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Corporate Headquarters:
1725 Shepherd Road
Chattanooga, Tennessee 37421 USA
Tel: 423.899.5898 • Fax: 423.899.4456
www.astecindustries.com
S A F E T Y , Q U A L I T Y , P R O D U C T I V I T Y
2 017 A N N U A L R E P O R T
26620_Astec_2017AnnReport_Cvr.indd 1
2/27/18 6:23 AM
FINANCIAL OVERVIEW
(in thousands, except as noted*)
OPERATING RESULTS
Net sales
Net income attributable to controlling interest
2017
2016
2015
2014
2013
$1,184,739
$1,147,431
$983,157
$975,595
$932,998
37,795
$55,159
$32,797
$34,458
$39,042
FINANCIAL POSITION
Total assets
Working capital
Equity
PER COMMON SHARE*
Net income attributable to controlling interest
Basic
Diluted
Book value per common share at year end
OTHER DATA
Weighted average number of common
shares outstanding
Basic
Diluted
Associates*
$889,579
$843,601
$777,353
$802,265
$749,291
423,823
686,765
407,972
648,841
399,785
609,858
388,862
596,152
385,680
577,311
$1.64
1.63
29.58
$2.40
2.38
27.99
$ 1.43
1.42
26.30
$1.51
1.49
25.62
$1.72
1.69
24.85
23,025
23,184
4,437
22,992
23,142
4,218
22,934
23,120
3,740
22,819
23,105
3,952
22,749
23,081
3,708
CONTENTS
Our Industry-Leading Footprint . . . . . . . . . 1
Letter to Shareholders . . . . . . . . . . . . . . . 2 New Technologies . . . . . . . . . . . . . . . . . 6
INFRASTRUCTURE GROUP
AGGREGATE & MINING GROUP
ENERGY GROUP
Astec and Dillman Equipment . . . . . . . . . 12
Astec do Brasil . . . . . . . . . . . . . . . . . . . 22
CEI Enterprises . . . . . . . . . . . . . . . . . . . 38
Astec Australia . . . . . . . . . . . . . . . . . . . 14
Astec Mobile Screens . . . . . . . . . . . . . . 24
GEFCO . . . . . . . . . . . . . . . . . . . . . . . . 40
Astec Mobile Machinery . . . . . . . . . . . . 16
Breaker Technology . . . . . . . . . . . . . . . 26
Heatec . . . . . . . . . . . . . . . . . . . . . . . . 42
Carlson Paving Products . . . . . . . . . . . . 18
Johnson Crushers International . . . . . . . . 28
Peterson Pacific Corp. . . . . . . . . . . . . . . 44
Roadtec . . . . . . . . . . . . . . . . . . . . . . . . 20
Kolberg-Pioneer . . . . . . . . . . . . . . . . . . 30
Power Flame . . . . . . . . . . . . . . . . . . . . 46
Osborn Engineered Products . . . . . . . . . 32
RexCon . . . . . . . . . . . . . . . . . . . . . . . . 48
Telestack . . . . . . . . . . . . . . . . . . . . . . . 34
Telsmith . . . . . . . . . . . . . . . . . . . . . . . . 36
CORPORATE INFORMATION
Corporate Executive Officers . . . . . . . . . 50
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OTHER INFORMATION
Transfer Agent
Computershare
800.617.6437
Stock Exchange
250 Royall Street, Canton, MA 02021
www.computershare.com/investor
NASDAQ, National Market—ASTE
Auditors
KPMG LLP, Knoxville, TN
General Counsel and Litigation
Chambliss, Bahner & Stophel, P.C.,
Chattanooga, TN
Securities Counsel
Alston & Bird LLP, Atlanta, GA
Investor Relations
Stephen C. Anderson,
423.553.5934
Corporate Office
Astec Industries, Inc.
1725 Shepherd Road
Chattanooga, TN 37421
Ph 423.899.5898 Fax 423.899.4456
www.astecindustries.com
The form 10-K, as filed with the
Securities and Exchange Commission,
may be obtained at no cost by any
shareholder upon written request to
Astec Industries, Inc., Attention
Investor Relations.
The Company’s Code of Conduct is
posted at www.astecindustries.com.
The Annual Meeting will be held on
April 26, 2018, at 10:00 A.M. EST in
the Training Center of Astec, Inc.
located at 4101 Jerome Avenue,
Chattanooga, TN 37407.
26620_Astec_2017AnnReport_Cvr.indd 2
2/27/18 6:23 AM
OUR INDUSTRY-LEADING
FOOTPRINT
The companies of Astec Industries, Inc.
manufacture more than 240 products
for a global customer base operating in
the sectors of infrastructure, aggregates,
mining, and energy.
NORTH AMERICA
5
10
18
11
19
16
15
9
14
20
8
4
1
17
6
SOUTH AMERICA
EUROPE
AFRICA
AUSTRALIA
7
13
3
2
12
I NF RAS TRUCTURE GROUP
AGGREGATE & MINING GROUP
ENERGY GROUP
1 Astec
2 Astec Australia
3 Astec Mobile Machinery
4 Dillman Equipment
5 Carlson Paving Products
6 Roadtec
7 Astec do Brasil
8 Astec Mobile Screens
9 Breaker Technology
15 CEI Enterprises
16 GEFCO
17 Heatec
10 Johnson Crushers International
18 Peterson Pacific Corp.
11 Kolberg-Pioneer
12 Osborn Engineered Products
19 Power Flame
20 RexCon
13 Telestack
14 Telsmith
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT
1
SAFETY, QUALITY, PRODUCTIVITY
“ Safety, Quality, Productivity. These
three words are our focus and we are
excited to execute on the bottom line
in a better way in 2018.”
Benjamin G. Brock,
President and Chief Executive Officer
FELLOW SHAREHOLDERS:
The theme of our annual report
this year is, “Safety, Quality,
Productivity”. These three words
position to improve on a 2017
was front and center in 2017
that presented transitional
through our announced charges
challenges along with
to modify the equipment to
encouraging developments.
reach full production capacities
are very important to all of us.
Our two main transitional
First, we want to improve on our
challenges in 2017 were our
at the plants we have delivered
to customers.
strong safety incident rate, a rate
release of thirty-three new
Transitional challenges that come
that is half the industry average,
products at ConExpo in March
with new products are not new to
and push toward the ultimate
and getting two large wood
Astec Industries, but the number
goal of zero injuries. Second, we
pellet production plants up to full
of new products introduced in
work every day to protect our
heritage of providing the best
quality products and service
available in the industries we
serve. Finally, we have the
opportunity to improve our
operating capacity for our
2017 was extraordinary.
customers. While the ConExpo
Entering 2018, we are focused
show was one of our best shows
on improving our day-to-day
ever, we experienced the normal,
operations as a whole,
lower gross margins associated
having returned our research
with the new products as they
and development to more
in-house productivity, not only in
were sold and built for the first
typical levels.
manufacturing, but in all areas
few times in our facilities. Wood
of our company. Our efforts in
pellet plants have great potential
the three focus areas mentioned
for us in the long-run, however
above will help put us in
the investment to get to success
Someone said to me recently that
with the higher volume of
research and development and
2
the pellet plant charges behind
That being said, 2018 for us
on the way as the federal
us, we are back to being the
will be a year of focusing on
government in Washington D.C.
Astec Industries everyone knew
improving internally. Safety,
begins to consider the President’s
before. To me, that really
Quality, Productivity - these three
$1.5 trillion infrastructure
depends on when someone got
words are our focus and we are
spending proposal. Time will tell,
to know us. We started in 1972
excited to execute on the bottom
but we will be ready for the
as a single company focused on
line in a better way in 2018.
opportunities that come with a
providing a single product, hot
One of the specific things we
potential infrastructure bill.
mix asphalt production plants, to
have done to improve is hire a
customers in the United States.
new Vice President of Global
Today, we are a company made
Operational Excellence. This
up of 20 subsidiaries focused on
person has a successful track
providing over 240 products to
record of implementing
customers around the world in the
continuous improvement systems
infrastructure, aggregate, mining
and will guide our subsidiaries
and energy industries.
in this effort.
Our wood pellet plant business is
in our Infrastructure Group. We
will not take another wood pellet
plant order until we have met
production requirements at the
two plants already delivered. Our
plants are well known in the
industry now, so we are in
Another person commented to me
Order activity is strong and we
position to supply plants for the
that 2017 was a down year for
have a nice backlog as a result
projected demand increase in the
Astec Industries because our net
of a good economy in many
industry. We believe we will earn
income was not in line with our
record revenue. Again, it
depends on your perspective.
While it was not an excellent or
very good year on the bottom
line, considering the transitional
issues referenced above, it was a
good year. Many companies
would not have been as successful
as we have been given the
challenges we faced in 2017.
We performed well during the
financial crisis years and when
things got better we quickly
acted to advance plans for the
future which in turn brought on
the transitional challenges we
faced. We are now well
positioned for the long-run.
I am proud of our team’s effort
in 2017 bearing in mind the
challenges we worked through.
Order activity is strong and we have a nice
backlog as a result of a good economy in many
countries around the world.
countries around the world. We
our next pellet plant order for
are also in the middle of a long-
delivery in 2019 after we meet
term federal highway bill in the
production levels at the two
United States. Reflected by our
existing plants.
best third quarter (excluding
pellets) since 2008, our core
businesses performed well in
2017, and we have an
opportunity to perform even
better in 2018.
Our main headwinds from the
last few years have been
subsiding. The headwinds have
been low oil and natural gas
prices (stabilized), the global
mining slowdown (improving),
In addition to the current long-
and a strong United States dollar
term highway bill that expires in
(weakening). Our energy group
the year 2020, there could be
is in a better place with the
more funding for infrastructure
stabilized oil prices, we have
3
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT seen an increase in quotations
As a reminder, our corporate
serve. The year 2017 presented
to mining companies and our
management team and subsidiary
challenges to our efforts but it
international sales improved
presidents took time in September
did not put our fire out. Our
in 2017.
2015 and together developed a
goals remain achievable with
With regards to international
sales, we have been purposeful
in our efforts over the years to
improve and maintain our sales
and service around the globe
and our export sales were up this
year. We are not sitting still on
our international gains. We
recently hired a new group
managing director of
international region offices.
This person will lead our efforts
five-year strategic plan. We
focused effort.
reviewed our progress as a team
in August 2017 and came away
from that meeting with a renewed
We have been fortunate to
remain debt-free with cash on
hand. Our plan is to use this
We also plan to use our strong balance sheet and
recent United States tax plan changes to invest in
operational excellence efforts as we spread best
management practices among our subsidiaries.
to be even closer to customers
focus on our goals to continually
position for acquiring companies
globally through regional offices
improve and grow our company
we feel are a fit with our family
for sales, service and parts for
the majority of our subsidiaries.
This will position us in an even
better way for the future in
international markets.
deliberately and strategically
through new product releases
and market-share gains; while
of companies. We have a goal of
making one or two acquisitions
during 2018. However, we do not
adding new subsidiaries through
see acquisitions as a must-do
acquisitions in the industries we
item. We will only add to our
NET SALES (IN MILLIONS)
$1,184.7
$1,147.4
$983.2
$975.6
$933.0
$936.3
$908.6
$737.1
$698.1
$891.3
0
200
400
600
800
1,000
1,200
17
16
15
14
13
12
11
10
09
08
4
family if we believe there is a
software technology upgrades
sites during the year, it always is
strategic fit with our business.
and other opportunities as they
clear to me how truly blessed we
arise. As always, any investment
are with great people at all levels
will only be made after adequate
of our company.
To that end, we did announce
the addition of RexCon to our
family of companies during 2017.
RexCon is a leader in concrete
return on investment analysis has
been completed.
production equipment with
In closing, 2017 was a record
great market shares in every
year for revenues with net income
segment they serve. We are
reflective of transitional
pleased to have the RexCon
challenges. At the end of 2017
team with us and look forward
Rick Dorris, our chief operating
We look forward to success in
2018 – and beyond!
Thank you for taking the time to
read this letter and thank you for
your support.
to participating in their future
officer, and I marked the fourth
Sincerely,
growth and success.
year of being in our current roles.
We also plan to use our strong
balance sheet and recent United
States tax plan changes to invest
in operational excellence efforts
as we spread best management
practices among our subsidiaries.
These investments could include,
but not be limited to, state-of-the-
art equipment in our facilities,
As we enter our fifth year of
service we are optimistic about
Astec Industries’ position going in
to 2018, and we are focused on
“safety, quality and productivity”.
We have a great team of
corporate and subsidiary officers,
and in my travels to our
subsidiaries and customer job
Benjamin G. Brock
President and Chief Executive Officer
Astec Industries, Inc.
OPERATING PROFIT (IN PERCENT)
7.60%
4.69%
5.08%
4.39%
5.30%
5.46%
5.97%
6.43%
6.86%
0
2
4
6
8
10
$8.91%
17
16
15
14
13
12
11
10
09
08
5
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT
NEW TECHNOLOGIES
Astec Industries, Inc. is committed to bringing innovative products and solutions
to market through nurturing the inventive spirit of our employees and listening to
the needs and wants of customers.
CARLSON PAVING PRODUCTS
ASTEC, INC.
CP130 Asphalt Paver
Silobot™ Inspection Device
Introduced at ConExpo in March, 2017, the CP130
represents a new class of commercial paver. Combining
highway-class material throughput, production, and wear
components in a compact, transportable platform, the
CP130 excels across a wide array of job-sites, including
commercial, municipal, and county roadwork. The paver
features a 130hp Cummins Tier IV Final engine, class-
exclusive armrest operator controls, and Carlson’s newest
8’-15’ screed in the EZCSS, based on the company’s
larger highway-class platforms. The CP130 is available
in an export-compliant version for overseas markets.
At ConExpo 2017, Astec introduced the Silobot
inspection service for testing silo wall thickness. Astec
Silobot inspection service uses an innovative, remotely
controlled robot that analyzes, evaluates and inspects
asphalt silos for wear.
The chief benefit of the Silobot inspection service is
equipment inspection without entering the silo. It
allows for safer and more efficient inspection. One
would only need to enter the silo to perform any
identified maintenance.
6
ASTEC, INC.
JOHNSON CRUSHERS INTERNATIONAL
Generation 3 Warm Mix System
Kodiak® Cone Improvements
Astec continues to evolve the revolutionary warm mix
system, first introduced in 2007. The latest generation of
the Astec warm mix system debuted at ConExpo 2017.
The new design simplifies production of warm mix asphalt,
achieving better foaming with less maintenance. The
benefits of warm mix asphalt, such as reduced energy
consumption, lowered emissions and elimination of visible
smoke, are well-known in the asphalt paving industry.
The Astec warm mix system achieves a lower temperature
at a lower cost by eliminating the need for additives or
special asphalt cement. Instead, the Astec warm mix system
injects a small amount of water into the liquid AC to create
microscopic steam bubbles. These small bubbles reduce the
viscosity of the liquid AC, allowing the mix to be worked
at lower temperatures.
JCI has continued to improve the operation and ease
of maintenance on the Kodiak Plus line of premier
roller-bearing cone crushers. The Kodiak Control System
has been fully implemented into all new cone crushers.
This new, innovative technology allows producers to
monitor crusher performance and routine maintenance on
an easy-to-use Human Machine Interface. Updates to the
bowl float sensor and the addition of a labyrinth contact
seal have continued to improve bearing life and reduce
operating costs.
7
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT NEW TECHNOLOGIES
Within our culture of innovation, ideas are shared among employees and with
customers. Creating these opportunities to share and grow ideas, creates an
environment where innovation thrives.
GEFCO
GEFCO DP 3000
ASTEC MOBILE SCREENS
Electric ProSizer® 3600
Astec Mobile Screens has expanded its ProSizer line to
include an electric version of the ProSizer 3600. The
launch of the electric version of the unit will give producers
the flexibility to better control their operating costs and can
allow for smoother operation in dirty environments, such
as recycled asphalt pavement processing. The ProSizer
3600 is a single-load crushing plant for processing virgin
aggregate and recycled materials.
The GEFCO DP 3000 is a high-pressure, high-volume,
double-fluid pumper for cleaning and stimulating natural
gas or petroleum wells. The unit can use water or mud
mixes in its treatments.
The double-fluid pumper utilizes two 1,300-hp, quintuplex
pumps driven by a pair of Cummins QST30 turbocharged
diesel engines producing 1,500 hp each — 3,000 hp
total. The Cummins engines drive the pumps through
Allison 9000 series transmissions coupled to
Namco NM-203 Series 2-speed gearboxes.
The pumps can operate in tandem or independently to
ensure the ability to pump in the event of component
failure or while conducting routine maintenance. The unit is
capable of a maximum discharge pressure of 15,000 psi.
8
KOLBERG-PIONEER
Drop-In Carbides
KOLBERG-PIONEER
Containerized Units
Drop-In carbides are now available for all models of
vertical shaft impactors (VSI) from KPI. The new industry-
standard drop-in carbide wear parts will significantly
decrease downtime required for service and maintenance.
The new carbides cut replacement time to as little as 20%
of other solutions. The drop-in carbides can be retrofitted
into existing VSI crushers from KPI.
KPI has continued to expand its capabilities to offer
world-class equipment in convenient containerized
configurations. The SuperStacker® telescoping stacker is
now offered as a containerized unit for its 150-foot,
36-inch belt model. Fines recovery plants are also
available for containerization. They are the ideal solution
for KPI to more efficiently deliver equipment to producers.
9
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT NEW TECHNOLOGIES
Ultimately, our goal is to supply our customers with state-of-the-art
equipment that enables them to operate profitably.
ROADTEC
MTV-1105
PETERSON
2700D Horizontal Grinder
Peterson’s all-new 2700D is the smallest, and lightest
horizontal grinder in our product line. With up to
765hp, the 2700D packs impressive performance in
a small package.
In 2017, Roadtec designed the rubber-tracked Material
Transfer Vehicle, the MTV-1105. As an example of
Roadtec’s customer-focused innovations, the MTV-1105 was
born out of customer feedback. By offering the MTV-1100
and the MTV-1105, Roadtec gives customers the choice of
tracks or tires on their MTV.
With the addition of the MTV-1105, operators and crews
have options for any application. Jobs that require extra
traction and flotation, such as steep grades and sandy
environments, are ideal for the MTV-1105. Like the
MTV-1100, the MTV-1105 includes the option for
Guardian® telematics.
10
REXCON
Lightning Batching System
REXCON
Mag Meter
RexCon released their very own water meter – the RexCon
Mag Meter. All meters are calibrated at the factory. With
the parameters stored in the meter, on-site calibration is
completely eliminated.
The meter features static ring technology and an ebonite
lined body which eliminates false or ghost signals. The meter
also has a removable head to ensure the safety of the meter
during transport. The circuitry of the meter is separated
from the meter body. This isolation reduces the chances of
condensation on important electrical components.
RexCon introduced the new Lightning batching system.
This new control builds on the already very successful
RexCon Control and Communication Center (RC3).
The Lightning system, which is a new state-of-the art
Programmble Logic Controller (PLC), utilizes a high-speed
Ethernet communication port for an extremely fast batching
control. The new PLC can be updated with a USB flash
drive that can also be used to back up the system.
The PLC CPU, power supply, I/O relays and associated
I/O modules are all mounted in a DIN rail, allowing
additional modules to be added at the customer site and
replaced quickly. The parts are available around the
world, so replacement parts can be obtained quickly.
Although the batching system is much faster, the control
interface is exactly the same as the RC3 control users have
come to know. No specialized operator training is required
to run the new system if they have used the RC3 in the past.
