investor presentation - astec industries, inc. · 5.11.2019 · this presentation and discussion...

I nve s t o r P r e s e n t at i o n

B a i r d C o n f e r e n c e

N o v e m b e r 5 , 2 0 1 9

A S T E I N V E S T O R P R E S E N T A T I O N 2

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


Key Messages

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

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Astec Industries at a Glance (NASDAQ: ASTE)

KEY STATISTICS1

Founded 1972

Headquarters Chattanooga, TN

Employees ~4,100

Global Locations 25 in 6 Countries

Market-cap $732.4M

Product Categories 100+

Design, Manufacture and Provide Innovative, Productive, Reliable, Eco-friendlyand Safe Equipment to Drive Value for Customers and Shareholders

By SegmentTTM 3Q19 REVENUE MIX | ~$1.2B2

By Geography

1 As of 9/30/19; 2 Ex-pellets.

41.5%

36.4%

22.1% Infrastructure

Aggregate & Mining

Energy

78%

22%Domestic

International


Our Global Footprint

W e l l P o s i t i o n e d t o L e v e r a g e a n d G r o w

Sites# of Mfg. / Sales# of Sales Only

Brisbane, AU1

Bangkok, TH1

Ahmedabad, IN

Santiago, CL1

Belo Horizonte, BR1 Johannesburg, SA1

Omagh, NI1

Chattanooga, TN7

Parsons, KS1

Enid, OK1

Strategic Expansion Focus Areas• Asia• Australia• Europe• India

Thornbury, ON1

Mequon, WI1

Burlington, WI1

Prairie du Chien, WI1

Tacoma, WA 1

Eugene, OR 2

1

Yankton, SD 1

Sterling, IL 1

• Latin America• Middle East• Northern Africa


Key Observations as Newly Appointed CEO

E x c e l l e n t F o u n d a t i o n t o C r e a t e S h a r e h o l d e r V a l u e

KEY, STRATEGICOPPORTUNITY AREAS

OPTIMIZED STRUCTURESimplify the organization, be closer to customers, make quicker decisions

TECHNOLOGYEnhance customer engagement with more touch points to provide greater value for all stakeholders

OPERATIONAL EXCELLENCEInvesting in people and tools to be best in class

GLOBAL EXPANSIONDriving our strategy for international growth

PROFITABLE GROWTHAlign organizational structure and optimize product portfolio to maximize shareholder value

FOUNDATIONAL COMPANY STRENGTHS

• People

• Customer Focus

• Innovation

• Market Position

• Global Footprint

• Balance Sheet


Aligned Strategy for Profitable Growth

FOCUSSIMPLIFY GROW

• Leveraging global footprint and scale while maintaining strong customer relationships

• Reduce organizational structure complexity

• Consolidate and rationalize footprint and product portfolio

• Optimize supply chain by leveraging size and scale of business

• Strengthen customer-centric approach by providing a holistic set of solutions

• Drive commercial excellence

• Embrace and streamline operational excellence processes

• Enhance accountability through a performance-based culture with aligned KPIs and incentives

• Reinvigorate innovation with a new product development approach

• Leverage technology and digital connectivity to enhance customer experience

• Capitalize on global growth opportunities

• Allocate capital effectively to drive greatest shareholder value


Simplify Our Organization

• Eliminating redundancy by centralizing procurement, engineering, IT, HR and finance functions

• Removed a management layer to improve agility and speed to decision• Leadership team in place, including hiring SVP of Operational Excellence

and CIO, and creating an SVP of Innovation role

• Closed Astec Mobility Machinery (AMM) facility – expected to sell building by end of 2019

• Consolidated CEI facility into Heatec / RexCon production facilities • Reviewing additional opportunities to consolidate facilities and streamline

product portfolio

• Implemented Astec Strategic Procurement (ASP) to consolidate and optimize spending power

• Leverage global footprint to enhance supply chain• Share best practices throughout organization

Organizational Structure & Talent

Optimize Footprint& Product Portfolio

Leverage Scale


…with Solid Efficiencies from Strategic Sourcing Initiative

~ $ 2 5 M A n n u a l i z e d S a v i n g s T a r g e t i n 2 0 2 0

PROCUREMENT LOGISTICS INVENTORY S&OP1 DATA ANALYTICS

Extensive analysis of spend, specifications,

supply base and market

Operational shift to best cost sourcing with network

optimization

Provided organization wide transparency to

inventory / stock levels

Established a sustainable forecasting and planning

methodology

Installation of KPIs and reporting standards across procurement

• Designed approach for category and segment spend

• Established category managers by material type

• Hosted first supplier engagement forum

• Developed supplier scorecard

• Renegotiated rates

• Data analytics to inform purchase, negotiations and identify lane optimization

• Intra-subsidiary lane optimization, cost reduction and consolidations

• Deployed enhanced Logistics Management Operating System with performance metrics

