Astec Industries (ASTE) Q4 2003 earnings summary

Executive summary

• FY2003 net sales were $426.6M, down 11.2% YoY; net loss widened to $29.0M, or $1.47 per diluted share, from a $4.7M loss.

• Results reflected lower domestic equipment demand, competitive pricing, underused capacity, Loudon start-up costs, used-equipment write-downs and $16.3M of goodwill impairment.

Financial highlights

• Gross profit fell to $70.9M from $83.9M; gross margin was 16.6% versus 17.5% in 2002.

• SG&A declined to $69.5M from $72.4M; the reduction was partly offset by $2.9M of small-trencher costs and $2.5M of refinancing expense.

• Interest expense decreased 30.4% to $7.3M; a $3.8M senior-note termination charge was recorded in the 2003 refinancing.

• Operating cash flow was $8.2M versus $33.6M in 2002; investing activities provided $30.4M, primarily from the finance-portfolio wind-down.

Outlook and guidance

• Year-end backlog increased 30.8% to $79.4M from $60.7M; backlog rose in Aggregate, Mobile and Underground, while Asphalt decreased slightly.

• Management expected working capital, future operating cash flow and remaining credit availability to fund needs through Dec. 31, 2004; this depended on projected operating cash flow and credit access.

• FY2004 capital expenditures were budgeted at approximately $7.4M, primarily maintenance and equipment-related, funded through revolver capacity and internal cash flow.

• A Grapevine facility sale was being pursued; the first $6.25M of proceeds would repay term debt, with remaining proceeds for working capital or revolver reduction.