11
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
INFRASTRUCTURE
ENERGY
PRODUCTS AND SERVICES:
• Portable Asphalt Plants
• Relocatable Asphalt Plants
• Stationary Asphalt Plants
• Soil Remediation Equipment
• Wood Pellet Processing Plants
• Control Systems
REPORTING GROUP: INFRASTRUCTURE
LOCATION:
CHATTANOOGA, TENNESSEE, USA
PRAIRIE DU CHIEN, WISCONSIN, USA
ASTEC AND
DILLMAN EQUIPMENT
Astec offers a complete line of portable, relocatable, and stationary
asphalt plant equipment produced under the Astec and the Dillman
brands. In addition, Astec also manufactures soil remediation equipment
and wood pellet processing plants. In 2017, Astec enhanced its position
as a global leader in design, innovation, manufacturing and service.
In 2017, sales for asphalt plants and related equipment were brisk with
Astec seeing one of its strongest years for asphalt equipment sales. Astec
continued to see industry acceptance of the Double Barrel® XHR drum
dryer with an external mixer as a premium solution for utilizing a high
percentage of RAP. This innovative drum design allows production of mix
with up to 70% RAP content, producing high-quality mix across the RAP
percentage range.
In March of 2017, participation at ConExpo produced interest in several
improved products, including the debut of a new design for the Astec
warm mix system. The new design is now operating in the field and is
being well received. Also at ConExpo, Astec unveiled a new Silobot
inspection service.
Astec initiated design upgrades to its customers’ Georgia and Arkansas
wood pellet plants. The upgrades were driven by the need for both
facilities to achieve full production rates. Astec remains very confident in
the near-term and long-term outlook for the wood pellet business and
believes it has been a good investment for the company.
Astec is optimistic about future prospects and plans to continue to
position itself to take full advantage of opportunities both domestically
and abroad. Astec continues to grow and maintain customer loyalty
through innovative equipment designs, industry-leading customer service
and state-of-the-art technical education.
12
INFRASTRUCTURE
ASTEC AND
DILLMAN EQUIPMENT
PLANT PROCESS CONTROL SYSTEMS
DILLMAN UNIDRUM® ASPHALT PLANT
PHOENIX® TALON II™ BURNER
ASTEC offers a complete
line of portable, relocatable
and stationary asphalt plant
equipment produced under
the ASTEC and the
DILLMAN brands.
DOUBLE BARREL XHR ASPHALT PLANT
GENERATION 3 WARM MIX SYSTEM
WOOD PELLET MANUFACTURING PLANT
PORTABLE SIX PACK® ASPHALT PLANT WITH SEB
13
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
INFRASTRUCTURE
ASTEC AUSTRALIA
AGGREGATE AND MINING
Exclusively representing Astec Industries family of companies, Astec
ENERGY
PRODUCTS AND SERVICES:
• Milling Machines
• Cold In-Place Asphalt Recyclers
• Commercial-Class Asphalt Pavers
• Highway-Class Asphalt Pavers
• Material Transfer Vehicles
• Self-Propelled Brooms
• Aggregate Processing Equipment
REPORTING GROUP: INFRASTRUCTURE
LOCATION:
ACACIA RIDGE, QUEENSLAND, AUSTRALIA
Australia continues to grow business internationally for Astec’s
Infrastructure, Aggregate and Mining and Energy Groups.
INFRASTRUCTURE GROUP
2017 was a record sales year in Australia for Roadtec’s paving products,
mainly the RP170EX and SB2500. The first new Carlson EZR2 heavy
highway screed was promoted and sold at the Asphalt Association’s
bi-annual conference and the first Astec Double Barrel X style plant was
sold into Australia. Committed to providing customers with the best
service and support in the industries we serve, the company also
recorded its strongest ever sales in after-market products.
AGGREGATE AND MINING GROUP
For the Aggregate and Mining Group, we had a strong year in materials
processing products for JCI and AMS. The promotion of Astec Mobile
Screens high-frequency products yielded sales in 2017, providing us with
high expectations for 2018, particularly for the recycling industry and the
quarry industry which are our focus.
ENERGY GROUP
Heatec’s development of a new liquid asphalt tank to meet the specific
needs of the Australian market proved successful with multiple sales in
2017. With multiple orders in hand for 2018 the Australian tank market is
a key focus for our Energy Group for the year(s) ahead.
In 2018 we expect continued growth. With most of our aggregate sales
occurring in the Southern Region, we will open a sales and service
workshop in Melbourne to support our growing customer base there.
New products planned for promotion and introduction to the market are
Roadtec’s and Carlson’s narrow width 8’ pavers, Astec, Inc.’s Double
Barrel XHR plant and Johnson Crushers International’s modular crushing
and screening plant.
14
INFRASTRUCTURE
GT205 MULTI FREQUENCY NRL
AAPA CONFERENCE BOOTH
SB-2500EX SHUTTLE BUGGY® MTV
Exclusively representing Astec
Industries family of companies,
Astec Australia continues to
grow business internationally
for Astec’s Infrastructure,
Aggregate and Mining
and Energy Groups.
PORTABLE DOUBLE BARREL ASPHALT PLANT WITH SEB AND HEATEC STORAGE TANK
HEATEC LIQUID ASPHALT TANK FARM
RX-600E/EX COLD PLANER
15
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT MOBILE MACHINERY GmbH
INDUSTRIES SERVED:
INFRASTRUCTURE
ENERGY
PRODUCTS AND SERVICES:
• Material Transfer Vehicles
• Asphalt Pavers—Asphalt Screeds
• Milling Machines
• Cold In-Place Recyclers
• Front Mounted Brooms
• Road Wideners
• Wood Processing Equipment
ASTEC
MOBILE MACHINERY
In addition to representing Roadtec and Peterson Pacific products in
Europe, Astec Mobile Machinery (AMM) also supplies road wideners
for hard shoulder work, maintenance and repairs of roads, farm roads
and road widening. AMM also specializes in the technical reworking
and resale of its used machines.
Located in Hamelin, Germany, AMM has sold equipment to customers
all over the world.
REPORTING GROUP: INFRASTRUCTURE
In the future, AMM will work to represent additional Astec Industries’
LOCATION: HAMELIN, GERMANY
subsidiaries as opportunities arise.
16
INFRASTRUCTURE
ASTEC
MOBILE MACHINERY
BF-400 ROAD WIDENER
BF-400 ROAD WIDENER
AMM supplies road
wideners for hard
shoulder work,
maintenance and
repairs of roads,
farm roads and
road widening.
RX-600E ASPHALT MILLING MACHINE
SB-2500E SHUTTLE BUGGY® MTV
SB-2500EX SHUTTLE BUGGY® MTV
17
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Highway-Class Asphalt Screeds
• Commercial-Class Asphalt Pavers
• Mobile Equipment Lighting
• Asphalt Screed Attachments
REPORTING GROUP: INFRASTRUCTURE
LOCATION: TACOMA, WASHINGTON, USA
CARLSON
PAVING PRODUCTS
Carlson Paving Products has grown to become the asphalt paving
industry’s leader in highway-class asphalt screeds, commercial-class
paver platforms and attachment innovations that enhance the safety
and longevity of roadways around the globe.
Solidifying itself as the preeminent leader among asphalt screed
manufacturers, Carlson produces seven highway-class screed
platforms in front-mount, rear-mount, and fixed width variations.
With their ability to mount to all North American tractors built by the
major paver manufacturers, as well as the ability to retrofit to nearly
all previous models, Carlson’s line of the EZIII, EZIV, EZV and EZR2
screeds remain the most demanded platforms by highway-class
contractors on the market today.
In 2017, Carlson achieved a milestone with its commercial paver
platforms with the introduction of three all-new models: the CP85,
CP100 II and CP130. Now with a full line of commercial pavers,
ranging from the economical CP75 II to the class-redefining CP130,
Carlson’s platforms have emerged as the contractor’s choice for
performance, machine life cycle, and mat quality. With a steadily
growing network of leading distributors, Carlson is poised to grow
its market-share while targeting new opportunities with all-new
export-oriented platforms for global markets.
With its continuously growing product line and steadfast dedication
to the customer, Carlson enters 2018 poised to take advantage of
emerging opportunities and deliver innovative solutions for the
commercial and highway-class contractor in North America and
around the globe.
18
INFRASTRUCTURE
CARLSON
PAVING PRODUCTS
CP85 PAVER
CP100 II PAVER
LED BLADE LIGHT
Carlson Paving Products
has grown to become
the asphalt paving
industry’s leader in
highway-class asphalt
screeds, commercial-class
paver platforms and
attachment innovations.
CP75 II PAVER
EZR2: REAR-MOUNT SCREED
CP130 PAVER
EZV: FRONT-MOUNT SCREED
19
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Milling Machines
• Cold In-Place Asphalt Recyclers
• Commercial Class Asphalt Pavers
• Material Transfer Vehicles
• Self-Propelled Brooms
• Soil Stabilizers
ROADTEC
Roadtec was founded 36 years ago as a manufacturer of asphalt pavers.
Today, Roadtec continues to lead the industry in asphalt pavers, and is
an innovator in cold planers, soil stabilizers, brooms and material
transfer vehicles.
In 2017, Roadtec maximized areas of growth and opportunity by
releasing new products, expanding wear parts lines, growing the dealer
REPORTING GROUP: INFRASTRUCTURE
network and refining telematics innovations.
LOCATION: CHATTANOOGA, TENNESSEE, USA
The product line grew with the addition of the RX-600eLR Cold Planer
and the MTV-1105 Material Transfer Vehicle. The RX-600eLR’s dual flush
cut capability gives operators an advantage when dealing with barrier
walls and other obstructions. The MTV-1105’s operator station provides
exceptional visibility from the dump hopper to the paver.
Roadtec continues to expand the competitive wear parts line and
promotes products to achieve record sales. The company also attracts
competitor market share with customer focused service and support.
The Roadtec Dealer Network, initiated in 2016, saw exponential growth
in 2017. As a result Roadtec experienced increased sales, while
customers benefited from local service. This strategy continues to build
trust and reinforce brand loyalty.
The industry-leading Guardian™ Telematics System continues to provide
customers with best-in-class fleet management and real time reporting.
As the system continues to develop, Roadtec is able to gather data
and proactively support customers in the field, decreasing downtime
and costs.
2018 will be a year of working to exceed customer expectations.
Roadtec looks forward to continuing to lead the industry by providing
unparalleled value, original product development and best-in-class
service to customers worldwide.
20
INFRASTRUCTURE
SB-1500E SHUTTLE BUGGY® MTV WORKING WITH RP-195E PAVER
MTV-1105E MATERIAL TRANSFER VEHICLE
In 2017, Roadtec maximized
areas of growth and
opportunity by releasing new
products, expanding wear
parts lines, growing the dealer
network and refining
telematics innovations.
RX-600ELR COLD PLANER
SB-2500E SHUTTLE BUGGY® MTV WORKING WITH RP-190E PAVER
SX-8 SOIL STABILIZER
RP-170E RUBBER TIRE PAVER
21
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
ASTEC DO BRASIL
INFRASTRUCTURE
Astec do Brasil is Astec’s only manufacturing facility in South America
PRODUCTS AND SERVICES:
• Mobile Screening Plants
• Portable Screening Plants
• Stationary Screen Structures
• High-Frequency Screens
• Crushing and Vibrating Equipment
• Asphalt Production Equipment
producing a complete line of crushers, vibrating screens and portable,
relocatable and stationary asphalt plants. In addition, Astec do Brasil
markets and supports Astec’s subsidiaries’ equipment such as, track-
mounted equipment, material transfer vehicles and scalers.
With the delivery and startup of complete crushing plants already
manufactured in the new facility, Astec do Brasil is poised to become a
significant supplier to the infrastructure and aggregate/mining segment
REPORTING GROUP: AGGREGATE AND MINING
of the market. The goal is to become the leader in the Brazilian market,
LOCATION:
VESPASIANO, MINAS GERAIS, BRASIL
while expanding throughout the Mercosur market. Shipment of
equipment has already occurred to Argentina and Colombia.
Astec do Brasil continues to increase its line of products, with a focus
on safety, quality, productivity and customer satisfaction. In 2017,
they introduced an Astec Mobile Screens Vari-Vibe® Screen to the
Brazilian market. This Vari-Vibe Screen is manufactured in Brasil and
has already been shipped to customers.
Wear parts sales are becoming increasingly important to the market.
Astec do Brasil continues to put its brand in contact with sales
representatives, users and customers with competitive brands to
continue increasing market penetration.
Overall, the response from current customers regarding our equipment
has been exceptional, including Telsmith crushers and screens, which
are reaching and even exceeding expected performance. This response
supports increasing growth for Astec throughout Brazil.
22
AGGREGATE AND MINING
44SBS CONE CRUSHER
VARI-VIBE SCREEN
SPARE AND WEAR PARTS
Astec do Brasil continues
to increase its line of
products, with a focus
on safety, quality,
productivity and
customer satisfaction.
COMPLETE CRUSHING PLANT WITH H3244 HYDRA JAW CRUSHER, VGF 48X16 FEEDER AND 5’ X 14’ DD VIBRO KING SCREEN
8’ X 24’ TD VIBRO KING SCREEN
CMH3244 PRIMARY PORTABLE CRUSHING PLANT
23
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
INFRASTRUCTURE
ENERGY
PRODUCTS AND SERVICES:
• Track-Mounted Screening Plants
• Stationary Screen Structures
• Portable Screening Plants
• High-Frequency and Multi-Frequency Screens
• ProSizer® Plants
REPORTING GROUP: AGGREGATE AND MINING
LOCATION: STERLING, ILLINOIS, USA
ASTEC
MOBILE SCREENS
Astec Mobile Screens is recognized as a global leader in screening
solutions. Marketed together with the Kolberg-Pioneer (KPI) and
Johnson Crushers International (JCI) brands, the company’s products
include mobile screening plants, portable and stationary screen
structures and high-frequency screens for quarry, recycle, sand and
gravel, industrial and other material processing industries.
In 2017, the GT205 Multi-Frequency Screen saw great adoption as
producers were eager to try the new technology. The unit is ideal for
the toughest applications where conventional incline screens are
limited. Astec Mobile Screens also expanded the multi-frequency
technology into its popular PTSC line, a portable screening structure.
Astec Mobile Screens has also expanded its ProSizer® line to include
an electric version of the ProSizer® 3600. As an alternative to diesel
power, the launch of the electric version of the unit will give producers
the flexibility to better control their operating costs and can allow for
smoother operation in dirty environments, such as recycled asphalt
pavement processing. The ProSizer® 3600 is a single-load crushing
plant for processing virgin aggregate and recycled materials.
In addition to their OEM parts, Astec Mobile Screens continues to
develop its PDQ parts line for competitive products. Astec Mobile
Screens now offers parts on nearly all lines of competitive mobile
screening lines and has developed a truck kit to showcase a portable
package of the PDQ parts line.
24
AGGREGATE AND MINING
PROSIZER® 4200 PORTABLE PLANT
HIGH FREQUENCY STATIONARY SCREEN STRUCTURE
GT205 MULTI-FREQUENCY MOBILE SCREEN PLANT
Astec Mobile
Screens, Inc. is
recognized as
a global leader in
screening solutions.
PROSIZER® 3100 PORTABLE PLANT
GT205 MULTI-FREQUENCY MOBILE SCREEN PLANT
PROSIZER® 3600 PORTABLE PLANT
25
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
BREAKER TECHNOLOGY
INFRASTRUCTURE
Breaker Technology (BTI) is the rock-breaking expert in the mining and
PRODUCTS AND SERVICES:
• Mine, Quarry and Construction Equipment
• Stationary Rockbreaker Systems
• Hydraulic Breakers
• Underground Mobile Rockbreakers
• Underground Mechanized Scalers
• Underground Utility Vehicles
quarrying industries. For nearly 60 years, BTI has been helping
companies power their productivity and break into profitability.
BTI is known worldwide for exceptional rockbreaker systems. It
offers 12 different model series, with over 300 boom-to-breaker
combinations, for breaking oversize at primary crushers, grizzlies,
draw points and stopes. All rockbreaker systems are custom-fitted to
• Demolition and Construction Attachments
the mine or quarry application for maximum endurance.
REPORTING GROUP: AGGREGATE AND MINING
Manufacturing and distributing a wide-range of underground mining
LOCATION: THORNBURY, ONTARIO, CANADA
RIVERSIDE, CALIFORNIA, USA
SOLON, OHIO, USA
vehicles has always been one of the core products in BTl’s product
line. Its latest design, the ScaleBOSS 3D/3DE scaler, is a cutting-edge
machine for a new generation of underground mining. BTl’s Mine
Runner, a purpose-built utility vehicle, recently received an overhaul to
increase its payload capacity to 4,000 to 6,000 pounds and a new
extended wheel base model was added to the lineup.
BTI also distributes a range of excavator attachments, which includes
hydraulic rockbreakers, demolition attachments and compactors.
The attachment line is known to be some of the most efficient
attachments in North America.
Situated along the Southern Georgian Bay in Thornbury, Ontario,
Canada, BTI has been innovating custom sales and dealer network
engineering solutions since 1958. Its highly-qualified sales and dealer
network supplies and services mining and aggregate equipment
worldwide. BTI offers a depth of engineering experience, a dedicated
and professional service and support network and a commitment to
superior customer service, remaining a trusted brand in today’s
aggregate and mining industries.
26
AGGREGATE AND MINING
MRHT20 ROCKBREAKER SYSTEM FITTED WITH A BXR65 HYDRAULIC BREAKER
SCALEBOSS 3DE SCALER
For nearly 60 years, BTI has
been helping companies
power their productivity and
break into profitability.
BXR85 HYDRAULIC ROCKBREAKER
EAGLE SHEAR II
MINE RUNNER UTILITY VEHICLE
27
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
INFRASTRUCTURE
ENERGY
PRODUCTS AND SERVICES:
• Crushing Equipment
• Screening Equipment
• Track-Mounted Equipment
• Portable Equipment
• Stationary Equipment
REPORTING GROUP: AGGREGATE AND MINING
LOCATION: EUGENE, OREGON, USA
JOHNSON CRUSHERS
INTERNATIONAL
Johnson Crushers International (JCI) is a global leader in engineering
and manufacturing full lines of cone crushers, horizontal and incline
vibrating screens and track-mounted, portable and stationary
crushing and screening plants. Marketed together with the Kolberg-
Pioneer (KPI) and Astec Mobile Screens brands, JCI is committed to
meeting consumer demand.
JCI has continued to improve the operation and ease of maintenance
on the Kodiak® Plus line of premier roller-bearing cone crushers. The
Kodiak® Control System (KCS) has been fully implemented into all
new cone crushers. This new, innovative technology allows producers
to monitor crusher performance and routine maintenance on an easy-
to-use interface. Updates to the bowl float sensor and the addition of
a labyrinth contact seal have continued to improve bearing life and
reduce operating costs.
The modular plants, launched in 2016, have shown growth as JCI has
continued to offer more options for jaw and impact crushers, as well
as horizontal and incline screens on its simple modular structures.
They are the ideal solution for producers looking for a simplified
equipment selection process with industry-leading technology and
low cost transportation.
JCI continues to develop its PDQ parts line for competitive products,
as well as grow support for its OEM line. In 2017, JCI has worked
closely with its distribution network to more efficiently provide crusher
castings to the market through a commitment to stocking programs.
28
AGGREGATE AND MINING
Manufacturing full lines of
cone crushers, horizontal and
incline vibrating screens and
track-mounted, portable and
stationary crushing and
screening plants.
