independent directors:
✓ Brad Southern, CEO & Director, LP
✓ Tracey Cook, President, AMECO
Business Line of Fluor Corporation
✓ Mary Howell, Founder & CEO,
Howell Strategy Group
✓ 1Q19: Appointed William D.
Gehl as Chairman of the Board
✓ 3Q19: Named Barry Ruffalo as
President, CEO and Director
✓ Increased quarterly dividend by
10% to $0.11/share in 2Q18
✓ Announced a $150M share
repurchase authorization -
$24M completed in 2018
Long-term Profitable Growth Strategy
Invest in Organic Growth• Expanded facilities to support growth at Carlson Paving Products and Telestack
• Growing international footprint by developing regional offices
12
• Assess ROIC for all capital expenditures
• Planned closure of Astec Mobile Machinery in Germany
• Transitioned to Phase Two of Astec Strategic Procurement initiative
• Implemented Astec Sales and Operational Planning initiative
Focus on Productivity,
Quality and Safety
• Established operational excellence managers at each subsidiary
• Tracking at less than half of industry average for recordable injuries
Continue Tradition of
Innovation
• Driving innovation through network of 200+ highly-skilled engineers
• Developing 82 new products; 191 active patents, additional 141 pending approval
Increase Profitability through
Gross Margin Initiatives and
Expense Discipline
Allocate Capital Effectively to
Drive Greatest Shareholder
Value
• Completed first phase of strategic
sourcing in 2Q19; identified
savings on raw materials,
components and logistics to be
realized in 2020+
• Consolidating suppliers;
streamlining procurement
function across customer-
focused, central-led business
model
• SGA&E1 expenses as a percent
of sales are in-line with peers
despite incurring consulting fees,
exhibit expenses, R&D, legal and
professional costs in 1H19
Proactively Managing for Profitability
13
RECURRING, HIGH-MARGIN PARTS SALES($M, % of NET SALES, AS ADJUSTED)
SGA&E1 EXPENSES(% OF NET SALES, AS ADJUSTED)
$247 $255 $265 $264
$283
$309
27% 26% 27% 26% 24% 25%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
$150
$250
2013 2014 2015 2016 2017 2018
17.4% 17.3%16.0%
17.9%16.3%
14.8% 14.8%
18.6%19.2%17.1%
19.9%17.7%
14.6%
17.3%
2016 2017 2018 2019
Q1 Q2 Q3 Q4
4.6%5-year CAGR
1 Selling, General, Administrative and Engineering
Recent Financial Highlights ($M except EPS, as Adjusted)
REVENUE GROSS MARGIN EBITDA
$1,012
$1,177$1,246
FY16 FY17 FY18
23.3% 23.3% 23.8%
FY16 FY17 FY18
$86
$113 $116
FY16 FY17 FY18
NET INCOME ADJUSTED EPS BACKLOG
$39
$58
$67
FY16 FY17 FY18
$1.69
$2.49
$2.92
FY16 FY17 FY18
$284
$341 $345
FY16 FY17 FY18
14
KEY HIGHLIGHTS
► Overall strength of the balance
sheet provides the financial
flexibility to accomplish long-
term strategic initiatives
► Inventory turnover improved to
2.5x from 2.4x a year ago
► Net debt leverage ratio of 0.3x
Focused on Maintaining a Strong Balance Sheet
MANAGING CASH FLOW AND BALANCE SHEET WITH GREAT FINANCIAL DISCIPLINE
($M) 06/30/19
Cash and Cash Equivalents $ 24,905
Total Current Assets $ 557,535
Total Assets $ 848,555
Total Current Liabilities $ 173,936
Total Debt $ 28,891
Total Liabilities and Equity $ 848,555
SUMMARY BALANCE SHEET
15
16
Balanced Approach to Capital Allocation
CONTINUALLY EVALUATE STRATEGY TO ENSURE A BALANCED APPROACH
Reinvestments
Acquisitions
Returns to
Shareholders
Grow business through internal investments that meet return
objectives of >14% ROIC
Enhance portfolio through disciplined and strategic
acquisitions in adjacent markets to complement core
competencies and maximize long-term shareholder value
Use strong cash position to pay dividends and repurchase
stock, when appropriate
Key Takeaways
17
Leadership positions within attractive niche markets in industries
benefitting from long-term secular trends including population
growth, urbanization and aging infrastructure
Industry-leading reputation for innovation, high-quality products
and superior customer service
Recurring, high-margin aftermarket revenue driven by a large
global installed base
Financial strength to execute our strategic priorities to improve
productivity and drive long-term earnings growth
Refreshed Board members supporting new experienced
leadership team to drive long-term shareholder value creation
1
2
3
4
5
18
Contact Information
STEPHEN ANDERSON
VP of Administration & Director of Investor Relations
Phone: 423-553-5934
Email: [email protected]
APPENDIX
Income Statement
2019 2018
Net sales 630,582$ 597,981$
Cost of sales 470,606 518,868
Gross profit 159,976 79,113
Selling, general, administrative & engineering expenses 111,316 103,341
Income from operations 48,660 (24,228)
Interest expense (1,131) (318)
Other 911 1,658
Income before income taxes 48,440 (22,888)
Income taxes 10,789 (2,481)
Net income attributable to controlling interest 37,651$ (20,407)$
Basic 1.67$ (0.89)$
Diluted 1.66$ (0.89)$
Condensed Consolidated Statements of Operations
(In thousands, except per share data) (Unaudited)
June 30
Six Months Ended
Astec Industries, Inc.
20
Balance Sheet
June 30 June 30
2019 2018
Assets
Current assets
Cash and cash equivalents 24,905$ 65,206$
Investments 1,211 1,972
Receivables, net 139,196 144,205
Inventories 360,883 394,789
Prepaid expenses and other 31,340 36,044
Total current assets 557,535 642,216
Property and equipment, net 191,854 185,455
Other assets 99,166 96,165
Total assets 848,555$ 923,836$
Liabilities and equity
Current liabilities
Accounts payable - trade 70,338 64,702
Other current liabilities 103,598 177,978
Total current liabilities 173,936 242,680
Long-term debt, less current maturities 28,891 1,062
Non-current liabilities 25,120 23,113
Total equity 620,608 656,981
Total liabilities and equity 848,555$ 923,836$
Astec Industries, Inc.
Condensed Consolidated Balance Sheets
(In thousands) (Unaudited)
21