Astec Industries (ASTE) Q4 2004 earnings summary

Executive summary

• FY 2004 returned to profitability: net sales rose 25.5% to $504.6M and net income was $19.1M, versus a $29.0M loss in 2003; results included a $5.4M after-tax disposal gain.

• Full-year growth reflected higher equipment and parts sales, improved factory utilization, international demand and reduced used-equipment write-downs; rising steel costs limited margin recovery.

• Q4 sales were $111.2M, gross profit $20.4M and net income $268K, compared with Q3 sales of $111.7M, gross profit of $22.7M and net income of $731K.

Financial highlights

• FY net sales increased 25.5% to $504.6M; domestic sales rose 23.8% to $381.9M and international sales rose 30.9% to $122.6M.

• Gross profit was $103.1M, or 20.4% of sales, versus $65.3M, or 16.2%, in 2003; reduced capacity underutilization and used-equipment write-downs supported improvement.

• Operating income was $23.2M versus a $24.8M operating loss in 2003; 2003 included $16.3M of goodwill impairment.

• Net income was $19.1M, or $0.95 diluted EPS, versus a $29.0M loss, or $1.47 loss per diluted share; continuing-operations income was $12.5M, or $0.62 diluted EPS.

• Parts sales increased to $116.5M from $97.4M; parts represented 23.1% of FY revenue.

Outlook and guidance

• FY 2005 capital expenditures budgeted at $14M, including ~$4M for capacity to replace production previously supplied by the disposed business; funding expected from revolver availability and internally generated cash.

• Management expected working capital, operating cash flow and remaining credit availability to cover working capital and capex requirements through Dec. 31, 2005; forecast assumes no assurance of the Grapevine facility sale.

• Steel and oil prices were expected to change little in 2005; management anticipated no steel supply shortages.

• Backlog reached $93.5M at year-end, up 23% YoY; management linked the increase to stronger customer confidence, while noting uncertainty around highway-funding legislation.