KODIAK® PLUS K200+ MOBILE CONE CRUSHER PLANT
AGGREGATE SYSTEM
KODIAK® PLUS K400+ CONE CRUSHER
DUAL HORIZONTAL PORTABLE SCREEN PLANT
KODIAK® PLUS K500+ IN AND OUT PORTABLE PLANT
COMBO™ SCREEN
29
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
KOLBERG-PIONEER
INFRASTRUCTURE
For more than 75 years, Kolberg-Pioneer (KPI) has led the marketplace
ENERGY
PRODUCTS AND SERVICES:
• Material Handling Equipment
• Crushing Equipment
• Screening Equipment
• Track-Mounted Equipment
• Washing and Classifying Equipment
• Portable Equipment
• Stationary Equipment
REPORTING GROUP: AGGREGATE AND MINING
LOCATION: YANKTON, SOUTH DAKOTA, USA
in designing and manufacturing powerful equipment for the aggregate,
construction, mining, industrial and recycling industries. Marketed together
with the Johnson Crushers International (JCI) and Astec Mobile Screens
brands, KPI manufactures complete lines of crushing, screening, material
handling and washing and classifying equipment in stationary, portable
and mobile configurations.
In 2017, KPI greatly expanded several of its product lines. The crushing
line now features the 3500 Vertical Shaft Impactor (VSI), with a 14-inch
feed tube opening and 350 TPH capacity. All VSI crushers from KPI also
offer new drop-in carbides to greatly reduce downtime for maintenance.
KPI also expanded its SuperStacker® telescoping stacker line with the
launch of the 190-foot model with 36-inch belt, and the containerized
150-foot model with 36-inch belt. The updated, patent-pending Wizard
Touch® automation software provides application flexibility with
configurable stockpiles.
The washing and classifying line from KPI also received an update with its
fines recovery plants being released with containerized options. This will
greatly reduce transportation costs and allow KPI to more efficiently ship
equipment to producers.
In addition to their OEM parts, Kolberg-Pioneer continues to develop its
PDQ parts line for competitive products. In 2017, KPI has grown the
washing and classifying PDQ parts lines with dedicated, internal
engineering resources. KPI now offers an online platform for interactive,
3D parts manuals to more efficiently serve customers and dealers
anywhere and at any time.
30
AGGREGATE AND MINING
WASHING AND CLASSIFYING SYSTEM
GT125 MOBILE JAW PLANT
CS4250 PORTABLE HORIZONTAL SHAFT IMPACTOR PLANT
KPI manufactures complete
lines of crushing, screening,
material handling and
washing and classifying
equipment in stationary,
portable and mobile
configurations.
3500 VSI VERTICAL SHAFT IMPACT CRUSHER
CS3055 PORTABLE JAW PLANT
FT4250 MOBILE HORIZONTAL SHAFT IMPACTOR PLANT
GT440 HYBRID MOBILE HORIZONTAL SHAFT IMPACTOR PLANT
31
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Jaw and Cone Crushers
• Modular Crushing Plants
• Coal Crushers
• Vibrating Screens
• Aggregate Feeders and Conveyors
• Rotary Scrubbers
REPORTING GROUP: AGGREGATE AND MINING
LOCATION: JOHANNESBURG, SOUTH AFRICA
OSBORN
ENGINEERED PRODUCTS
Osborn designs, engineers, manufactures, markets and provides full
after-market support for a well-established range of mineral processing
equipment. Osborn’s primary market is in the mining industry, followed
by the aggregate and metallurgical industries.
Osborn maintains an ISO:9001:2008 certification for quality
assurance and offers the following equipment of its own design:
single- and double-toggle jaw crushers, rotary breakers, roll crushers,
ring crushers, grinding mills, out-of-balance or exciter-driven screens
and feeders and modular “containerized” crusher and screening
systems. Complementing its own designed range of products Osborn
also manufactures, markets and supports, under licenses, products
from Telsmith and KPI.
Osborn has, in the past year, developed a D3 apron feeder, which
will be put into production during April 2018. The D3 will be the
smallest offering within Osborn’s apron feeder range. The expectation
is that the D3 will be well received by the market, which traditionally
had to settle for a D4 apron feeder. In addition, Osborn continues to
introduce innovative upgrades and features to existing products,
through close collaboration with its customer base, with focus on
“safety, quality, and productivity”.
32
AGGREGATE AND MINING
MODULAR 3042 JAW STATION
MODULAR 3648 JAW PLANT
ROTARY COAL BREAKER 3M X 6M
MODULAR 44 GYRASPHERE
Osborn designs, engineers,
manufactures, markets and
provides full after-market support
for a well-established range of
mineral processing equipment.
MODULAR SCREEN STATIONS
MODULAR PRIMARY AND SECONDARY CRUSHERS
33
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
TELESTACK
INFRASTRUCTURE
Telestack’s products include ship loaders, ship unloaders, bulk reception
ENERGY
PRODUCTS AND SERVICES:
• Shiploaders and Unloaders
• Bulk Reception Feeders
• Radial Telescopic Stackers
• Mobile Truck Unloaders
• Track-Mounted Conveyors
• Reclaim Hoppers
• Mobile Truck Unloaders
feeders, radial telescopic stackers, mobile hopper feeders, track
mounted conveyors and reclaim hoppers. Their customized solutions are
used for vessel loading/unloading, stacking, reclaiming and rail
wagon loading/unloading of a range of dry bulk materials. The end
users are some of the largest companies in their chosen industries and
they repeatedly rely on Telestack’s proven record of performance to
develop customized solutions for their bulk-handling facilities. Its
externally audited procedures ISO 14001: 2015 (Environmental
Management), OHSAS 18001:2007 (Health & Safety Management)
and ISO 9001:2025 (Quality Management Systems) ensures Telestack
REPORTING GROUP: AGGREGATE AND MINING
has the processes in place to deliver what the customer ordered on
LOCATION: OMAGH, NORTHERN IRELAND
time, within budget and to the quality standards required by large multi-
national companies. Robust designs and innovative assembly designs
allow Telestack equipment to be easily packed into shipping containers
and quickly assembled on site, anywhere in the world, ensuring
Telestack is competitive globally.
Telestack continues to invest heavily in its facility and has recently
invested $2.5 million in its paint facility, as part of a long term strategy
to future proof its capacity to support the development of an extensive
range of world-class, innovative and quality products. Demonstrating
enviable year-on-year growth, Telestack is globally regarded as one of
the world’s leading manufacturers in the global material handling
industry designing, manufacturing and exporting from its base in
Northern Ireland.
34
AGGREGATE AND MINING
TS1042 & T800-6 STOCKPILING COAL
MH4875 MULCH HOPPER
One of the world’s leading
manufacturers in the global
material handling industry.
HF REVOLUTION LOADING COASTER VESSELS
TITAN 450-4 BULK RECEPTION FEEDER AND TS650 RADIAL TELESCOPIC CONVEYOR
TS 527 RAIL MOUNTED SHIPLOADER
TCL 1031 STOCKPILING AGGREGATE AFTER PRIMARY JAW CRUSHER
35
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
TELSMITH
INFRASTRUCTURE
For over 110 years, Telsmith has provided integrated minerals
PRODUCTS AND SERVICES:
• Cone, Jaw and Impactor Crushers
• Horizontal and Vertical Screens
• Conveyors
• Feeders
• Track and Wheeled Portable Plants
• Modular Plants
processing solutions to the global aggregate and mining industries
through a commitment to ethical business practices, technologically
advanced products, manufacturing excellence and world-class
customer support.
With a focus on improving efficiency, profitability and safety in
customer operations, Telsmith designs and manufactures processing
equipment for the reduction and sizing of raw material. Industries
REPORTING GROUP: AGGREGATE AND MINING
served include precious metals mining, processing of aggregates for
LOCATION: MEQUON, WISCONSIN, USA
construction materials and recycling of recovered materials, including
concrete, asphalt and steel slag. Core products include jaw crushers,
cone crushers, impact crushers, vibrating screens and feeders.
In addition to core components, Telsmith also designs and
manufactures complete processing systems. Telsmith capabilities
include custom solutions ranging from mobile crushing systems to large
modular processing plants that deliver high volume production with
low operating costs.
Offering a full spectrum of services including conceptual design,
engineering and construction management, Telsmith brings a truly
integrated package of solutions to the market place.
In 2017, Telsmith continued the roll-out of the T-Series line of cone
crushers with the introduction and initial sale of the T500 to a
quartzite mine. Telsmith also completed the design, manufacture,
shipment and installation of a containerized, modular crushing
plant located in Thailand. This new design allows Telsmith to
design and build complete plants and ship them competitively
throughout the world.
36
AGGREGATE AND MINING
CONTAINERIZED PLANT
Telsmith designs and
manufactures processing
equipment for the
reduction and sizing
of raw material.
32X58 TEL-TRAX JAW PLANT
8X20 VIBRO-KING TL SCREEN PLANT
T400 PORTABLE CONE CRUSHER
CONTAINERIZED 3450 HYDRA JAW PLANT
37
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
ENERGY
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Asphalt-Rubber Blending Systems
• Hot Oil Heaters
• Asphalt Storage Tanks
• Heavy Fuel Preheaters
• Emission Control Equipment
• Liquid Additive Systems
• Asphalt Storage Tanks
• Concrete Plants
REPORTING GROUP: ENERGY
LOCATION: ALBUQUERQUE, NEW MEXICO, USA
CEI ENTERPRISES
CEI Enterprises designs, produces and services mixing equipment
for both concrete and modified asphalt materials. Products include
concrete batch plants, asphalt-rubber blending systems, hot oil
heaters and storage tanks for liquid asphalt and fuel, as well as
liquid additive systems.
Concrete production equipment includes the Fusion™ concrete
batch plant. The Fusion plant combines established, high-precision,
aggregate blending technology from the asphalt industry with
traditional cement metering from the concrete industry. This
process yields superior quality concrete, while allowing producers
to reduce their material and labor costs. This contributes to higher
profitability for producers, while still letting them offer better
concrete mix to their local markets. In 2017, the CEI Fusion plant
contributed to high-spec, military infrastructure work at Kirtland
AFB in Albuquerque, New Mexico.
In addition to the Fusion plant, CEI also developed a portable
Cement Treated Base (CTB) plant that is currently operating in
San Antonio, Texas.
CEI is an industry leader in asphalt-rubber blending systems.
These systems mix ground rubber from recycled tires with liquid
asphalt to create better, longer-lasting roads. Recent CEI projects
have included multiple asphalt-rubber blending systems delivered
to California and Canada.
38
ENERGY
CEI ENTERPRISES
PORTABLE ASPHALT RUBBER TANK
CEMENT TREATED BASE PLANT
LIQUID ASPHALT STORAGE TANKS
FUSION™ HYBRID-PROCESS READY MIX CONCRETE PLANT
CEI Enterprises of
Albuquerque, NM designs,
produces and services
mixing equipment for both
concrete and modified
asphalt materials.
HEATERS
FUSION™ HYBRID-PROCESS READY MIX CONCRETE PLANT
39
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
ENERGY
PRODUCTS AND SERVICES:
• Fluid Pump Trailers
• Drills for Oil and Gas
• Water Well Drills
• Drills for Mining Core Samples
REPORTING GROUP: ENERGY
LOCATION: ENID, OKLAHOMA, USA
GEFCO
GEFCO is a known leader in the development and manufacture
of reliable and safe drilling equipment and related products.
Our experienced engineers design a diverse line of products
allowing us to serve various industries including: water well,
environmental, groundwater monitoring, construction, mining,
and oil and gas exploration.
In operation for over 80 years, GEFCO is well known in the
industry for reliability and exceptional customer service.
GEFCO’s 260,000 sq. ft. state-of-the-art manufacturing facility
includes a fully-integrated machine shop, fabrication and weld
shop, assembly, painting and testing facility.
As a global company, with products delivered to over 100
countries, GEFCO is focused on remaining competitive by
researching and developing equipment that can be adapted for
various terrains, climates and demanding conditions.
We are committed to producing high-quality products, exceptional
customer support and outstanding value. It is our priority to
exceed our customers’ requirements and comply with our industry
standards by promoting a continuous improvement culture for our
products, processes, and services.
40
ENERGY
GEFCO
GEFCO DP 2000
GEFCO 135
GEFCO, Inc. is a known
leader in the development
and manufacture of reliable
and safe drilling equipment
and related products.
GEFCO 20K
GEFCO 30K
GEFCO 22 RC
41
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
ENERGY
HEATEC
INFRASTRUCTURE
Heatec celebrated its 40th anniversary in 2017. The company continues
PRODUCTS AND SERVICES:
• Thermal Fluid Heaters
• Process Heaters
• Asphalt Storage, Heating, and
Blending Equipment
• Instantaneous Water Heaters
to design, manufacture and service heating and storage equipment.
Heatec products are used in a variety of industries, including hot mix
asphalt plants, asphalt terminals, gas processing plants, food and
beverage production facilities, chemical plants and power plants. The
company continues to adapt its products to meet the needs and
standards of the international market and to configure the products for
• Engineering Services for Asphalt Terminals
easy transport overseas.
and Emulsion Plants
REPORTING GROUP: ENERGY
LOCATION: CHATTANOOGA, TENNESSEE, USA
The company developed new computerized control systems for asphalt
terminals and tank farms at hot mix asphalt plants. Heatec polymer
systems were upgraded to use programmable logic controllers (PLCs).
New versions of its Recon® monitoring system were introduced. One
version can monitor equipment at numerous plants simultaneously,
eliminating the need to switch back and forth. Another version expands
the monitoring capabilities to include the operating status of the heater.
The company has expanded its customer training programs to include
an annual class on operation of equipment at asphalt terminals. The
class is conducted at the training center located at the Heatec
manufacturing facility. The company continues to participate in Astec
customer schools held in Chattanooga and to provide on-site training for
operators at their facilities.
42
ENERGY
HEATEC
TANK FARM MANAGEMENT CONTROLS
WATER BATH HEATERS FOR A POWER PLANT
ASPHALT TANK FARM
ASPHALT EMULSION BLENDING TERMINAL
VERTICAL THERMAL FLUID HEATERS
Heatec products are used in a
variety of industries, including
hot mix asphalt plants, asphalt
terminals, gas processing
plants, food and beverage
production facilities, chemical
plants and power plants.
THERMAL FLUID HEATER
ASPHALT TERMINAL
43
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
ENERGY
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Whole Tree Chippers
• Whole Tree Debarkers
• Horizontal Grinders
• Blower Trucks and Trailers
• Screening Equipment
• Asphalt Shingle Shredders
REPORTING GROUP: ENERGY
LOCATION: EUGENE, OREGON, USA
PETERSON PACIFIC
CORPORATION
Peterson Pacific Corp. is a manufacturer of grinders, chippers,
debarkers, screens and blower trucks that serve a wide variety of
markets. The company has 110,000 square feet of modern
manufacturing space. Peterson machines are sold and supported
through a worldwide network of distributors and direct sales and
service representatives.
Peterson horizontal grinders reduce wood, low value logs and other
organic materials; the reduced material is used in the compost, mulch,
and biomass energy markets. Peterson grinders can also reduce
certain construction and demolition materials, such as asphalt
shingles, that can then be recycled and used in hot mix asphalt
paving. Peterson drum and disc chippers and debarkers are used to
produce wood chips for pulp and paper production, as well as
biomass energy markets. Peterson blower trucks and trailers are used
to broadcast compost and mulch for landscaping and erosion control.
Peterson deck screens are used for classifying materials to maximize
the value of each product. Many Peterson machines are available in
either electric or diesel power, depending on the application. For
increased mobility at a job site, both tracked and wheeled versions of
many of their products are available.
44
ENERGY
PETERSON PACIFIC
CORPORATION
6310B DRUM CHIPPER
3310 DRUMCHIPPER
5700D HORIZONTAL GRINDER
4710D HORIZONTAL GRINDER
5000H WHOLE TREE CHIPPER
Peterson Pacific Corp. is a
Eugene, Oregon based
manufacturer of grinders,
chippers, debarkers, screens,
and blower trucks that serve a
wide variety of markets.
2700D HORIZONTAL GRINDER
BT60C BLOWER TRUCK
45
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
ENERGY
POWER FLAME
INFRASTRUCTURE
Power Flame’s products are sold to a wide range of customers in the
PRODUCTS AND SERVICES:
• Forced Draft Burners
• Direct Fired Applications
• Indirect Fired Applications
• Control Systems
• Pump Sets
• Custom Engineered Systems
REPORTING GROUP: ENERGY
commercial/industrial burner market to produce steam or hot water for
heating buildings, schools, hospitals, food processing, aerospace,
petrochemical and infrastructure.
Its products consist of “design and build” burners capable of converting
liquid or gaseous fuels into usable energy. Its product lines cover input
capacities from 400,000 to 120,000,000 BTU/HR. Its combustion
systems are offered through manufacturer representatives for retrofit to
replace existing combustion equipment with new, state-of-the art systems
LOCATION: PARSONS, KANSAS, USA
or directly to original equipment manufacturers’ customers for new
packaged energy generating systems.
Power Flame has been able to use its proven advanced low and ultra-
low emission technologies to expand sales on an international level by
assisting environmental authorities to set new emission and efficiency
standards to clean the air in new global markets.
In addition to state-of-the-art combustion systems, it offers a wide range
of operating control systems, which can vary from simple relay-based
logic to microprocessor-based controls to sophisticated PLC applications.
46
ENERGY
POWER FLAME
RF AND LOW-NOX BURNERS
C BURNER WITH NEW AIR DAMPER
VECTOR INDUSTRIAL BURNER WITH DIRECTOR SCS CONTROLS
CMAX 50 HZ BURNER
Our products consist
of “design and build”
burners capable of
converting liquid or
gaseous fuels into
usable energy.
FREE STANDING CONTROL PANELS WITH TOUCH SCREEN DISPLAYS
ULTRA-LOW NOX CSB BURNER ON A D-TYPE WATERTUBE BOILER
47
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT INDUSTRIES SERVED:
ENERGY
REXCON
INFRASTRUCTURE
RexCon manufactures a complete line of stationary and portable central
PRODUCTS AND SERVICES:
• Stationary Transit and Central Mix
Concrete Batch Plants
• Portable Transit and Central Mix
Concrete Batch Plants
• High Production Paving Concrete Batch Plants
• Tilt Mixers
• Controls
mix and ready mix concrete batch plants. For decades, the RexCon
product line has been an industry leader because of its quality design,
durability and high-production capabilities.
In 2017, RexCon participated in ConExpo 2017 in Las Vegas, Nevada,
showcasing their highly-popular Mobile 12 Self-Erecting Central Mix Batch
Plant. The self-supporting sub frame and superior hydraulic system reduces
the need for site preparation, foundations and cranes. This plant is
• Concrete Placing Equipment
capable of producing about 250 cubic yards per hour.
REPORTING GROUP: ENERGY
RexCon was tasked with designing a highly custom concrete batch plant.
LOCATION: BURLINGTON, WISCONSIN, USA
The result: a batch plant that can produce about 800 cubic yards of
concrete per hour. With two gravity-fed dry lanes, and one central mix
wet lane, it can charge three trucks simultaneously. In 2017, it finished the
manufacturing and erection of the plant located in Chicago, Illinois near
the O’Hare airport. It is currently the largest batch plant in the Midwest.
2017 was a significant year for RexCon. Not only did it have a record
year for sales, but it also joined the Astec Industries family. RexCon is
looking forward to continued growth, both domestically and internationally.
RexCon’s reputation continues to be based on honesty and integrity, with
devoted commitment to supporting customers, new and old, in a manner
which ensures long-term loyalty to our products.
48
ENERGY
REXCON
RexCon manufactures a
complete line of stationary
and portable central mix
and ready mix concrete
batch plants.