• Extensive inventory insight across organization

• Revised categorization for consistent tracking

• Established strategic safety stock, minimum / maximum levels and replenishment points

• Trained in inventory management best practices and installed scorecards for continuous improvement

• Developed standard model for stage gate S&OP process, including KPIs

• Installed S&OP Management Operating System

• Enabled real-time procurement data to dashboard readouts

• Established weekly metrics-based review cycles to drive continuous improvement

• Interfaced with other corporate functions for alignment / optimization

1 Sales & Operations Planning.


Improve Focus Within Our Organization

• Consolidate regional CRM tools to leverage customer database• Maximize ease of doing business• Increase share of wallet with new and existing customers

• Identify KPIs to measure and monitor operational progress• Implement processes with leaders in place at each of our sites • Focus on leadership in Safety, Quality, Delivery and Cost • Analyze opportunities to value engineer products without sacrificing quality

• Hired CIO to oversee data analytics implementation• Align incentive plans with key financial metrics to drive performance• Identify high potential talent to develop and promote

CommercialExcellence

OperationalExcellence

PerformanceCulture


Drive Profitable Growth to Increase Shareholder Value

• Forming innovation council comprised of CEO, CFO, group presidents and SVP of Innovation to identify investment opportunities with highest returns

• Creating a product management group for each segment to leverage voice of the customer and construct NPD roadmaps

• Developing a stage gate NPD process ensuring milestones are met• Increase and retain organizational IP

• Created new position – SVP of Innovation to oversee function• Unifying technology and digital platforms with Telematics• Applying digital applications to monitor customer usage and processes to

more effectively optimize sales solutions (e.g., preventative maintenance, grow aftermarket parts / service)

• Aspire to consistent top quartile financial performance within industrial peers• Align organization with key metrics – including revenue growth, EBITDA

margin, EPS growth, ROIC and FCF – to drive TSR• Focus on sustainable, profitable growth

ReinvigorateInnovation

Technology

Enhance Shareholder Value


Recent Financial Highlights ($M except EPS, as Adjusted)

REVENUE1 GROSS MARGIN1 ADJUSTED EBITDA1

$1,012$1,177 $1,246

$929 $866

FY16 FY17 FY18 YTD 18 YTD 19

23.3% 23.3% 23.8% 23.8%22.2%


$86

$113 $116

$88

$53


NET INCOME1 ADJUSTED EPS1 BACKLOG

$39

$58$67

$53

$27


$1.69

$2.49 $2.92

$2.30

$1.18


$284

$341 $345$309

$244

FY16 FY17 FY18 3Q18 3Q191 See Appendix for Non-GAAP to GAAP reconciliation table.


Focused on Maintaining a Strong Balance Sheet

M a n a g i n g C a s h F l o w a n d B a l a n c e S h e e t w i t h G r e a t F i n a n c i a l D i s c i p l i n e

($M) 9/30/19

Cash and Cash Equivalents $ 26.3

Total Current Assets $ 529.9

Total Assets $ 815.7

Total Current Liabilities $ 173.1

Total Debt $ 0.9

Total Liabilities and Equity $ 815.7

SUMMARY BALANCE SHEET KEY HIGHLIGHTS

• Overall strength of the balance sheet provides the financial flexibility to accomplish long-term strategic initiatives

• Inventory turnover improved to 2.6x from 2.4x a year ago

• Net cash position

• Total liquidity available of $167.8M


Disciplined Capital Deployment Framework

C o n t i n u a l l y e v a l u a t e s t r a t e g y t o e n s u r e a b a l a n c e d a p p r o a c h

Reinvestments

Acquisitions

Returns to Shareholders

• Internal investments meeting return objectives of >14% ROIC

• Future acquisitions to align with growth strategy and meet financial criteria

• Quarterly dividend of $0.11 per share• $150M repurchase program authorized• Repurchased $24M in 2018

Future Priorities Remain ConsistentUse of Cash Over Last 3 Years

~$196M

40%

34%

14%

12%

ReinvestmentsAcquisitionsDividendsShare Repurchases


Company Targets

Long-term Goals

Revenue Growth 5% - 10%

EBITDA Margin > 12%

EPS Growth > 10%

FCF Conversion1 > 100% Net Income

ROIC > 14%

Create Value for Shareholders

Alignment to Incentive Plan

Stand through Cycles

1 Calculated by dividing YTD Adjusted FCF by Adjusted Net Income.


Key Investment Highlights

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


Contact Information

STEVE ANDERSONVP of Administration, Corporate Secretary & Director of IRPhone: 423-553-5934Email: [email protected]

mailto:[email protected]

