Astec Industries(ASTE) - 2021 Q1 - Quarterly Report

PART I Financial Statements (Unaudited) Presents Astec Industries, Inc.'s unaudited consolidated financial statements for Q1 2021, covering balance sheets, income, cash flows, and equity, with detailed accounting notes Consolidated Balance Sheets Total assets increased to $868.3 million as of March 31, 2021, with corresponding increases in total liabilities and equity Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $592.0 | $565.8 | | Total Assets | $868.3 | $848.2 | | Total Current Liabilities | $185.1 | $170.3 | | Total Liabilities | $221.3 | $205.2 | | Total Equity | $647.0 | $643.0 | Consolidated Statements of Operations Net sales slightly decreased to $284.4 million in Q1 2021, resulting in a significant drop in net income to $8.7 million or $0.38 per diluted share Q1 2021 vs. Q1 2020 Performance (in millions, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Sales | $284.4 | $288.8 | | Gross Profit | $68.5 | $73.4 | | Income from Operations | $9.8 | $15.1 | | Net Income Attributable to Controlling Interest | $8.7 | $20.6 | | Diluted Earnings Per Share | $0.38 | $0.91 | Consolidated Statements of Cash Flows Net cash from operating activities significantly improved to $14.6 million in Q1 2021, contributing to an ending cash balance of $164.6 million Cash Flow Summary (in millions) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $14.6 | $5.4 | | Net cash used by investing activities | $(3.0) | $(4.1) | | Net cash used by financing activities | $(5.6) | $(3.7) | | Increase (decrease) in cash | $6.0 | $(5.0) | | Cash and cash equivalents, end of period | $164.6 | $43.9 | Notes To Unaudited Consolidated Financial Statements Detailed notes explain accounting policies, business segments, recent acquisitions, revenue recognition, segment performance, and restructuring activities - The company operates in two reportable segments: Infrastructure Solutions and Materials Solutions, with a Corporate category for the parent and a captive insurance company[26][27] - In 2020, the company acquired CON-E-CO for $13.8 million and BMH Systems for $15.6 million to strengthen its Infrastructure Solutions segment[35][37] - The effective income tax rate was 9.4% for Q1 2021, compared to a (33.3)% benefit in Q1 2020, significantly impacted by a $9.5 million CARES Act tax benefit in the prior year[51][52] - Restructuring charges of $0.7 million were recorded in Q1 2021, primarily for facility closures, compared to $2.1 million in Q1 2020, which included a $1.6 million goodwill impairment[78][83][85] Management's Discussion and Analysis (MD&A) Management discusses Q1 2021 financial results, noting a 1.5% decrease in net sales and a 57.8% drop in net income, alongside a 71.5% increase in order backlog Q1 2021 Financial Highlights vs. Q1 2020 | Metric | Change | | :--- | :--- | | Net Sales | -1.5% | | Gross Profit | -6.7% | | Income from Operations | - $5.3M | | Net Income | -57.8% | | Diluted EPS | -58.2% to $0.38 | - The backlog of orders increased 71.5% to $420.8 million as of March 31, 2021, driven by pent-up demand and slower production cycles due to labor shortages[98][114] - The company faces challenges from rising steel prices, supply constraints on components like engines, and a shortage of production personnel[101][102] Results of Operations Net sales decreased 1.5% to $284.4 million in Q1 2021, primarily due to Materials Solutions, while gross profit margin contracted and SG&A expenses increased - Net sales decreased by $4.4 million (1.5%) year-over-year, primarily due to lower international equipment and parts sales in the Materials Solutions segment[104] - Gross profit margin decreased by 130 basis points to 24.1% from 25.4% in Q1 2020, attributed to reduced sales volumes and lower manufacturing efficiency[108] - SG&A expenses rose by $2.0 million (4.0%), mainly due to transformation initiatives, $3.6 million in higher software licensing costs, and $2.2 million from acquired businesses[109] Segment Analysis Infrastructure Solutions profit increased 22.1% to $21.0 million, Materials Solutions profit rose 8.3% to $6.5 million, but Corporate segment loss significantly increased to $18.8 million Segment Profit (Loss) (in millions) | Segment | Q1 2021 | Q1 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Infrastructure Solutions | $21.0 | $17.2 | $3.8 | 22.1% | | Materials Solutions | $6.5 | $6.0 | $0.5 | 8.3% | | Corporate | $(18.8) | $(2.9) | $(15.9) | (548.3)% | - Infrastructure Solutions profit grew due to decreased selling expenses ($7.5 million) and lower restructuring/impairment charges ($1.8 million), offsetting a $3.8 million decrease in gross profit[117] - The increased Corporate loss was driven by $7.0 million in higher income tax expense, $4.9 million in increased payroll/incentive costs, and $3.7 million in higher software licensing costs[119] Liquidity and Capital Resources The company maintains a strong liquidity position with $164.6 million in cash and $144.5 million available credit, with estimated 2021 capital expenditures between $25 million and $30 million - As of March 31, 2021, the company had $164.6 million in cash and no outstanding borrowings on its $150.0 million credit facility[121] - Estimated capital expenditures for the full year 2021 are projected to be between $25 million and $30 million[120] - In late 2020, the company entered into software arrangements with future payment obligations of $42.0 million through September 2027 as part of its transformation initiatives[132] Quantitative and Qualitative Disclosures About Market Risk No material changes in the company's market risk exposures have occurred since the 2020 Annual Report on Form 10-K disclosures - The company's market risk exposures have not materially changed since its 2020 Annual Report on Form 10-K[133] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of March 31, 2021, the company's disclosure controls and procedures were effective[134] - No changes in internal control over financial reporting occurred during Q1 2021 that have materially affected, or are reasonably likely to materially affect, these controls[135] PART II - OTHER INFORMATION Legal Proceedings The company is involved in various legal actions, including a breach of warranty lawsuit against its GEFCO subsidiary, with no expected material adverse effect - The company's GEFCO subsidiary is a defendant in a lawsuit alleging breach of warranty for equipment sold in 2013, with the plaintiff seeking rescission of the ~$8.5 million contract and damages[57] - Management does not believe that any pending or threatened litigation will result in an outcome that would materially affect the company's business or financial position[136] Risk Factors This section refers to the 2020 Annual Report on Form 10-K for detailed risk factors, indicating no material changes during the quarter - The report directs stakeholders to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2020, implying no new material risks have emerged[137] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - No unregistered sales of equity securities or use of proceeds were reported[137] Exhibits This section lists exhibits filed with the Form 10-Q, including compensation plans, equity award agreements, and CEO/CFO certifications - Filed exhibits include management compensation plans and agreements, such as the Deferred Compensation Plan and award agreements for the 2021 Equity Incentive Plan[140] - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[140]