MODEL S BATCH PLANT WITH HORIZONTAL MIXER
LOGO 12 TRANSIT MIX BATCH PLANT
MOBILE 5 CENTRAL MIX BATCH PLANT
REXBATCH 150 DUAL LANE WET/DRY PLANT
MOBILE 12 SELF-ERECTING CENTRAL MIX PLANT
LOGO 12 CENTRAL MIX BATCH PLANT
49
ASTEC INDUSTRIES, INC. | 2017 ANNUAL REPORT BOARD OF DIRECTORS
FRONT ROW, LEFT TO RIGHT
James B. Baker
Co-Managing Director of River
Associates Investments, LLC
Chairman—Audit Committee
Member—Compensation Committee
William D. Gehl
Chairman of the Board of IBD
Southeastern Wisconsin
Chairman of the Board of
FreightCar America
Member—Compensation Committee
Member—Audit Committee
Benjamin G. Brock
President and Chief Executive Officer of
Astec Industries, Inc.
Chairman—Executive Committee
Charles F. Potts
Chairman of the Board of Heritage
Construction and Materials
Member—Audit Committee
Member—Compensation Committee
William G. Dorey
Former Chief Executive Officer and
President of Granite Construction, Inc.
Chairman—Compensation Committee
Member—Audit Committee
Member—Nominating and Corporate
Governance Committee
BACK ROW, LEFT TO RIGHT
W. Norman Smith
Vice Chairman of
Astec Industries, Inc.
Vice Chairman of the Board
Member—Executive Committee
William B. Sansom
Chairman of the Board and Chief
Executive Officer of The H.T. Hackney
Company
Member—Audit Committee
Member—Nominating and Corporate
Governance Committee
Lead Independent Director
Daniel K. Frierson
Chairman of the Board and Chief
Executive Officer of the Dixie Group, Inc.
Chairman—Nominating and Corporate
Governance Committee
Member—Audit Committee
Member—Executive Committee
Glen E. Tellock
President and CEO of Lakeside Foods
Member—Audit Committee
Member—Nominating and Corporate
Governance Committee
ASTEC INDUSTRIES' CORPORATE EXECUTIVE OFFICERS
Benjamin G. Brock
President and
Chief Executive Officer
Richard J. Dorris
Executive Vice President and
Chief Operating Officer
W. Norman Smith
Vice Chairman
Steve Claude
Group President
Infrastructure
Richard A. Patek
Group President – Aggregate
and Mining International
Jaco van der Merwe
Group President
Energy
Jeffrey J. Elliott
Group President – Aggregate
and Mining U.S.A.
David C. Silvious
Vice President, Chief
Financial Officer and
Treasurer
Stephen C. Anderson
Vice President of
Administration, Corporate
Secretary and Director
of Investor Relations
Robin A. Leffew
Corporate Controller
50
FINANCIAL
INFORMATION
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except as noted*)
2017
2016
2015
2014
2013
Consolidated Statement of Income Data
Net sales
Gross profit
Gross profit %
Selling, general and administrative
expenses
Research and development
Income from operations
Interest expense
Other income
Net income
Net income attributable to controlling
interest
Earnings per common share*:
Net income attributable to controlling
interest
Basic
Diluted
Consolidated Balance Sheet Data
Working capital
Total assets
Short-term debt
Current maturities of long-term debt
Long-term debt, less current maturities
Total equity
Cash dividends declared per common
share*
Book value per share at year-end
(shareholders’ equity / diluted shares
outstanding for the year)*
$ 1,184,739 $ 1,147,431 $ 983,157 $ 975,595 $ 932,998
207,119
22.2%
243,129
20.5%
218,843
22.3%
265,269
23.1%
215,316
22.1%
160,775
26,817
55,537
840
1,218
37,590
153,145
24,969
87,155
1,395
529
54,988
145,180
23,676
49,987
1,611
3,055
31,966
141,490
22,129
51,697
720
1,207
34,206
133,337
18,101
55,681
423
1,937
39,214
37,795
55,159
32,797
34,458
39,042
1.64
1.63
2.40
2.38
1.43
1.42
1.51
1.49
1.72
1.69
$
423,823 $
889,579
--
2,469
1,575
686,765
777,353
407,972 $ 399,785 $ 388,862 $ 385,680
843,601
749,291
4,632
2,538
4,116
648,841
802,265
2,814
1,027
7,061
596,152
--
4,528
5,154
609,858
--
34
510
577,311
0.40
0.40
0.40
0.40
0.30
29.58
27.99
26.30
25.62
24.85
52 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
SUPPLEMENTARY FINANCIAL DATA
(in thousands, except as noted*)
Quarterly Financial Highlights
(Unaudited)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2017 Net sales
Gross profit
Net income (loss)
Net income (loss) attributable to controlling
$ 318,401
75,771
15,080
$ 301,909
65,524
14,359
$ 252,054
39,084
(2,703)
$ 312,375
62,750
10,854
interest
15,120
14,420
(2,667)
10,922
Earnings (loss) per common share*
Net income (loss) attributable to controlling
interest:
Basic
Diluted
2016 Net sales
Gross profit
Net income
Net income attributable to controlling interest
Earnings per common share*
Net income attributable to controlling
interest:
Basic
Diluted
Common Stock Price*
2017 High
2017 Low
2016 High
2016 Low
0.66
0.65
0.63
0.62
(0.12)
(0.12)
0.47
0.47
$ 278,721
71,956
17,678
17,743
$ 294,394
73,452
18,141
18,192
$ 247,752
55,389
6,835
6,838
$ 326,564
64,472
12,334
12,386
0.77
0.77
0.79
0.79
0.30
0.30
$
$
$
$
73.37
59.02
47.97
33.08
$
$
66.66
52.35
57.51
44.21
$
$
58.06
45.70
62.75
51.73
0.54
0.53
59.22
48.44
71.88
52.08
The Company’s common stock is traded in the Nasdaq National Market under the symbol ASTE. Prices shown are
the high and low sales prices as announced by the Nasdaq National Market. The Company paid quarterly dividends
of $0.10 per common share to shareholders in each quarter of 2016 and 2017. As determined by the proxy search on
the record date for the Company’s 2018 annual shareholders’ meeting, the number of holders of record is
approximately 215.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 53
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollar and share amounts in thousands, except per share amounts, unless otherwise specified)
The following discussion contains forward-looking statements that involve inherent risks and uncertainties. Actual
results may differ materially from those contained in these forward-looking statements. For additional information
regarding forward-looking statements, see “Forward-looking Statements” on page 68.
Overview
The Company is a leading manufacturer and seller of equipment for the road building, aggregate processing,
geothermal, water, oil and gas, and wood processing industries. The Company’s businesses:
•
•
design, engineer, manufacture and market equipment used in each phase of road building, including
mining, quarrying and crushing the aggregate, mobile bulk and material handling solutions, producing
asphalt or concrete, recycling old asphalt or concrete and applying the asphalt;
design, engineer, manufacture and market additional equipment and components, including equipment for
geothermal drilling, oil and natural gas drilling, industrial heat transfer, wood chipping and grinding, wood
pellet processing, commercial and industrial burners, combustion control systems; and
• manufacture and sell replacement parts for equipment in each of its product lines.
The Company, as we refer to it herein, consists of a total of 21 companies that are consolidated in our financial
statements, which includes 17 manufacturing companies, two companies that operate as dealers for the
manufacturing companies, a captive insurance company and the parent company. RexCon, Inc. was purchased by
the Company on October 1, 2017 and is included in the number of companies disclosed above. The companies fall
within three reportable operating segments: the Infrastructure Group, the Aggregate and Mining Group and the
Energy Group.
Infrastructure Group - This segment consists of five business units, three of which design, engineer, manufacture
and market a complete line of asphalt plants, asphalt pavers, wood pellet plants and related components and
ancillary equipment. The two remaining companies in the Infrastructure Group primarily sell, service and install
equipment produced by the manufacturing subsidiaries of the Company, with the majority of sales to the
infrastructure industry.
Aggregate and Mining Group - This segment consists of eight business units that design, manufacture and market
heavy equipment and parts in the aggregate, metallic mining, quarrying, recycling, ports and bulk handling industries.
Energy Group - This segment consists of six business units that design, manufacture and market heaters, gas, oil
and combination gas/oil burners, combustion control systems, drilling rigs, concrete plants, wood chippers and
grinders, pump trailers, commercial and industrial burners, combustion control systems, storage equipment and
related parts to the oil and gas, construction, and water well industries. RexCon, Inc. was added to this group
effective October 1, 2017 as described below.
Individual Company subsidiaries included in the composition of the Company’s segments are as follows:
1.
Infrastructure Group – Astec, Inc., Roadtec, Inc., Carlson Paving Products, Inc., Astec Australia, Pty
Ltd and Astec Mobile Machinery GmbH.
2. Aggregate and Mining Group – Telsmith, Inc., Kolberg-Pioneer, Inc., Johnson Crushers International,
Inc., Osborn Engineered Products SA (Pty) Ltd, Breaker Technology, Inc., Astec Mobile Screens, Inc.,
Astec do Brasil Fabricacao de Equipamentos LTDA and Telestack Limited.
3. Energy Group – Heatec, Inc., CEI, Inc., GEFCO, Inc., Peterson Pacific Corp., Power Flame
Incorporated (beginning in August 2016) and RexCon, Inc. (beginning in October 2017). RexCon, Inc., a
manufacturer of high-quality stationary and portable, central mix and ready mix concrete batch plants,
concrete mixers and concrete paving equipment, was added to this group effective October 1, 2017
upon the acquisition of substantially all of the assets and liabilities of RexCon LLC.
The Company also has one other category, Corporate, that contains the business units that do not meet the
requirements for separate disclosure as a separate operating segment or inclusion in one of the other reporting
segments. The business units in the Corporate category are Astec Insurance Company (“Astec Insurance” or “the
captive”) and Astec Industries, Inc., the parent company. These two companies provide support and corporate
oversight for all the companies that fall within the reportable operating segments.
54 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
The Company’s financial performance is affected by a number of factors, including the cyclical nature and varying
conditions of the markets it serves. Demand in these markets fluctuates in response to overall economic conditions
and is particularly sensitive to the amount of public sector spending on infrastructure development, privately funded
infrastructure development, changes in the price of crude oil, which affects the cost of fuel, and liquid asphalt and
changes in the price of steel.
The Company believes that federal highway funding influences the purchasing decisions of the Company’s
customers, who are typically more comfortable making capital equipment purchases with long-term federal legislation
in place. Federal funding provides for approximately 25% of all highway, street, roadway and parking construction in
the United States.
In July 2012, the “Moving Ahead for Progress in the 21st Century Act” (“Map-21”) was approved by the U.S. federal
government, which authorized $105 billion of federal spending on highway and public transportation programs
through fiscal year 2014. In August 2014, the U.S. government approved short-term funding of $10.8 billion through
May 2015. Federal transportation funding operated on short-term appropriations until December 4, 2015 when the
Fixing America’s Surface Transportation Act (“FAST Act”) was signed into law. The $305 billion FAST Act approved
funding for highways of approximately $205 billion and transit projects of approximately $48 billion for the five-year
period ending September 30, 2020.
The Company believes a multi-year highway program (such as the FAST Act) will have the greatest positive impact
on the road construction industry and allow its customers to plan and execute longer-term projects, but given the
inherent uncertainty in the political process, the level of governmental funding for federal highway projects will
similarly continue to be uncertain. Since elected in late 2016, the current executive branch of the federal government
has stressed that one of its priorities is a new infrastructure bill including increased funding for roads, bridges,
tunnels, airports, railroads, ports and waterways, pipelines, clean water infrastructure, energy infrastructure and
telecommunication needs. The funding for the bill as proposed would rely in part on direct federal spending as well as
increased private sector funding in exchange for federal tax credits. Governmental funding that is committed or
earmarked for federal highway projects is always subject to repeal or reduction. Although continued funding under the
FAST Act or funding of a bill passed by the new administration is expected, it may be at lower levels than originally
approved or anticipated. In addition, Congress could pass legislation in future sessions that would allow for the
diversion of previously appropriated highway funds for other purposes, or it could restrict funding of infrastructure
projects unless states comply with certain federal policies. The level of future federal highway construction is
uncertain and any future funding may be at levels lower than those currently approved or that have been approved in
the past.
The public sector spending described above is needed to fund road, bridge and mass transit improvements. The
Company believes that increased funding is unquestionably needed to restore the nation’s highways to a quality level
required for safety, fuel efficiency and mitigation of congestion. In the Company’s opinion, amounts needed for such
improvements are significantly greater than amounts approved to date, and funding mechanisms such as the federal
usage fee per gallon of gasoline, which is still at the 1993 level of 18.4 cents per gallon, would likely need to be
increased along with other measures to generate the funds needed.
In addition to public sector funding, the economies in the markets the Company serves, the price of oil and its impact
on customers’ purchasing decisions and the price of steel may each affect the Company’s financial performance.
Economic downturns generally result in decreased purchasing by the Company’s customers, which, in turn, causes
reductions in sales and increased pricing pressure on the Company’s products. Rising interest rates also typically
negatively impact customers’ attitudes toward purchasing equipment. The Federal Reserve has maintained
historically low interest rates in response to the economic downturn which began in 2009; however, the Federal
Reserve raised the Federal Funds Rate in 2016 and again in March, June and December 2017, and may implement
additional increases in the future.
Significant portions of the Company’s revenues from the Infrastructure Group relate to the sale of equipment involved
in the production, handling, recycling or installation of asphalt mix. Liquid asphalt is a by-product of oil production. An
increase or decrease in the price of oil impacts the cost of asphalt, which is likely to alter demand for asphalt and
therefore affect demand for certain Company products. While increasing oil prices may have a negative financial
impact on many of the Company’s customers, the Company’s equipment can use a significant amount of recycled
asphalt pavement, thereby partially mitigating the effect of increased oil prices on the final cost of asphalt for the
customer. The Company continues to develop products and initiatives to reduce the amount of oil and related
products required to produce asphalt mix. Oil price volatility makes it difficult to predict the costs of oil-based products
used in road construction such as liquid asphalt and gasoline. Oil prices rose during much of 2016 and continued to
fluctuate during 2017 and fluctuations are expected to continue in the future. Minor fluctuations in oil prices should not
have a significant impact on customers’ buying decisions. Other factors such as political uncertainty in oil producing
countries, interruptions in oil production due to disasters, whether natural or man-made, or other economic factors
could significantly impact oil prices, which could negatively impact demand for the Company’s products. However, the
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 55
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Company believes the continued funding of the FAST Act federal highway bill passed in December 2015 has greater
potential to impact the buying decisions of the Company’s customers than does the fluctuation of oil prices in 2018.
Contrary to the impact of oil prices on many of the Company’s Infrastructure Group products as discussed above, the
products manufactured by the Energy Group, which are used in drilling for oil and natural gas, in heaters for refineries
and oil sands and in double fluid pump trailers for fracking and oil and gas extraction, would benefit from higher oil
and natural gas prices, to the extent that such higher prices lead to increased development in the oil and natural gas
production industries. The Company believes further development of domestic oil and natural gas production
capabilities is needed and would positively impact the domestic economy and the Company’s business.
Steel is a major component in the Company’s equipment. Steel followed typical seasonal patterns during 2017,
peaking in April and reaching lows in November. Prices began to rise in early 2018 and are expected to continue to
rise throughout the first and second quarters of 2018 due to seasonal demand and an improving economy. The
Company expects normal seasonal price movement during 2018 with steel prices higher on average than in 2017.
The Company continues to utilize forward-looking contracts (with no minimum or specified quantity guarantees)
coupled with advanced steel purchases to minimize the impact of any price increases. The Company will review the
trends in steel prices entering into the second half of 2018 and establish future contract pricing accordingly.
In addition to the factors stated above, many of the Company’s markets are highly competitive, and its products
compete worldwide with a number of other manufacturers and dealers that produce and sell similar products. From
2010 through mid-2012, a weak U.S. dollar, combined with improving economic conditions in certain foreign
economies, had a positive impact on the Company’s international sales. From mid-2012 through 2017, the strong
U.S. dollar has negatively impacted pricing in certain foreign markets the Company serves. The Company expects
the U.S. dollar to remain strong as compared to historical rates in the near term relative to most foreign currencies.
Increasing domestic interest rates or weakening economic conditions abroad could cause the U.S. dollar to continue
to strengthen, which could negatively impact the Company’s international sales.
In the United States and internationally, the Company’s equipment is marketed directly to customers as well as
through dealers. During 2017, approximately 65% of the Company’s sales were to the end user. The Company
expects this ratio to be between 60% and 70% for 2018.
The Company is operated on a decentralized basis with a complete management team for each operating subsidiary.
Finance, insurance, legal, shareholder relations, corporate accounting and other corporate matters are primarily
handled at the corporate level (i.e., Astec Industries, Inc., the parent company). The engineering, design, sales,
manufacturing and basic accounting functions are handled at each individual subsidiary. Standard accounting
procedures are prescribed and followed in all reporting.
During 2016, the Company implemented revised profit sharing plans whereby corporate officers, subsidiary
presidents and other employees at each subsidiary have the opportunity to earn profit sharing incentives based upon
the Company’s and/or the individual groups or subsidiaries’ return on capital employed, EBITDA margin and safety.
Corporate officers’ and subsidiary presidents’ awards when calculated at targeted performance, are between 35%
and 100% of their base salary, depending upon their responsibilities, and the plans allow for awards of up to 200% of
the target. Each subsidiary has the opportunity to earn up to 10% of its after-tax profit as a profit-sharing incentive
award to be paid to its employees.
The Company also implemented revised long-term incentive plans during 2016 whereby corporate officers, subsidiary
presidents and other corporate or subsidiary management employees will be awarded Restricted Stock Units
(“RSUs”) if certain goals are met based upon the Company’s Total Shareholder’s Return (“TSR”) as compared to a
peer group and the Company’s pretax profit margin. The grant date value of corporate officers’ and subsidiary
presidents’ awards, when calculated at targeted performance, are between 20% and 100% of their base salary,
depending upon their responsibilities, and the plans allow for awards of up to 200% of the target. Additional RSUs
may be granted to other key subsidiary management employees based upon individual subsidiary profits.
Results of Operations: 2017 vs. 2016
Net Sales
Net sales increased $37,308 or 3.3% to $1,184,739 in 2017 from $1,147,431 in 2016. Sales are generated primarily
from new equipment purchases made by customers for use in construction of privately funded infrastructure, public
sector spending on infrastructure and sales of equipment for the aggregate, mining, wood pellet, quarrying and
recycling markets, and for oil and gas and geothermal industries. Excluding a decline in domestic wood pellet plant
sales discussed below, total sales increased $164,508 between years.
Domestic sales for 2017 were $932,294 or 78.7% of net sales compared to $941,273 or 82.0% of net sales for 2016,
a decrease of $8,979 or 1.0%. The decrease in domestic sales was due to a $127,200 decline in pellet plant related
56 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
sales due to no new orders being received in 2017, offset by increases in sales of most of the Company’s other major
product lines due to the continuing positive economic conditions in the domestic markets and the impact of the FAST
Act funding.
International sales for 2017 were $252,445 or 21.3% of net sales compared to $206,158 or 18.0% of net sales for
2016, an increase of $46,287 or 22.5%. The Company experienced improved markets for most of its major product
lines internationally in 2017 compared to 2016 caused by improved global market conditions, the stabilization of the
U.S. dollar in certain foreign markets and a slight recovery in the mining and oil and gas sectors. The Company
believes its strategy of keeping its sales and service structure in place during the recent downturn aided international
sales in 2017. Sales reported by the Company for 2017 would have been $2,884 lower had 2017 foreign exchange
rates been the same as 2016 rates. The increase in international sales occurred primarily in Canada, Russia,
Australia, Brazil and Africa, offset by sales decline in South America (excluding Brazil), Japan and Mexico. The
Company continues its efforts to grow its international business by increasing its presence in the markets it serves.
Parts sales for 2017 were $283,361 or 23.9% of net sales compared to $263,457 or 23.0% of net sales for 2016, an
increase of $19,904 or 7.6%. All of the Company’s major product lines experienced increased parts sales in 2017 as
compared to 2016.