A S T E I N V E S T O R P R E S E N T A T I O N

Appendix


Income Statement

2019 2018 2019 2018Net sales 255,807$ 256,613$ 886,389$ 854,595$ Cost of sales 203,947 198,329 674,362 717,197 Gross profit 51,860 58,284 212,027 137,398 Selling, general, administrative & engineering expenses 47,643 51,054 158,594 154,396 Restructuring charges 875 - 1,431 - Income (loss) from operations 3,342 7,230 52,002 (16,998) Interest expense (167) (170) (1,299) (488) Other 467 115 1,379 1,774 Income (loss) before income taxes 3,642 7,175 52,082 (15,712) Income tax expense (benefit) 632 180 11,420 (2,301) Net income (loss) attributable to controlling interest 3,010$ 6,995$ 40,662$ (13,411)$

Earnings (loss) per Common ShareNet income (loss) attributable to controlling interest Basic 0.13$ 0.31$ 1.81$ (0.58)$ Diluted 0.13$ 0.30$ 1.79$ (0.58)$

Weighted average common shares outstanding Basic 22,523 22,923 22,510 23,009 Diluted 22,685 23,084 22,666 23,009

September 30September 30

(in thousands, except per share data)(unaudited)

Three Months Ended

Astec Industries, Inc.Condensed Consolidated Statements of Operations

Nine Months Ended


Balance Sheet

September 30 September 302019 2018

AssetsCurrent assetsCash and cash equivalents 26,289$ 25,674$ Investments 1,103 2,432 Receivables, net 114,073 127,523 Inventories 356,889 429,220 Prepaid expenses and other 31,530 39,513 Total current assets 529,884 624,362 Property and equipment, net 190,545 187,903 Other assets 95,240 91,199 Total assets 815,669$ 903,464$

Liabilities and equityCurrent liabilitiesAccounts payable - trade 59,886$ 74,419$ Other current liabilities 113,195 132,534 Total current liabilities 173,081 206,953 Long-term debt, less current maturities 717 26,506 Non-current liabilities 24,287 23,731 Total equity 617,584 646,274 Total liabilities and equity 815,669$ 903,464$

Astec Industries, Inc.Condensed Consolidated Balance Sheets

(in thousands)(unaudited)


Reconciliation from Non-GAAP to GAAP

($000s)

As Reported (GAAP)

Restructuring Charges

As Adjusted (Non-GAAP)

Q3 2019ConsolidatedOp Income 3,342 875 4,217Income Tax Expense (Benefit)1 632 (132) 764Net Income 3,010 743 3,753EPS 0.13 0.04 0.17EBITDA 9,869 875 10,744Free Cash Flow 32,037 875 32,912InfrastructureEBITDA 1,681 875 2,556

1 Tax effect on restructuring charges is calculated using the applicable jurisdictional blended tax rate.



($M, except per share data)As Reported

(GAAP)Pellet Plant

Activity1Restructuring

ChargesAs Adjusted (Non-GAAP)

Q3 YTD 2019Revenues 886 (20) - 866 GM 212 (20) - 192 GM% 23.9% - - 22.2%EBITDA 72 (20) 1 53 Net Income (Loss)2 41 (15) 1 27 EPS 1.79 (0.67) 0.06 1.18

1 Includes all revenues and expenses related to pellet plants during the period. 2 Tax effect on all adjustments are calculated using the applicable jurisdictional blended tax rate.


(GAAP)Pellet Plant



Q3 YTD 2018Revenues 855 74 - 929GM 137 84 - 221GM% 16.1% - - 23.8%EBITDA 5 83 - 88Net Income (Loss)2 (13) 66 - 53EPS (0.58) 2.88 - 2.30




(GAAP)Pellet Plant



FY 2017Revenues 1,185 (8) - 1,177 GM 243 31 - 274 GM% 20.5% - - 23.3%EBITDA 83 30 - 113 Net Income (Loss)2 38 20 - 58 EPS 1.63 0.86 - 2.49


(GAAP)Pellet Plant

Activity1Restructuring and

Other Charges3As Adjusted (Non-GAAP)

FY 2018Revenues 1,171 75 - 1,246GM 136 149 12 297GM% 11.6% - - 23.8%EBITDA (58) 149 25 116Net Income (Loss)2 (60) 112 15 67EPS (2.64) 4.89 0.67 2.92

1 Includes all revenues and expenses related to pellet plants during the period. 2 Tax effect on all adjustments are calculated using the applicable jurisdictional blended tax rate. 3 Includes restructuring charges along with goodwill and inventory impairment charges.




(GAAP)Pellet Plant


ChargesAs Adjusted(Non-GAAP)

FY 2016Revenues 1,147 (135) - 1,012 GM 265 (29) - 236 GM% 23.1% - - 23.3%EBITDA 113 (27) - 86 Net Income (Loss)2 55 (16) - 39 EPS 2.38 (0.69) - 1.69

1 Includes all revenues and expenses related to pellet plants during the period. 2 Tax effect on all adjustments are calculated using the applicable jurisdictional blended tax rate.

investor presentation - astec industries, inc. · 5.11.2019 · this presentation and discussion...

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