Gross Profit
Gross profit for 2017 was $243,129 or 20.5% of net sales as compared to $265,269 or 23.1% of net sales in 2016, a
decline of $22,140 or 8.3%. Due to cost overruns incurred in 2017 by the Company on the installation phase of its
customer’s Arkansas wood pellet plant sold in 2016 and the identification of design issues its customers’ wood pellet
plants in Arkansas and Georgia discovered in the third quarter of 2017, the Company experienced an overall
reduction in wood pellet plant margins of $60,107 between years. As the Company has financed the sale of the
$60,249 Georgia wood pellet plant, revenue from the sale will be recorded when the customer pays for the
equipment, which is expected in late 2018. No significant margins are expected to be recorded on the Georgia pellet
plant in 2018.
Selling, General and Administrative Expense
Selling, general and administrative expense for 2017 was $160,775 or 13.6% of net sales compared to $153,145 or
13.3% of net sales for 2016, an increase of $7,630 or 5.0% due to an increase of $8,646 in selling expenses resulting
primarily from increased ConExpo Show-related costs of $4,355 and other increased costs related to the $164,508
increase in total sales excluding wood pellet plants.
Research and Development
Research and development expenses increased $1,848 or 7.4% to $26,817 in 2017 from $24,969 in 2016. During
2017, the Company continued its focus on research and development spending for new products as well as
improvements to existing product lines and adaptation of those products to other markets.
Interest Expense
Interest expense in 2017 decreased $555 or 39.8%, to $840 from $1,395 in 2016 due to a reduction in debt levels at
the Company’s subsidiary in Brazil and reduced interest on tax return audit assessments.
Interest Income
Interest income increased $496 or 61.5% to $1,302 in 2017 from $806 in 2016 due primarily to interest received in
2017 from a wood pellet plant customer.
Other Income
Other income increased $689 or 130.2% to $1,218 in 2017 from $529 in 2016 due primarily to a $347 deposit
forfeited by a customer on a cancelled order, reduced investment losses of $180 and improved licensing fee income
of $105.
Income Tax
Income tax expense for 2017 was $19,627, compared to $32,107 for 2016. The effective tax rates for 2017 and 2016
were 34.3% and 36.9%, respectively. The reduction in tax rates between periods is due primarily to an increase in the
percent impact of the Company’s Domestic Production Activities Deduction and Research and Development Tax
Credit (due to similar dollar impacts on lower taxable earnings) and a $1,056 reduction in income tax expense in the
fourth quarter of 2017 due to the application of the provisions of Tax Cuts and Jobs Act of 2017, enacted by the U.S.
government on December 22, 2017.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 57
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Net Income Attributable To Controlling Interest
The Company had net income attributable to controlling interest of $37,795 in 2017 compared to $55,159 in 2016, a
decrease of $17,364, or 31.5%. Earnings per diluted share decreased $0.75 to $1.63 in 2017 from $2.38 in 2016.
Weighted average diluted shares outstanding for the years ended December 31, 2017 and 2016 were 23,184 and
23,142, respectively.
Backlog
The backlog of orders at December 31, 2017 was $411,469 compared to $361,831 at December 31, 2016, an
increase of $49,638, or 13.7%. Backlogs for both periods include a $60,249 pellet plant order the Company has
financed for its customer. Revenue will not be recorded on the order until cash payments are received, which is
expected to occur in late 2018. The increase in the backlog of orders was due to an increase in domestic backlog of
$36,786 or 12.3% and an increase in international backlog of $12,852 or 20.5%. The Infrastructure Group backlog
increased $7,271 or 3.1% from 2016. The Aggregate and Mining Group backlog increased $28,036 or 31.5% from
2016 while the backlog in the Energy Group increased $14,331 or 35.2% over the 2016 levels. The Company is
unable to determine whether the changes in backlogs were experienced by the industry as a whole.
Net Sales by Segment
Infrastructure Group
Aggregate and Mining Group
Energy Group
2017
2016
$ Change % Change
$
553,691 $
403,720
227,328
608,908 $
359,760
178,763
(55,217)
43,960
48,565
(9.1)%
12.2%
27.2%
Infrastructure Group: Sales in this group decreased $55,217 or 9.1%. Excluding a $127,200 decrease in wood pellet
plant sales, the group’s sales increased $71,983 in 2017 as compared to 2016. Domestic sales for the Infrastructure
Group decreased $80,666 or 14.7% in 2017 compared to 2016. The decrease in domestic sales was due to a
$127,200 decline in pellet plant related sales due to no new orders being received in 2017, offset by increases in
sales of most other major product lines due to the continuing positive economic conditions in the domestic markets
and the impact of the FAST Act funding. International sales for the Infrastructure Group increased $25,449 or 41.3%
in 2017 compared to 2016. The increase in international sales was due primarily to the improved sales of mobile
asphalt equipment and increased sales by the Company owned distributor in Australia. The increase in international
sales for the Infrastructure Group occurred mainly in Canada, Australia and Russia, offset by a decrease in sales in
South America and Japan. Parts sales for the Infrastructure Group increased 3.7% in 2017 compared to 2016.
Aggregate and Mining Group: Sales in this group increased $43,960 or 12.2%. Domestic sales for the Aggregate and
Mining Group increased $32,206 or 13.1% in 2017 compared to 2016 primarily due to improved sales into the
Company’s traditional rock quarry markets, increased sales of the Company’s larger aggregate equipment due to the
release of pent-up demand and increased sales by the Company’s Northern Ireland subsidiary in the U.S. domestic
market. International sales for the Aggregate and Mining Group increased $11,754 or 10.3% in 2017 compared to
2016. The increase in international sales is due to an easing of pent-up demand, the Company’s continued sales
efforts in the international markets and improved sales by the Company’s Brazilian subsidiary. The increase in
international sales for the Aggregate and Mining Group occurred primarily in Canada, Brazil, Australia, Asia and
Africa, offset by sales declines in Mexico, Japan and South America. Parts sales for the Aggregate and Mining Group
increased 7.9% in 2017 compared to 2016 due to improved sales by the Company’s South African subsidiary and
sales into the traditional rock quarry markets.
Energy Group: Sales in this group increased $48,565 or 27.2%. Domestic sales for the Energy Group increased
$39,482 or 26.6% in 2017 compared to 2016 due to an increase in sales of $14,739 by Power Flame, which was
acquired on August 1, 2016, and improved sales of wood chipping and grinding equipment, drilling rigs and oil and
gas pumpers. RexCon, Inc., which was acquired on October 1, 2017, also contributed $2,449 of domestic sales in
2017. International sales for the Energy Group increased $9,083 or 30.0% in 2017 compared to 2016. The increase
in international sales was due primarily to increased sales by Power Flame of $3,287 and increased sales of oil and
gas drilling rigs. The increase in international sales occurred in Canada, Africa, China, Brazil and the Middle East,
offset by decreased sales in South America (excluding Brazil). Parts sales for the Energy Group increased 19.6% in
2017 compared to 2016 due to increased sales in all major product lines.
58 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Segment Profit (Loss)
Infrastructure Group
Aggregate and Mining Group
Energy Group
Corporate
2017
2016
$ Change
$
26,641 $
35,748
16,219
(40,963)
71,482 $
34,877
4,145
(55,992)
(44,841)
871
12,074
15,029
% Change
(62.7)%
2.5%
291.3%
26.8%
Infrastructure Group: Profit for this group decreased $44,841 or 62.7% from 2016. This group’s profits were impacted
by a decrease in gross profit of $42,821 or 550 basis points. Due to cost overruns incurred by the Company in 2017
on the installation phase of its customer’s Arkansas wood pellet plant sold in 2016 and the identification of design
issues its customers’ wood pellet plants in Arkansas and Georgia discovered in the third quarter of 2017, the
Company experienced an overall reduction in wood pellet plant margins of $60,107 between years. As the Company
has financed the sale of the Georgia wood pellet plant, revenue from the sale will be recorded when the customer
pays for the equipment, which is expected in late 2018. No significant margins are expected to be recorded on the
Georgia pellet plant in 2018. Segment profits were also negatively impacted by a $3,448 increase in selling
expenses, including $1,986 related to the ConExpo Show and other cost increases related to the $71,983 increase in
group sales, excluding wood pellet plants. Research and development costs also increased by $1,475 between
periods.
Aggregate and Mining Group: Profit for this group increased $871 or 2.5% from 2016. This group’s profits were
impacted by an increase in gross profit of $2,440 on increased sales of $43,960, offset by a 220 basis point decrease
in gross margin due to intercompany profit eliminations, product mix considerations and reduced margins at the
Company’s Northern Ireland subsidiary. The group’s profits were also negatively impacted by increased ConExpo
Show costs of $1,842.
Energy Group: Profit for this group increased $12,074 or 291.3% from 2016. This group’s profits were impacted by an
increase in gross profit of $17,954 on increased sales of $48,565 and a 330 basis point increase in gross margins.
Margins were favorably impacted by significant improvements at the Company’s GEFCO subsidiary, due to a 64%
increase in sales, and by the addition of Power Flame, which was acquired on August 1, 2016. The group’s profits
were negatively impacted by a $5,540 increase in selling, general and administrative expenses, of which $3,280
relates to additional costs incurred by Power Flame and RexCon, which were acquired in 2016 and 2017,
respectively.
Corporate: Net corporate expenses decreased $15,029 from 2016 due to decreases in profit sharing and SERP
expenses of $5,031 and decreased income taxes of $10,617.
Results of Operations: 2016 vs. 2015
Net Sales
Net sales increased $164,274 or 16.7% to $1,147,431 in 2016 from $983,157 in 2015. Sales are generated primarily
from new equipment purchases made by customers for use in construction of privately funded infrastructure, public
sector spending on infrastructure and sales of equipment for the aggregate, mining, wood pellet, quarrying and
recycling markets, and for oil and gas and geothermal industries.
Domestic sales for 2016 were $941,273 or 82.0% of net sales compared to $722,287 or 73.5% of net sales for 2015,
an increase of $218,985 or 30.3%. The overall increase in domestic sales for 2016 compared to 2015 reflects the
strengthening economic conditions for the Company’s products in the domestic market and a $135,187 increase in
wood pellet plant sales between years.
International sales for 2016 were $206,158 or 18.0% of net sales compared to $260,870 or 26.5% of net sales for
2015, a decrease of $54,711 or 21.0%. The Company continued to experience a challenging market for its products
internationally in 2016 compared to 2015 caused by competitive pressures due to the strengthening of the U.S. dollar,
as we compete with local manufacturers that do not price their products based on the U.S. dollar and the continued
sluggishness in the global mining industry. Sales reported by the Company for 2016 would have been $10,148 higher
had 2016 foreign exchange rates been the same as 2015 rates. The Company continues its efforts to grow its
international business by increasing its presence in the markets it serves.
Parts sales as a percentage of net sales decreased 400 basis points to 23.0% in 2016 from 27.0% in 2015. Parts
sales decreased 0.6% to $263,457 in 2016 from $265,092 in 2015.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 59
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Gross Profit
Gross profit as a percentage of sales increased to 23.1% in 2016 as compared to 22.3% in 2015. Gross profit
increased 21.2% to $265,269 in 2016 from $218,843 in 2015. Gross margins increased in 2016 due to a release of
pent-up demand from the lack of a long-term federal highway bill, which led to increased margins in the Infrastructure
Group as well as margins recorded for wood pellet plant sales by the Company.
Selling, General and Administrative Expense
Selling, general and administrative expense for 2016 was $153,145 or 13.3% of net sales compared to $145,180 or
14.8% of net sales for 2015, an increase of $7,965 or 5.5%. The increase in selling, general and administrative
expense over 2015 was due to an increase in payroll and related expense of $6,263 and an increase of $7,640 in
profit sharing and SERP expenses, offset by a reduction in the cost of repairs and maintenance, primarily on
Company airplanes of $3,001, a decrease in consultant fees of $789 and a decrease in computer expenses of $874.
Research and Development
Research and development expenses increased $1,293 or 5.5% to $24,969 in 2016 from $23,676 in 2015. During
2016, the Company continued its focus on research and development spending for new products as well as
improvements to existing product lines and adaptation of those products to other markets. The Company will
introduce many of its new products at the ConExpo Show to be held in March 2017.
Interest Expense
Interest expense in 2016 decreased $216 or 13.4%, to $1,395 from $1,611 in 2015.
Interest Income
Interest income increased $264 or 48.7% to $806 in 2016 from $542 in 2015.
Other Income
Other income was $529 in 2016 compared to $3,055 in 2015, a decrease of $2,526 or 82.7% due to $1,204 of
income from key-man life insurance policies received in 2015 resulting from the death of the Company’s Chairman
(and former CEO) and the forfeiture of a customer deposit of $1,002 in 2015 on a cancelled order.
Income Tax
Income tax expense for 2016 was $32,107, compared to $20,007 for 2015. The effective tax rates for 2016 and 2015
were 36.9% and 38.5%, respectively. The effective tax rate decreased in 2016 from the 2015 effective tax rate due to
an increase in domestic tax credits for research and development expenditures, a decrease in the overall effective
state rate caused by changes in apportionment and statutory state rates and a reduced impact of valuation
allowances on deferred tax assets.
Net Income Attributable To Controlling Interest
The Company had net income attributable to controlling interest of $55,159 in 2016 compared to $32,797 in 2015, an
increase of $22,362, or 68.2%. Earnings per diluted share increased $0.96 to $2.38 in 2016 from $1.42 in 2015.
Weighted average diluted shares outstanding for the years ended December 31, 2016 and 2015 were 23,142 and
23,120, respectively.
Backlog
The backlog of orders at December 31, 2016 was $357,367 compared to $315,910 at December 31, 2015, an
increase of $41,457, or 13.1%. The increase in the backlog of orders was due to an increase in domestic backlog of
$33,006 or 12.6% and an increase in international backlog of $8,451 or 15.6%. The Infrastructure Group backlog
increased $28,394 or 13.9% from 2015. The Infrastructure Group backlog includes $60,249 in both 2016 and 2015
for the first three-line pellet plant order from a single customer under a Company financed arrangement whereby the
Company expects to record the related revenues in 2018 when payment is due to be received. The Infrastructure
Group believes the FAST Act federal highway funding bill passed in late 2015, continues to positively impact order
backlogs of the group. The Aggregate and Mining Group backlog increased $14,467 or 19.5% from 2015 while the
backlog in the Energy Group decreased $1,404 or 3.7% over the 2015 levels. Both the Aggregate and Mining Group
and the Energy Group continue to be negatively impacted by competitive pricing issues in many foreign countries due
to the strength of the U.S. dollar compared to foreign currencies, and reduced demand for equipment in the mining
and oil and gas industries. The Company is unable to determine whether the changes in backlogs were experienced
by the industry as a whole.
60 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Net Sales by Segment
Infrastructure Group
Aggregate and Mining Group
Energy Group
2016
2015
$ Change % Change
$
608,908 $
359,760
178,763
428,737 $
370,813
183,607
180,171
(11,053)
(4,844)
42.0%
(3.0)%
(2.6)%
Infrastructure Group: Sales in this group increased $180,171 or 42.0%. Domestic sales for the Infrastructure Group
increased 55.2% in 2016 compared to 2015 due to a release of some of the pent-up demand from the lack of a long-
term federal highway bill for most of 2015 and increased pellet plant sales of $135,187. International sales for the
Infrastructure Group decreased 19.2% in 2016 compared to 2015. The decrease in international sales was due
primarily to the strengthening of the U.S. dollar compared to the currencies in many of the countries in which the
Company operates. The decrease in international sales for the Infrastructure Group occurred mainly in Canada,
Europe, the Middle East, Post-Soviet States, South America and Asia, offset by an increase in sales in the Mexico,
Japan, Australia, West Indies, China and Central America. Parts sales for the Infrastructure Group increased 5.7% in
2016 compared to 2015. The Company believes the increase in parts sales from 2015 to 2016 was due to the impact
of the FAST Act federal highway bill passed in late 2015. The Company also believes a portion of the increase in
parts sales was attributed to sales of replacement parts for our competitors’ equipment.
Aggregate and Mining Group: Sales in this group decreased $11,053 or 3.0%. Domestic sales for the Aggregate and
Mining Group increased 6.3% in 2016 compared to 2015 primarily due to improved demand related to infrastructure
projects. International sales for the Aggregate and Mining Group decreased 18.3% in 2016 compared to 2015. The
decrease in international sales is due to the strength of the U.S. dollar compared to the currencies in many of the
countries in which the Company operates and the continuing slowdown in the mining industry. The decrease in
international sales for the Aggregate and Mining Group occurred primarily in Africa, the Middle East, Canada, Brazil,
Russia and India, offset by increases in Mexico, Japan, Europe and Asia. Sales reported by the Company’s foreign
subsidiaries in this group would have been $10,134 higher had foreign exchange rates for 2016 been the same as
2015 rates. Parts sales for the Aggregate and Mining Group decreased 6.4% in 2016 compared to 2015.
Energy Group: Sales in this group decreased $4,844 or 2.6%. Sales in this group were positively affected by the
purchase of Power Flame Incorporated (PFI), located in Parsons, Kansas in August 2016. PFI manufactures and
sells gas, oil and combination gas/oil and low NOx burners as well as combustion control systems designed for
commercial, industrial and process applications. Without the purchase of PFI, sales would have decreased 10% from
2015 to 2016. Domestic sales for the Energy Group increased 6.9% in 2016 compared to 2015. International sales for
the Energy Group decreased 32.3% in 2016 compared to 2015. The decrease in international sales was due primarily
to the continued strength of the U.S. dollar in 2016 and a continued reduction in oil production and exploration
brought on by the low oil prices. The decrease in international sales occurred in Russia, the Middle East, Australia,
Asia, Africa and Brazil, offset by increased sales in Japan and China. Parts sales for the Energy Group decreased
4.8% in 2016 compared to 2015.
Segment Profit (Loss)
Infrastructure Group
Aggregate and Mining Group
Energy Group
Corporate
2016
2015
$ Change
$
71,482 $
34,877
4,145
(55,992)
33,890 $
30,690
3,609
(36,623)
37,592
4,187
536
(19,369)
% Change
110.9%
13.6%
14.9%
(52.9)%
Infrastructure Group: Profit for this group increased $37,592 or 110.9% from 2015. This group’s profits were impacted
by an increase in gross profit of $42,884 or 60 basis points on increased sales of $180,171 partially due to increased
overhead absorption on a 20% increase in direct labor hours worked from 2015 to 2016, offset by an increase in
payroll and related expenses of $5,692.
Aggregate and Mining Group: Profit for this group increased $4,187 or 13.6% from 2015. This group’s profits were
impacted by an increase in gross profit of $1,851 on decreased sales of $11,053 due to a 130 basis point increase in
gross margin and decreases in payroll and related expense of $1,329, decreased travel expense of $786 and a $528
decrease in repairs and maintenance expense, primarily on a company airplane.
Energy Group: Profit for this group increased $536 or 14.9% from 2015. This group’s profits were impacted by an
increase in gross profit of $2,077 on decreased sales of $4,844 due to a 170 basis point increase in gross margin and
decreased outside service expense of $741, repairs and maintenance of $346 and computer expense of $235.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 61
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Corporate: Net corporate expenses increased $19,369 from 2015 due to increases in profit sharing and SERP
expense of $7,640, stock incentive expense of $1,376, and increased income taxes of $9,826.
Liquidity and Capital Resources
The Company’s primary sources of liquidity and capital resources are its cash on hand, borrowing capacity under a
$100,000 revolving credit facility with a lender and cash flows from operations. The Company had $62,280 (of which
$22,064 was held by our foreign subsidiaries) of cash available for operating purposes at December 31, 2017. The
Company had outstanding letters of credit of $9,757 and borrowing availability of $90,243 under the credit facility as
of December 31, 2017. The Company had no outstanding borrowings at any time during 2017 under this facility.
Borrowings under the Company’s credit agreement are subject to an interest rate equal to the daily one-month LIBOR
rate plus a 0.75% margin, resulting in a rate of 2.32% at December 31, 2017. The credit agreement contains certain
financial covenants, including provisions concerning required levels of annual net income, minimum tangible net
worth and maximum allowed capital expenditures. The Company was in compliance with these covenants as of
December 31, 2017.
The Company’s South African subsidiary, Osborn Engineered Products SA (Pty) Ltd (“Osborn”), has a credit facility of
$7,672 with a South African bank to finance short-term working capital needs, as well as to cover performance letters
of credit, advance payment and retention guarantees. As of December 31, 2017, Osborn had no outstanding
borrowings, but had $813 in performance, advance payment and retention guarantees outstanding under the facility.
The facility has been guaranteed by Astec Industries, Inc., but is otherwise unsecured. A 0.75% unused facility fee is
charged if less than 50% of the facility is utilized. As of December 31, 2017, Osborn had available credit under the
facility of $6,859. The interest rate is 0.25% less than the South Africa prime rate, resulting in a rate of 10.0% as of
December 31, 2017.
The Company's Brazilian subsidiary, Astec do Brasil Fabricacao de Equipamentos Ltda. ("Astec Brazil"), has
outstanding working capital loans totaling $3,402 from Brazilian banks with interest rates ranging from 10.4% to
11.0%. The loans’ maturity dates range from November 2018 to April 2024 and are secured by Astec Brazil’s
manufacturing facility and also by letters of credit totaling $3,200 issued by Astec Industries, Inc. Additionally, Astec
Brazil has various 5-year equipment financing loans outstanding with Brazilian banks in the aggregate of $642 as of
December 31, 2017 that have interest rates ranging from 3.5% to 16.3%. These equipment loans have maturity dates
ranging from September 2018 to April 2020. Astec Brazil reduced its outstanding debt by $2,610 during 2017 and
plans to further reduce it by $2,469 during 2018.
Cash Flows from Operating Activities
Net income
Depreciation and amortization
Provision for warranties
Deferred income tax benefits
Increase in receivables
(Increase) decrease in inventories
(Increase) decrease in prepaid expenses
Increase in accounts payable
Increase (decrease) in customer deposits
Decrease in accrued product warranties
Other, net
Net cash provided by operating activities
2017
37,590
25,802
16,725
(291)
(7,749)
(19,618)
(5,181)
630
9,379
(14,642)
(764)
41,881
$
$
2016
54,988
24,813
18,912
(3,521)
(4,895)
30,839
4,846
8,836
(762)
(15,125)
15,875
134,806
$
$
Increase /
Decrease
(17,398)
989
(2,187)
3,230
(2,854)
(50,457)
(10,027)
(8,206)
10,141
483
(16,639)
(92,925)
$
$
Net cash provided by operating activities decreased $92,925 in 2017 compared to 2016. The primary reasons for the
decrease in operating cash flows relate to increased inventories due to increased order volumes, reduced net
income, increased prepaid expenses and reduced accounts payable offset by cash provided by customer deposits.
62 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Cash Flows from Investing Activities
Expenditures for property and equipment
Business acquisition, net of cash acquired
Other
Net cash used by investing activities
2017
(20,046) $
(26,443)
(411)
(46,900) $
$
$
2016
(27,367) $
(39,764)
904
(66,227) $
Increase /
Decrease
7,321
13,321
(1,315)
19,327
Net cash used by investing activities decreased by $19,327 in 2017 compared to 2016 due primarily to the reductions
in cash used for business acquisitions and expenditures for property and equipment.
Cash Flows from Financing Activities
Payment of dividends
Borrowings under bank loans
Repayments of bank loans
Other, net
Net cash used by financing activities
2017
2016
(9,226) $
--
(7,242)
(324)
(16,792) $
(9,217) $
5,973
(5,903)
(1,873)
(11,020) $
$
$
Increase /
Decrease
(9)
(5,973)
(1,339)
1,549
(5,772)
Financing activities used cash of $16,792 in 2017 and $11,020 in 2016 for an increase of $5,772. The change is
primarily due to reduced borrowings and increased debt repayments by the Company’s Brazilian and South African
subsidiaries.
Approved capital expenditures for 2018 total $35,398, including facility additions at the Company’s Roadtec and
Carlson subsidiaries. The remaining approved capital expenditures are for various purchases of machinery and
equipment, automobiles and technology related spending to meet the needs across all Company subsidiaries. The
Company expects to finance these expenditures using currently available cash balances, internally generated funds
and available credit under the Company’s credit facility.
Financial Condition
The Company’s current assets increased to $602,969 at December 31, 2017 from $576,833 at December 31, 2016,
an increase of $26,136. The increase is due to increases in inventories of $30,975 and accounts receivable of $9,279
due to increased order and sales volumes, offset by decreases in cash and cash equivalents of $20,091. Additionally,
accounts receivable days outstanding increased from 30.5 in 2016 to 34.3 in 2017.
The Company’s current liabilities increased to $179,146 at December 31, 2017 from $168,861 at December 31, 2016,
an increase of $10,285. The increase is primarily due to increases in customer deposits of $10,279 and accounts
payable of $3,120.
Market Risk and Risk Management Policies
The Company is exposed to changes in interest rates, primarily from its revolving credit agreements. A hypothetical
100 basis point adverse move (increase) in interest rates would not have materially affected interest expense for the
years ended December 31, 2017 and 2016, due to minimal borrowings during the periods. The Company does not
hedge variable interest.
The Company is subject to foreign exchange risk at its foreign operations. Foreign operations represent 15.9% and
15.8% of total assets at December 31, 2017 and 2016, respectively, and 10.8% and 9.5% of total net sales for the
years ended December 31, 2017 and 2016, respectively. Each period, the balance sheets and related results of
operations of the Company’s foreign subsidiaries are translated from their functional foreign currency into U.S. dollars
for reporting purposes. As the U.S. dollar strengthens against those foreign currencies, the foreign denominated net
assets and operating results become less valuable in the Company’s reporting currency. When the U.S. dollar
weakens against those currencies, the foreign denominated net assets and operating results become more valuable
in the Company’s reporting currency. At each reporting date, the fluctuation in the value of the net assets and
operating results due to foreign exchange rate changes is recorded as an adjustment to other comprehensive income
(loss) in equity. The Company views its investments in foreign subsidiaries as long-term and does not hedge the net
investments in foreign subsidiaries.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 63
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
From time to time, the Company’s foreign subsidiaries enter into transactions not denominated in their functional
currency. In these situations, the Company evaluates the need to hedge those transactions against foreign currency
rate fluctuations. When the Company determines a need to hedge a transaction, the subsidiary enters into a foreign
currency exchange contract. The Company does not apply hedge accounting to these contracts and, therefore,
recognizes the fair value of these contracts in the consolidated balance sheets and the change in the fair value of the
contracts in current earnings.
Due to the limited exposure to foreign exchange rate risk, a 10% fluctuation in the foreign exchange rates at
December 31, 2017 or 2016 would not have a material impact on the Company’s consolidated financial statements.
Contractual Obligations
Contractual obligations and the period in which payments are due as of December 31, 2017 are as follows:
Contractual Obligations
Operating lease obligations
Inventory purchase obligations
Debt obligations
Total
Payments Due by Period
Years
2 to 3
Years
4 to 5
Less Than
1 Year
More Than
5 Years
Total
$
6,263 $
3,951
4,044
$ 14,258
$
2,146
3,951
2,469
8,566
$
$
2,971
--
980
3,951
$
$
913
--
502
1,415
$
$
233
--
93
326
The above table excludes the Company’s liability for unrecognized tax benefits, which totaled $365 at December 31,
2017, since the timing of cash settlements to the respective taxing authorities cannot be reliably predicted.
In 2017 and 2016, the Company made contributions of approximately $415 to its pension plan. The Company has no
planned contributions to the pension plan in 2018. The Company’s funding policy is to make at least the minimum
annual contributions required by applicable regulations.
Contingencies
Management has reviewed all claims and lawsuits and has made adequate provision for any losses that can be
reasonably estimated. Based upon currently available information and with the advice of counsel, management
believes that the ultimate outcome of its current claims and legal proceedings, individually and in the aggregate, will
not have a material adverse effect on the Company’s financial position, cash flows or results of operations. However,
claims and legal proceedings are subject to inherent uncertainties and rulings unfavorable to the Company could
occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse effect on the
Company’s financial position, cash flows or results of operations.
Certain customers have financed purchases of the Company’s products through arrangements in which the Company
is contingently liable for customer debt aggregating $3,805 at December 31, 2017. These obligations have average
remaining terms of 1.8 years. The Company has recorded a liability of $836 related to these guarantees at December
31, 2017.
The Company is contingently liable under letters of credit of approximately $13,314, primarily for performance
guarantees to customers, banks or insurance carriers.
The Company has a sales contract with the purchaser of a large wood pellet plant, on which revenues of $7,987 and
$135,187 were recorded in 2017 and 2016, respectively. As the plant has not yet met the production output and the
operational specifications set forth in the original contract, as amended through December 31, 2017, the Company
entered into a contract amendment in February 2018, whereby the Company agreed to compensate the customer for
production shortfalls caused by the Company and other potential costs (depending upon the market price of wood
pellets), from January 1, 2018 through June 15, 2018. The Company incurred production shortfalls in January and
February 2018. The Company expects to meet the contract’s operational specifications prior to June 15, 2018.
Off-balance Sheet Arrangements
As of December 31, 2017, the Company does not have off-balance sheet arrangements as defined by Item 303(a)(4)
of Regulation S-K.
64 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Critical Accounting Policies and Estimates
The Company’s consolidated financial statements are prepared in accordance with U.S. generally accepted
accounting principles. Application of these principles requires the Company to make estimates and judgments that
affect the amounts as reported in the consolidated financial statements. Accounting policies that are critical to aid in
understanding and evaluating the results of operations and financial position of the Company include the following:
Inventory Valuation: Inventories are valued at the lower of first-in first-out cost or net realizable value. The most
significant component of the Company’s inventories is steel. Open market prices, which are subject to volatility,
determine the cost of steel for the Company. During periods when open market prices decline, the Company may
need to reduce the carrying value of the inventory. In addition, certain items in inventory become obsolete over time,
and the Company reduces the carrying value of these items to their net realizable value. These reductions are
determined by the Company based on estimates, assumptions and judgments made from the information available at
that time. See Note 1, Summary of Significant Accounting Policies, for a description of the process used by the
Company to value inventories at the lower of first-in first-out cost or market. The Company does not believe it is
reasonably likely that the inventory values will materially change in the near future.
Product Warranty Reserve: The Company accrues for the estimated cost of product warranties at the time revenue is
recognized. Warranty obligations by product line or model are evaluated based on historical warranty claims
experience. For machines, the Company’s standard product warranty terms generally include post-sales support and
repairs of products at no additional charge for periods ranging from three months to two years or up to a specified
number of hours of operation. For parts from component suppliers, the Company relies on the original manufacturer’s
warranty that accompanies those parts. Generally, fabricated parts are not covered by specific warranty terms.
Although failure of fabricated parts due to material or workmanship is rare, if it occurs, the Company’s policy is to
replace fabricated parts at no additional charge.
The Company engages in extensive product quality programs and processes, including actively monitoring and
evaluating the quality of component suppliers. Estimated warranty obligations are based upon warranty terms,
product failure rates, repair costs and current period machine shipments. If actual product failure rates, repair costs,
service delivery costs or post-sales support costs differ from estimates, revisions to the estimated warranty liability
would be required. The Company does not believe it is reasonably likely that the warranty reserve will materially
change in the near future.
Revenue Recognition: Revenue is generally recognized on sales at the point in time when persuasive evidence of an
arrangement exists, the price is fixed or determinable, the product has been delivered or services have been
rendered and there is reasonable assurance of collection of the sales proceeds. The Company generally obtains
purchase authorizations from its customers for a specified amount of product at a specified price with specified
delivery terms. A significant portion of the Company’s equipment sales represents equipment produced in the
Company’s plants under short-term contracts for a specific customer project or equipment designed to meet a
customer’s specific requirements. Most of the equipment sold by the Company is based on standard configurations,
some of which are modified to meet customer needs or specifications. The Company provides customers with
technical design and performance specifications and performs pre-shipment testing to ensure the equipment
performs according to design specifications, regardless of whether the Company provides installation services in
addition to selling the equipment.
Certain contracts include terms and conditions through which the Company recognizes revenues upon completion of
equipment production, which is subsequently stored at the Company’s plant at the customer’s request. Revenue is
recorded on such contracts upon the customer’s assumption of title and risk of ownership and when collectability is
reasonably assured. In addition, there must be a fixed schedule of delivery of the goods consistent with the
customer’s business practices, the Company must not have retained any specific performance obligations such that
the earnings process is not complete and the goods must have been segregated from the Company’s inventory prior
to revenue recognition.
The Company has certain sales accounted for as multiple-element arrangements, whereby revenue attributable to
the sale of a product is recognized when the product is shipped, and the revenue attributable to services provided
with respect to the product (such as installation services) is recognized when the service is performed. Consideration
is allocated to deliverables using the relative selling price method and vendor specific objective evidence, if it exists.
Otherwise, the Company uses third-party evidence of selling price or the Company’s best estimate of the selling price
for the deliverables. The Company evaluates sales with multiple deliverable elements (such as an agreement to
deliver equipment and related installation services) to determine whether revenue related to individual elements
should be recognized separately, or as a combined unit. In addition to the previously mentioned general revenue
recognition criteria, the Company only recognizes revenue on individual delivered elements when there is objective
and reliable evidence that the delivered element has a determinable value to the customer on a standalone basis and
there is no right of return.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 65
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
The Company has certain sales accounted for under the percentage of completion method using the ratio of costs
incurred to estimated total costs. Revenue, in an amount equal to cost incurred, is recognized until there is sufficient
information to determine the estimated profit on the project with a reasonable level of certainty. The factors
considered in this evaluation include the stage of design completion, the stage of equipment manufacturing
completion, the state of construction completion, the status of outstanding subcontracts, certainty of quantities of
labor and materials, certainty of schedule and the relationship with the customer.
Goodwill and Other Intangible Assets: Intangible assets are classified into two categories: (1) intangible assets with
definite lives subject to amortization, and (2) goodwill. Intangible assets with definite lives are tested for impairment if
conditions exist that indicate the carrying value may not be recoverable. Risk factors that may be considered include
an economic downturn in the general economy, a geographic market or the commercial and residential construction
industries, a change in the assessment of future operations as well as the cyclical nature of our industry and the
customization of the equipment we sell, each of which may cause adverse fluctuations in operating results. Other risk
factors considered would be an increase in the price or a decrease in the availability of oil that could reduce the
demand for our products in addition to the significant fluctuations in the purchase price of raw materials that could
have a negative impact on the cost of production and gross margins as well as others more fully described in the Risk
Factors section of our Form 10-K. An impairment charge is recorded when the carrying value of the definite lived
intangible asset is not recoverable by the cash flows generated from the use of the asset. Some of the inputs used in
the impairment testing are highly subjective and are affected by changes in business factors and other conditions.
Changes in any of the inputs could have an effect on future tests and result in impairment charges.
Goodwill is not amortized but is tested for impairment annually or more frequently if events or circumstances indicate
that such intangible assets or goodwill might be impaired. See Note 1, Summary of Significant Accounting Policies,
for a description of testing performed by the Company to determine if the recorded value of intangible assets or
goodwill has been impaired.
The useful lives of identifiable intangible assets are determined after considering the specific facts and circumstances
related to each intangible asset. Factors considered when determining useful lives include the contractual term of any
agreement, the history of the asset, the Company’s long-term strategy for the use of the asset, any laws or other local
regulations which could impact the useful life of the asset, and other economic factors, including competition and
specific market conditions. Intangible assets that are deemed to have definite lives are amortized, generally on a
straight-line basis, over their useful lives, ranging from 5 to 19 years.
Income Taxes: The Company accounts for income taxes under the guidance of FASB Accounting Standards
Codification Topic 740-10, “Income Taxes”. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. A valuation allowance, that represents a reserve on
deferred tax assets for which utilization is not more likely than not, is recorded. Judgment is required in determining
the provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against net
deferred tax assets. Income tax contingency accruals are determined and recorded under the guidance of ASC Topic
740-10. Liabilities for uncertain income tax positions are based on a two-step process. The first step is to evaluate the
tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not
that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The
second step requires an estimate and measurement of the tax benefit as the largest amount that is more than 50%
likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the
Company must determine the probability of various possible outcomes. We reevaluate these uncertain tax positions
on a quarterly basis or when new information becomes available. These reevaluations are based on factors including,
but not limited to, changes in facts or circumstances, changes in tax law, successfully settled issues under audit,
expirations due to statutes, and new audit activity. Such a change in recognition or measurement could result in the
recognition of a tax benefit or an increase to accrued taxes.
U.S. Tax Reform: On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law
making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate
tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S
international taxation from a worldwide tax system to a territorial system and a one-time transition tax on the
mandatory deemed repatriation of foreign earnings. The Company’s fourth quarter 2017 provision for income taxes
was reduced by $1,056, (comprised of a $1,548 reduction in income tax expense recorded in connection with the
remeasurement of deferred tax assets and liabilities and $492 of additional income tax expense recorded in
connection with the transition tax on the mandatory deemed repatriation of foreign earnings) due to applying the
provisions of the Tax Act.
66 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of U.S.
GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed
(including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act.
In accordance with SAB 118, the Company determined that the $492 additional 2017 income tax expense discussed
above is a provisional amount and constitutes a reasonable estimate at December 31, 2017, based upon the best
information currently available. The ultimate impact may differ from the provisional amount, possibly materially, due
to, among other things, additional analysis, changes in interpretations and assumptions the Company has made,
additional regulatory guidance that may be issued and actions the Company may take as a result of the Tax Act. Any
subsequent adjustment to the amount will be recorded to current tax expense when the analysis is complete, which is
expected in 2018 shortly after the filing of the Company’s 2017 U.S. income tax return.
Beginning in 2018, the Company expects that its effective tax rate will be reduced by approximately 11% from its
historic average due to the effects of the Tax Act, resulting in an effective tax rate ranging from 23% to 25% in a
typical year. The primary drivers of this are the reduced U.S. federal tax rate and the elimination of the benefit for the
domestic production activities deduction which is repealed by the Tax Act.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (‘FASB”) issued Accounting Standards Update (“ASU”) No.
2014-09, "Revenue from Contracts with Customers", which supersedes existing revenue guidance under U.S. GAAP.
The standard's core principle is that a company will recognize revenue when it transfers promised goods or services
to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for
those goods or services. The implementation of this new standard will require companies to use more judgment and
to make more estimates than under current guidance and to expand their disclosures to include information regarding
contract assets and liabilities as well as a more disaggregated view of revenue. The standard, as amended, is
effective for public companies for annual periods beginning after December 15, 2017. The Company adopted the new
standard effective January 1, 2018 using the modified retrospective transition method and will expand its disclosures
in the first quarter 2018 consolidated financial statements to comply with the disclosure provisions of the new rule.
The Company does not expect the adoption of the standard to have a material impact on its financial position, results
of operations or cash flows.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10)”, which
requires, among other things, equity investments with readily determinable fair values, except those accounted for
under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair
value with changes in fair value recognized in net income. The standard is effective for public companies in fiscal
years beginning after December 15, 2017, and the Company adopted the standard effective January 1, 2018. The
Company does not expect the adoption of this standard to have a material impact on the Company’s financial
position, results of operations or cash flows.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which significantly changes the
accounting for operating leases by lessees. The accounting applied by lessors is largely unchanged from that applied
under previous guidance. The new guidance requires lessees to recognize lease assets and lease liabilities in the
balance sheet, initially measured at the present value of the lease payments, for leases which were classified as
operating leases under previous guidance. Lease cost included in the statement of income will be calculated so that
the cost of the lease is allocated over the lease term, generally on a straight-line basis. Lessees may make an
accounting policy election to exclude leases with a term of 12 months or less from the requirement to record related
assets and liabilities. The new standard is effective for public companies for fiscal years beginning after December
15, 2018. The Company plans to adopt the new standard effective January 1, 2019. The Company does not expect
the adoption of this standard to have a material impact on its results of operations or cash flows; however, the
Company has not determined the impact the adoption of this new standard will have on its financial position.
In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606)”, which
does not change the core principles of ASU No. 2014-09 discussed above, but rather clarifies the implementation
guidance in order to eliminate the potential for diversity in practice arising from inconsistent application of the principal
versus agent guidance. Under the new guidance, when an entity determines it is a principal in a transaction, the entity
recognizes revenue in the gross amount of consideration; however in transactions where an entity determines it is an
agent, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled. The
standard is effective for public companies for annual periods beginning after December 15, 2017. The Company
adopted the new standard effective January 1, 2018. The Company does not expect the adoption of this standard to
have a material impact on the Company’s financial position, results of operations or cash flows.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement
of Credit Losses on Financial Instruments”. The standard changes how credit losses are measured for most financial
assets and certain other instruments that currently are not measured through net income. The standard will require
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 67
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
an expected loss model for instruments measured at amortized cost as opposed to the current incurred loss
approach. In valuing available for sale debt securities, allowances will be required to be recorded, rather than the
current approach of reducing the carrying amount, for other than temporary impairments. A cumulative adjustment to
retained earnings is to be recorded as of the beginning of the period of adoption to reflect the impact of applying the
provisions of the standard. The standard is effective for public companies for periods beginning after December 15,
2019 and the Company expects to adopt the new standard as of January 1, 2020. The Company has not yet
determined what impact, if any, the adoption of this new standard will have on the Company's financial position,
results of operations or cash flows.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain
Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” which clarifies how certain
cash receipts and cash payments should be presented on the statement of cash flows. The statement also addresses
how the predominance principle should be applied when cash payments have aspects of more than one class of cash
flows. The standard is effective for public companies in fiscal years beginning after December 15, 2017, and the
Company adopted the standard effective January 1, 2018. The Company does not expect the adoption of this
standard to have a material impact on the Company’s consolidated statement of cash flows.
In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740), Intra-Entity Transfers of Assets
Other Than Inventory” which requires companies to account for the income tax effects of intercompany sales and
transfers of assets other than inventory, such as intangible assets, when the transfer occurs. This is a change from
current guidance, which requires companies to defer the income tax effects of intercompany transfers of assets until
the asset has been sold to an outside party or otherwise recognized by being depreciated, amortized, or impaired.
The new guidance will require companies to defer the income tax effects of only intercompany transfers of inventory.
The standard is effective for public companies in fiscal years beginning after December 15, 2017. The Company
adopted the new standard effective January 1, 2018. The Company does not expect the adoption of this standard to
have a material impact on the Company’s financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805), Clarifying the Definition of
a Business,” which provides additional guidance to assist entities with evaluating whether transactions should be
accounted for as acquisitions (or disposals) of assets or businesses. The standard is effective for public companies
for annual or interim periods beginning after December 15, 2017. The Company adopted the new standard effective
January 1, 2018. The Company does not expect the application of this standard to have a material impact on its
financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350), Simplifying the
Test for Goodwill Impairment,” which eliminates Step 2 from the goodwill impairment test for public companies.
Previously, Step 2 measured a goodwill impairment loss by comparing the implied fair value of a reporting unit’s
goodwill with the carrying amount of that goodwill. The new guidance stipulates that an entity should perform its
annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An
impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair
value, up to the amount of goodwill allocated to the reporting unit. The standard is effective for annual or interim
goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted. The
Company elected to adopt this standard as of December 31, 2017. The application of this standard did not have a
material impact on the Company’s financial position, results of operations or cash flows.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815), Targeted Improvements
to Hedging Activities”, to improve the financial reporting of hedging relationships to better portray the economic
results of an entity’s risk management activities in its financial statements. The new guidance is effective for public
companies for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with early
adoption permitted in any interim period after its issuance. The Company plans to adopt the new standard effective
January 1, 2019. The Company does not expect the application of this standard to have a material impact on its
financial position, results of operations or cash flows.
Forward-Looking Statements
This annual report contains forward-looking statements made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Statements contained anywhere in this Annual Report that are not limited to
historical information are considered forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, including, without limitation, statements regarding:
•
•
•
execution of the Company’s growth and operation strategy;
plans for technological innovation;
compliance with covenants in our credit facility;
68 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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liquidity and capital expenditures;
sufficiency of working capital, cash flows and available capacity under the Company’s credit facilities;
compliance with government regulations;
compliance with manufacturing and delivery timetables;
forecasting of results;
general economic trends and political uncertainty;
government funding and growth of highway construction and commercial projects;
taxes or usage fees;
interest rates;
integration of acquisitions;
industry trends;
pricing, demand and availability of steel, oil and liquid asphalt;
development of domestic oil and natural gas production;
condition of the economy;
strength of the U.S. dollar relative to foreign currencies;
the success of new product lines;
presence in the international marketplace;
suitability of our current facilities;
future payment of dividends;
competition in our business segments;
product liability and other claims;
protection of proprietary technology;
demand for products;
future fillings of backlogs;
employees;
the seasonality of our business;
tax assets and reserves for uncertain tax positions;
critical accounting policies and the impact of accounting changes;
our backlog;
ability to satisfy contingencies;
contributions to retirement plans and plan expenses;
reserve levels for self-insured insurance plans and product warranties;
construction of new manufacturing facilities;
supply of raw materials;
inventory;
plans to reduce indebtedness at the Company’s subsidiaries; and
the Company’s effective tax rate and other impacts of the Tax Cuts and Jobs Act of 2017
These forward-looking statements are based largely on management’s expectations, which are subject to a number
of known and unknown risks, uncertainties and other factors discussed in this report and in other documents filed by
the Company with the Securities and Exchange Commission, which may cause actual results, financial or otherwise,
to be materially different from those anticipated, expressed or implied by the forward-looking statements. All forward-
looking statements included in this document are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking statements to reflect future events or
circumstances. You can identify these statements by forward-looking words such as “expect”, “believe”, “anticipate”,
“goal”, “plan”, “intend”, “estimate”, “may”, “will”, “should”, “could” and similar expressions.
In addition to the risks and uncertainties identified elsewhere herein and in other documents filed by us with the
Securities and Exchange Commission, the risk factors described in this document under the caption “Risk Factors”
should be carefully considered when evaluating our business and future prospects, including without limitation risks
relating to: changes or delays in highway funding; rising interest rates; changes in oil prices; changes in steel prices;
changes in the general economy; unexpected capital expenditures and decreases in liquidity; the timing of large
contracts; production capacity; general business conditions in the industry; non-compliance with covenants in the
Company’s credit facilities; demand for the Company’s products; and those other factors listed from time to time in
the Company’s reports filed with the Securities and Exchange Commission. Certain of the risks, uncertainties and
other factors discussed above are more fully described in the section titled “Risk Factors” in the Company’s Annual
Report to Form 10-K for the year ended December 31, 2017.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 69
ASTEC INDUSTRIES, INC.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
The management of Astec Industries, Inc. and subsidiaries (the “Company”) is responsible for establishing and
maintaining adequate internal control over financial reporting for the Company. The Company’s internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. The Company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of assets of the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may
deteriorate.
Management, under the supervision and with the participation of the Company’s principal executive officer and
principal financial officer, has evaluated the effectiveness of the Company’s internal control over financial reporting as
of December 31, 2017. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission, Internal Control - Integrated Framework (2013). The scope
of management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2017 excluded the business unit that the Company acquired on October 1, 2017 (RexCon, Inc.). The
total consolidated assets with respect to the excluded business unit were $29.3 million as of December 31, 2017, and
the total consolidated revenues with respect to the excluded business unit were $2.7 million for the year ended
December 31, 2017. Management will complete its assessment of the internal control over financial reporting of this
newly-acquired operation during 2018. Based on its assessment, management concluded that, as of December 31,
2017, the Company’s internal control over financial reporting was effective.
KPMG LLP, the Company’s independent registered public accounting firm, has issued an attestation report on the
Company’s internal control over financial reporting as of December 31, 2017.
70 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Astec Industries, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Astec Industries, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting
as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2017 and 2016,
and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the
years in the three-year period ended December 31, 2017, and related notes, and our report dated March 1, 2018
expressed an unqualified opinion on those consolidated financial statements.
The Company acquired RexCon, Inc. (“RexCon”) during 2017, and management excluded from its assessment of
the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017, RexCon’s
internal control over financial reporting associated with total assets of $29.3 million and total revenues of $2.7
million included in the consolidated financial statements of the Company as of and for the year ended December
31, 2017. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the
internal control over financial reporting of RexCon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Knoxville, Tennessee
March 1, 2018
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 71
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Astec Industries, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Astec Industries, Inc. and subsidiaries (the
“Company”) as of December 31, 2017 and 2016, the related consolidated statements of income, comprehensive
income, equity and cash flows for each of the years in the three-year period ended December 31, 2017, and the
related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and
2016, and the results of their operations and their cash flows for each of the years in the three-year period ended
December 31, 2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated March 1, 2018 expressed an unqualified opinion on
the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2015.
Knoxville, Tennessee
March 1, 2018
72 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Assets
Current assets:
Cash and cash equivalents
Investments
Trade receivables, net
Other receivables
Inventories
Prepaid income taxes
Prepaid expenses and other assets
Total current assets
Property and equipment, net
Investments
Goodwill
Intangible assets
Deferred tax assets
Other long-term assets
Total assets
Liabilities and Equity
Current liabilities:
Short-term debt
Current maturities of long-term debt
Accounts payable
Customer deposits
Accrued product warranty
Accrued payroll and related liabilities
Accrued loss reserves
Other accrued liabilities
Total current liabilities
Long-term debt
Deferred income tax liabilities
Other long-term liabilities
Total liabilities
Equity:
Preferred stock - authorized 4,000 shares of $1.00 par value; none issued
Common stock – authorized 40,000 shares of $0.20 par value; issued
and outstanding – 23,070 in 2017 and 23,046 in 2016
Additional paid-in capital
Accumulated other comprehensive loss
Company shares held by SERP, at cost
Retained earnings
Shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
See Notes to Consolidated Financial Statements
December 31
2017
2016
$
$
$
62,280
1,624
114,786
5,166
391,379
12,556
15,178
602,969
190,396
14,553
45,732
30,952
2,576
2,401
889,579
--
2,469
60,417
49,381
15,410
23,297
2,504
25,668
179,146
1,575
1,509
20,584
202,814
82,371
1,024
106,659
4,014
360,404
2,967
19,394
576,833
180,538
13,965
40,804
26,643
2,676
2,142
843,601
4,632
2,538
57,297
39,102
13,156
25,693
2,852
23,591
168,861
4,116
1,669
20,114
194,760
--
--
4,614
141,931
(24,243)
(1,960)
565,330
685,672
1,093
686,765
889,579
$
4,609
139,970
(31,562)
(1,958)
536,771
647,830
1,011
648,841
843,601
$
$
$
$
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 73
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Research and development expenses
Income from operations
Other income:
Interest expense
Interest income
Other income
Income before income taxes
Income taxes
Net income
Net loss attributable to non-controlling interest
Net income attributable to controlling interest
Earnings per Common Share:
Net income attributable to controlling interest:
Basic
Diluted
Weighted average number of common shares outstanding:
Basic
Diluted
See Notes to Consolidated Financial Statements
Year Ended December 31
2016
2017
2015
$
$
$
$
1,184,739
941,610
243,129
160,775
26,817
55,537
$
1,147,431
882,162
265,269
153,145
24,969
87,155
840
1,302
1,218
57,217
19,627
37,590
(205)
37,795
1.64
1.63
23,025
23,184
$
$
1,395
806
529
87,095
32,107
54,988
(171)
55,159
2.40
2.38
22,992
23,142
$
$
983,157
764,314
218,843
145,180
23,676
49,987
1,611
542
3,055
51,973
20,007
31,966
(831)
32,797
1.43
1.42
22,934
23,120
74 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive income (loss):
Change in unrecognized pension and post-retirement
benefit costs
Tax (expense) benefit on change in unrecognized
pension and post-retirement benefit costs
Foreign currency translation adjustments
Tax (expense) benefit on foreign currency translation
adjustments
Other comprehensive income (loss)
Comprehensive loss attributable to non-controlling interest
Comprehensive income attributable to controlling interest
$
See Notes to Consolidated Financial Statements
Year Ended December 31
2016
2017
2015
$
37,590
$
54,988
$
31,966
689
(80)
(178)
(69)
6,699
--
7,319
(232)
45,141
$
29
(2,420)
(5,527)
(7,998)
(137)
47,127
$
36
(13,848)
3,341
(10,649)
(1,603)
22,920
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 75
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation
Amortization
Provision for doubtful accounts
Provision for warranties
Deferred compensation provision (benefit)
Deferred income tax benefit
Gain on disposition of fixed assets
Tax benefit from stock incentive plans
Stock-based compensation
Distributions to SERP participants
Change in operating assets and liabilities, net of effects
of acquisitions:
Sale (purchase) of trading securities, net
Trade and other receivables
Inventories
Prepaid expenses
Other assets
Accounts payable
Customer deposits
Accrued product warranty
Income taxes payable
Accrued retirement benefit costs
Accrued loss reserves
Other accrued liabilities
Other
Net cash provided by operating activities
Cash Flows from Investing Activities
Business acquisition, net of cash acquired
Proceeds from sale of property and equipment
Expenditures for property and equipment
Sale (purchase) of investments
Net cash used by investing activities
See Notes to Consolidated Financial Statements
Year Ended December 31
2016
2015
2017
$
37,590
$
54,988
$
31,966
21,312
4,490
482
16,725
(574)
(291)
(388)
--
3,142
(206)
473
(7,749)
(19,618)
(5,181)
(779)
630
9,379
(14,642)
(597)
45
122
(1,118)
(1,366)
41,881
(26,443)
480
(20,046)
(891)
(46,900)
20,818
3,995
280
18,912
1,742
(3,521)
(224)
--
2,936
(532)
(1,873)
(4,895)
30,839
4,846
2,069
8,836
(762)
(15,125)
181
(50)
229
11,142
(25)
134,806
(39,764)
614
(27,367)
290
(66,227)
20,744
3,334
18
13,743
241
(2,559)
(529)
(345)
1,250
(2,986)
(405)
3,163
(6,499)
(3,016)
(968)
(11,409)
(3,697)
(14,177)
(4,093)
24
103
3,576
3,387
30,866
178
10,054
(21,202)
378
(10,592)
76 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands)
Cash Flows from Financing Activities
Payment of dividends
Borrowings under bank loans
Repayment of bank loans
Proceeds from issuance of common stock
Tax benefit from stock option exercise
Purchase of shares of subsidiaries
Sale (purchase) of Company shares by SERP, net
Withholding tax paid upon vesting of restricted stock units
Proceeds from cash surrender value of life insurance
Net cash used by financing activities
Effect of exchange rates on cash
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental Cash Flow Information
Cash paid during the year for:
Interest
Income taxes, net of refunds
See Notes to Consolidated Financial Statements
$
$
$
$
Year Ended December 31
2016
2017
2015
(9,226) $
--
(7,242)
(9,217) $
5,973
(5,903)
--
--
(106)
289
(507)
--
(16,792)
1,720
(20,091)
82,371
62,280
$
--
--
(696)
(153)
(1,024)
--
(11,020)
(250)
57,309
25,062
82,371
$
(9,193)
106,034
(104,567)
72
345
(653)
2,084
(600)
416
(6,062)
(2,173)
12,039
13,023
25,062
588
26,917
$
$
1,407
28,455
$
$
1,651
29,573
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 77
CONSOLIDATED STATEMENTS OF EQUITY
For the Years Ended December 31, 2017, 2016 and 2015 (in thousands)
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Company
Shares Held
by SERP
Retained
Earnings
Non-
Controlling
Interest
Total
Equity
Balance December 31, 2014
22,930 $ 4,586 $ 135,887
$ (12,915) $ (2,929) $ 467,337 $ 4,186 $ 596,152
Net income
Quarterly dividends ($0.10 per share for 4
quarters)
Other comprehensive loss
Change in ownership percentage of subsidiary
Stock-based compensation
RSU vesting, including tax benefit
Withholding tax on vested RSUs
Sale of Company stock held by SERP, net
Other
32,797
(831)
31,966
8
(9,201)
(9,193)
(10,649)
4
54
1
11
1,249
406
(600)
933
1,151
(772)
(11,421)
(663)
(663)
1,250
417
(600)
2,084
(134)
(134)
Balance December 31, 2015
22,988
4,598
137,883
(23,564)
(1,778)
490,933
1,786
609,858
Net income
Quarterly dividends ($0.10 per share for 4
quarters)
55,159
(171)
54,988
9
(9,226)
(9,217)
Other comprehensive income (loss)
(7,998)
Change in ownership percentage of subsidiary
Stock-based compensation
RSU vesting
Withholding tax on vested RSUs
Sale of Company stock held by SERP, net
Cumulative effect of adopting ASU No. 2016-09
Other
5
53
1
10
2,935
(10)
(1,024)
27
150
34
(7,964)
(1,322)
(1,322)
2,936
--
(1,024)
(153)
55
684
(180)
(95)
684
Balance December 31, 2016
23,046
4,609
139,970
(31,562)
(1,958)
536,771
1,011
648,841
Net income
Quarterly dividends ($0.10 per share for 4
quarters)
37,795
(205)
37,590
10
(9,236)
(9,226)
Other comprehensive income
7,319
Change in ownership percentage of subsidiary
Stock-based compensation
RSU vesting
Withholding tax on vested RSUs
Sale of Company stock held by SERP, net
Other
1
23
5
2,172
(5)
(507)
291
(27)
7,292
(43)
(43)
2,172
--
(507)
289
357
(2)
357
Balance December 31, 2017
23,070 $ 4,614 $ 141,931 $ (24,243) $ (1,960) $ 565,330 $ 1,093 $ 686,765
See Notes to Consolidated Financial Statements
78 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
1. Summary of Significant Accounting Policies
Basis of Presentation - The consolidated financial statements include the accounts of Astec Industries, Inc. and
its domestic and foreign subsidiaries (the “Company”). The Company’s significant wholly-owned and consolidated
subsidiaries at December 31, 2017 are as follows:
Astec Australia Pty Ltd
Astec, Inc.
Astec Mobile Machinery GmbH
Breaker Technology, Inc.
Carlson Paving Products, Inc.
GEFCO, Inc.
Johnson Crushers International, Inc.
Osborn Engineered Products SA (Pty) Ltd
(99% owned)
RexCon, Inc.
Telestack Limited
Astec do Brasil Fabricacao de Equipamentos Ltda. (92% owned)
Astec Insurance Company
Astec Mobile Screens, Inc.
Breaker Technology Ltd.
CEI Enterprises, Inc.
Heatec, Inc.
Kolberg-Pioneer, Inc.
Peterson Pacific Corp.
Power Flame Incorporated
Roadtec, Inc.
Telsmith, Inc.
All intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have
been made to the 2016 consolidated financial statements to conform to the 2017 presentation.
Use of Estimates - The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts reported and disclosed
in the financial statements and accompanying notes. Actual results could differ from those estimates.
Foreign Currency Translation - Subsidiaries located in Australia, Brazil, Canada, Germany, Northern Ireland, and
South Africa operate primarily using local functional currencies. Accordingly, assets and liabilities of these
subsidiaries are translated using exchange rates in effect at the end of the period, and revenues and costs are
translated using average exchange rates for the period. The resulting adjustments are presented as a separate
component of accumulated other comprehensive loss. Foreign currency transaction gains and losses, net are
included in cost of sales and amounted to a gain of $431 in 2017 and losses of $246 and $1,377 in 2016 and 2015,
respectively.
Fair Value of Financial Instruments - For cash and cash equivalents, trade receivables, other receivables, revolving
debt and accounts payable, the carrying amount approximates the fair value because of the short-term nature of
those instruments. Trading equity investments are valued at their estimated fair value based on their quoted market
prices and debt securities are valued based upon a mix of observable market prices and model driven prices derived
from a matrix of observable market prices for assets with similar characteristics obtained from a nationally recognized
third party pricing service.
Financial assets and liabilities are categorized as of the end of each reporting period based upon the level of
judgment associated with the inputs used to measure their fair value. The inputs used to measure the fair value are
identified in the following hierarchy:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - Unadjusted quoted prices in active markets for similar assets or liabilities; or
unadjusted quoted prices for identical or similar assets or liabilities in markets
that are not active; or inputs other than quoted prices that are observable for
the asset or liability.
Level 3 -
Inputs reflect management’s best estimate of what market participants would
use in pricing the asset or liability at the measurement date. Consideration is
given to the risk inherent in the valuation technique and the risk inherent in the
inputs to the model.
All financial assets and liabilities held by the Company at December 31, 2017 and 2016 are classified as Level 1 or
Level 2, as summarized in Note 3, Fair Value Measurements.
Cash and Cash Equivalents - All highly liquid investments with an original maturity of three months or less when
purchased are considered to be cash and cash equivalents.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Investments - Investments consist primarily of investment-grade marketable securities. Trading securities are carried
at fair value, with unrealized holding gains and losses included in net income. Realized gains and losses are
accounted for on the specific identification method. Purchases and sales are recorded on a trade date basis.
Management determines the appropriate classification of its investments at the time of acquisition and reevaluates
such determination at each balance sheet date.
Concentration of Credit Risk - The Company sells products to a wide variety of customers. Accounts receivable are
carried at their outstanding principal amounts, less an allowance for doubtful accounts. The Company extends credit
to its customers based on an evaluation of the customers’ financial condition generally without requiring collateral,
although the Company normally requires advance payments or letters of credit on large equipment orders. Credit risk
is driven by conditions within the economy and the industry and is principally dependent on each customer’s financial
condition. To minimize credit risk, the Company monitors credit levels and financial conditions of customers on a
continuing basis. After considering historical trends for uncollectible accounts, current economic conditions and
specific customer recent payment history and financial stability, the Company records an allowance for doubtful
accounts at a level which management believes is sufficient to cover probable credit losses. Amounts are deemed
past due when they exceed the payment terms agreed to by the customer in the sales contract. Past due amounts
are charged off when reasonable collection efforts have been exhausted and the amounts are deemed uncollectible
by management. As of December 31, 2017, concentrations of credit risk with respect to receivables are limited due to
the wide variety of customers.
Allowance for Doubtful Accounts - The following table represents a rollforward of the allowance for doubtful
accounts for the years ended December 31, 2017, 2016 and 2015:
Allowance balance, beginning of year
Provision
Write offs
Other
Allowance balance, end of year
Year Ended December 31
2016
2017
2015
$
$
1,511
482
(308)
31
1,716
$
$
1,837
280
(560)
(46)
1,511
$
$
2,248
18
(357)
(72)
1,837
Inventories - The Company’s inventory is comprised of raw materials, work-in-process, finished goods and used
equipment.
Raw material inventory is comprised of purchased steel and other purchased items for use in the manufacturing
process or held for sale for the after-market parts business. The category also includes the manufacturing cost of
completed equipment sub-assemblies produced for either integration into equipment manufactured at a later date or
for sale in the Company’s after-market parts business.
Work-in-process inventory consists of the value of materials, labor and overhead incurred to date in the
manufacturing of incomplete equipment or incomplete equipment sub-assemblies being produced.
Finished goods inventory consists of completed equipment manufactured for sale to customers.
Used equipment inventory consists of equipment accepted in trade or purchased on the open market. The category
also includes equipment rented to prospective customers on a short-term or month-to-month basis. Used equipment
is valued at the lower of acquired or trade-in cost or net realizable value determined on each separate unit. Each unit
of rental equipment is valued at the lower of original manufacturing, acquired or trade-in cost or net realizable value.
Inventories are valued at the lower of cost (first-in, first-out) or net realizable value, which requires the Company to
make specific estimates, assumptions and judgments in determining the amount, if any, of reductions in the valuation
of inventories to their net realizable values. The net realizable values of the Company’s products are impacted by a
number of factors, including changes in the price of steel, competitive sales pricing, quantities of inventories on hand,
the age of the individual inventory items, market acceptance of the Company’s products, the Company’s normal
gross margins, actions by our competitors, the condition of our used and rental inventory and general economic
factors. Once an inventory item’s value has been deemed to be less than cost, a net realizable value allowance is
calculated and a new “cost basis” for that item is effectively established. This new cost is retained for that item until
such time as the item is disposed of or the Company determines that an additional write-down is necessary.
Additional write-downs may be required in the future based upon changes in assumptions due to general economic
downturns in the markets in which the Company operates, changes in competitor pricing, new product design or other
80 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
technological advances introduced by the Company or its competitors and other factors unique to individual inventory
items.
The most significant component of the Company’s inventory is steel. A significant decline in the market price of steel
could result in a decline in the market value of the equipment or parts we sell. During periods of significant declining
steel prices, the Company reviews the valuation of its inventories to determine if reductions are needed in the
recorded value of inventory on hand to its net realizable value.
The Company reviews the individual items included in its finished goods, used equipment and rental equipment
inventory on a model-by-model or unit-by-unit basis to determine if any item’s net realizable value is below its
carrying value. This analysis is expanded to include items in work-in-process and raw material inventory if factors
indicate those items may also be impacted. In performing this review, judgments are made and, in addition to the
factors discussed above, additional consideration is given to the age of the specific items of used or rental inventory,
prior sales offers or lack thereof, the physical condition of the specific items and general market conditions for the
specific items. Additionally, an analysis of raw material inventory is performed to calculate reserves needed for
obsolete inventory based upon quantities of items on hand, the age of those items and their recent and expected
future usage or sale.
When the Company determines that the value of inventory has become impaired through damage, deterioration,
obsolescence, changes in price levels, excessive levels of inventory or other causes, the Company reduces the
carrying value to the net realizable value based on estimates, assumptions and judgments made from the information
available at that time. Abnormal amounts of idle facility expense, freight, handling cost and wasted materials are
recognized as current period charges.
Property and Equipment - Property and equipment is stated at cost. Depreciation is calculated for financial reporting
purposes using the straight-line method based on the estimated useful lives of the assets as follows: airplanes (20
years), buildings (40 years) and equipment (3 to 10 years). Both accelerated and straight-line methods are used for
tax compliance purposes. Routine repair and maintenance costs and planned major maintenance are expensed
when incurred.
Goodwill and Other Intangible Assets - The Company classifies intangible assets as either intangible assets with
definite lives subject to amortization or goodwill.
The Company tests intangible assets with definite lives for impairment if conditions exist that indicate the carrying
value may not be recoverable. Such conditions may include an economic downturn in a geographic market or a
change in the assessment of future operations. An impairment charge is recorded when the carrying value of the
definite lived intangible asset is not recoverable by the future undiscounted cash flows expected to be generated from
the use of the asset.
The Company determines the useful lives of identifiable intangible assets after considering the specific facts and
circumstances related to each intangible asset. Factors considered when determining useful lives include the
contractual terms of agreements, the history of the asset, the Company’s long-term strategy for the use of the asset,
any laws or other local regulations which could impact the useful life of the asset, and other economic factors,
including competition and specific market conditions. Intangible assets that are deemed to have definite lives are
amortized over their useful lives as follows: dealer network and customer relationships: 8-19 years; trade names: 15
years; other: 5-19 years.
Goodwill is not amortized. The Company tests goodwill for impairment annually or more frequently if events or
circumstances indicate that goodwill might be impaired. The Company uses qualitative factors to determine whether it
is more likely than not (a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its
carrying value, including goodwill. The Company estimates the fair values of each of its reporting units using the
income approach.
The income approach uses a reporting unit’s projection of estimated future operating results and cash flows which
are then discounted using a weighted average cost of capital determined based on current market conditions for the
individual reporting unit. The projection uses management’s best estimates of cash flows over the projection period
based on estimates of annual and terminal growth rates in sales and costs, and changes in operating margins,
selling, general and administrative expenses, working capital requirements and capital expenditures. Other factors
used in evaluating the fair value of a reporting unit could include deterioration in the general economy, fluctuations in
foreign exchange, deterioration in the industry or markets in which the reporting unit operates, an increased
competitive market, regulatory or political developments in the market, increases in raw materials, labor costs or other
factors that have a negative effect on earnings and cash flows, a decline in actual or budgeted earnings or cash
flows, and entity specific changes in management, key personnel, strategy or customer base. If the fair value of a
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
reporting unit is found to be less than its book value, the company will record an impairment loss equal to the excess,
if any, of the book value over the fair value of its goodwill.
The fair value of reporting units that do not have goodwill are estimated using either the income or market
approaches, depending on which approach is the most appropriate for each reporting unit. The fair value of the
reporting units that serve operating units in supporting roles, such as the captive insurance company and the
corporate reporting unit are estimated using the cost approach. The sum of the fair values of all reporting units is
compared to the fair value of the consolidated Company, calculated using the market approach, which is inferred
from the market capitalization of the Company at the date of the valuation, to confirm that the Company’s estimation
of the fair value of its reporting units is reasonable.
Determining the fair values of the Company’s reporting units involves the use of significant estimates and
assumptions. Due to the inherent uncertainty involved in making these estimates and assumptions, actual results
could differ materially from those estimates.
Impairment of Long-lived Assets - In the event that facts and circumstances indicate the carrying amounts of long-
lived assets may be impaired, an evaluation of recoverability is performed. If an evaluation is required, the estimated
future undiscounted cash flows associated with the asset are compared to the carrying amount for each asset (or
group of assets) to determine if a write-down is required. If this review indicates that the assets will not be
recoverable, the carrying values of the impaired assets are reduced to their estimated fair value. Fair value is
estimated using discounted cash flows, prices for similar assets or other valuation techniques.
Self-Insurance Reserves - The Company retains the risk for a portion of its workers’ compensation claims and
general liability claims by way of a captive insurance company, Astec Insurance Company (“Astec Insurance” or the
“captive”). Astec Insurance was originally incorporated under the laws of the state of Vermont but was redomiciled to
the state of Tennessee in late 2017. The objectives of Astec Insurance are to improve control over and reduce the
cost of claims; to improve focus on risk reduction with the development of a program structure which rewards
proactive loss control; and to ensure management participation in the defense and settlement process for claims.
For general liability claims, the captive is liable for the first $1,000 per occurrence and $3,000 per year in the
aggregate. The Company carries general liability, excess liability and umbrella policies for claims in excess of
amounts covered by the captive.
For workers’ compensation claims, the captive is liable for the first $350 per occurrence and $3,250 per year in the
aggregate. The Company utilizes a large national insurance company as third-party administrator for workers’
compensation claims and carries insurance coverage for claims liabilities in excess of amounts covered by the
captive.
The financial statements of the captive are consolidated into the consolidated financial statements of the Company.
The short-term and long-term reserves for claims and potential claims related to general liability and workers’
compensation under the captive are included in accrued loss reserves or other long-term liabilities, respectively, in
the consolidated balance sheets depending on the expected timing of future payments. The undiscounted reserves
are actuarially determined to cover the ultimate cost of each claim based on the Company’s evaluation of the type
and severity of individual claims and historical information, primarily its own claims experience, along with
assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause
these estimates to change in the future. However, the Company does not believe it is reasonably likely that the
reserve level will materially change in the foreseeable future.
The Company is self-insured for health and prescription claims under its Group Health Insurance Plan at all but one
of the Company’s domestic manufacturing subsidiaries. The Company carries reinsurance coverage to limit its
exposure for individual health claims above certain limits. Third parties administer health claims and prescription
medication claims. The Company maintains a reserve for the self-insured health plan which is included in accrued
loss reserves on the Company’s consolidated balance sheets. This reserve includes both unpaid claims and an
estimate of claims incurred but not reported, based on historical claims and payment experience. Historically, the
reserves have been sufficient to provide for claims payments. Changes in actual claims experience or payment
patterns could cause the reserve to change, but the Company does not believe it is reasonably likely that the reserve
level will materially change in the near future.
The remaining U.S. subsidiary is covered under a fully insured group health plan. Employees of the Company’s
foreign subsidiaries are insured under separate health plans. No reserves are necessary for these fully-insured health
plans.
82 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Revenue Recognition - Revenue is generally recognized on sales at the point in time when persuasive evidence of
an arrangement exists, the price is fixed or determinable, the product has been delivered or services have been
rendered and there is a reasonable assurance of collection of the sales proceeds. The Company generally obtains
purchase authorizations from its customers for a specified amount of products at a specified price with specified
delivery terms. A significant portion of the Company’s equipment sales represents equipment produced in the
Company’s plants under short-term contracts for a specific customer project or equipment designed to meet a
customer’s specific requirements. Most of the equipment sold by the Company is based on standard configurations,
some of which are modified to meet customer needs or specifications. The Company provides customers with
technical design and performance specifications and performs pre-shipment testing to ensure the equipment
performs according to design specifications, regardless of whether the Company provides installation services in
addition to selling the equipment.
Certain contracts include terms and conditions pursuant to which the Company recognizes revenues upon completion
of equipment production, which is subsequently stored at the Company’s plant at the customer’s request. Revenue is
recorded on such contracts upon the customer’s assumption of title and risk of ownership and when collectability is
reasonably assured. In addition, there must be a fixed schedule of delivery of the goods consistent with the
customer’s business practices, the Company must not have retained any specific performance obligations such that
the earnings process is not complete and the goods must have been segregated from the Company’s inventory prior
to revenue recognition.
The Company has certain sales accounted for as multiple-element arrangements, whereby revenue attributable to
the sale of a product is recognized when the product is shipped, and the revenue attributable to services provided
with respect to the product (such as installation services) is recognized when the service is performed. Consideration
is allocated to deliverables using the relative selling price method using vendor specific objective evidence, if it exists.
Otherwise, the Company uses third-party evidence of selling price or the Company’s best estimate of the selling price
for the deliverables. The Company evaluates sales with multiple deliverable elements (such as an agreement to
deliver equipment and related installation services) to determine whether revenue related to individual elements
should be recognized separately, or as a combined unit. In addition to the previously mentioned general revenue
recognition criteria, the Company only recognizes revenue on individual delivered elements when there is objective
and reliable evidence that the delivered element has a determinable value to the customer on a standalone basis and
there is no right of return.
The Company has certain sales accounted for under the percentage of completion method using the ratio of costs
incurred to estimated total costs. Revenue, in an amount equal to cost incurred, is recognized until there is sufficient
information to determine the estimated profit on the project with a reasonable level of certainty. The factors
considered in this evaluation include the stage of design completion, the stage of equipment manufacturing
completion, the state of construction completion, the status of outstanding subcontracts, certainty of quantities of
labor and materials, certainty of schedule and the relationship with the customer.
The Company presents in the consolidated statements of income any taxes assessed by a governmental authority
that are directly imposed on revenue-producing transactions between the Company and its customers, such as sales,
use, value-added and some excise taxes, on a net (excluded from revenue) basis.
Advertising Expense - The cost of advertising is expensed as incurred. The Company incurred $3,793, $4,045, and
$4,231 in advertising costs during 2017, 2016 and 2015, respectively, which is included in selling, general and
administrative expenses.
Income Taxes - Income taxes are based on pre-tax financial accounting income. Deferred tax assets and liabilities
are recognized for the expected tax consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts. The Company periodically assesses the need to establish valuation allowances
against its deferred tax assets to the extent the Company no longer believes it is more likely than not that the tax
assets will be fully utilized.
The Company evaluates a tax position to determine whether it is more likely than not that the tax position will be
sustained upon examination, based upon the technical merits of the position. A tax position that meets the more-
likely-than-not recognition threshold is subject to a measurement assessment to determine the amount of benefit to
recognize and the appropriate reserve to establish, if any. If a tax position does not meet the more-likely-than-not
recognition threshold, no benefit is recognized. The Company is periodically audited by U.S. federal and state as well
as foreign tax authorities. While it is often difficult to predict final outcome or timing of resolution of any particular tax
matter, the Company believes its reserve for uncertain tax positions is adequate to reduce the uncertain positions to
the greatest amount of benefit that is more likely than not realizable.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Product Warranty Reserve - The Company accrues for the estimated cost of product warranties at the time revenue
is recognized. Warranty obligations by product line or model are evaluated based on historical warranty claims
experience. For equipment, the Company’s standard product warranty terms generally include post-sales support and
repairs of products at no additional charge for periods ranging from three months to two years or up to a specified
number of hours of operation. For parts from component suppliers, the Company relies on the original manufacturer’s
warranty that accompanies those parts. Generally, Company fabricated parts are not covered by specific warranty
terms. Although failure of fabricated parts due to material or workmanship is rare, if it occurs, the Company’s policy is
to replace fabricated parts at no additional charge.
The Company engages in extensive product quality programs and processes, including actively monitoring and
evaluating the quality of our component suppliers. Estimated warranty obligations are based upon warranty terms,
product failure rates, repair costs and current period machine shipments. If actual product failure rates, repair costs,
service delivery costs or post-sales support costs differ from our estimates, revisions to the estimated warranty
liability may be required.
Pension and Retirement Plans - The determination of obligations and expenses under the Company’s pension plan
is dependent on the Company’s selection of certain assumptions used by independent actuaries in calculating such
amounts. Those assumptions are described in Note 12, Pension and Retirement Plans and include among others,
the discount rate, expected return on plan assets and the expected mortality rates. In accordance with U.S. generally
accepted accounting principles, actual results that differ from assumptions are accumulated and amortized over
future periods and, therefore, generally affect the recognized expense in such periods. Significant differences in
actual experience or significant changes in the assumptions used may materially affect the pension obligations and
future expenses.
The Company recognizes the overfunded or underfunded status of its pension plan as an asset or liability. Actuarial
gains and losses, amortization of prior service cost (credit) and amortization of transition obligations are recognized
through other comprehensive income (loss) in the year in which the changes occur. The Company measures the
funded status of its pension plan as of the date of the Company’s fiscal year-end.
Stock-based Compensation - The Company recognizes the cost of employee services received in exchange for
equity awards in the consolidated financial statements based on the grant date calculated fair value of the awards.
The Company recognizes stock-based compensation expense over the period during which an employee is required
to provide service in exchange for the award (the vesting period). The Company’s equity awards are further described
in Note 16, Shareholders’ Equity.
Earnings Per Share - Basic earnings per share is based on the weighted average number of common shares
outstanding and diluted earnings per share includes potential dilutive effects of restricted stock units and shares held
in the Company’s supplemental executive retirement plan.
The following table sets forth a reconciliation of the number of shares used in the computation of basic and diluted
earnings per share:
Denominator:
Denominator for basic earnings per share
Effect of dilutive securities:
Restricted stock units
Supplemental executive retirement plan
Denominator for diluted earnings per share
Year Ended December 31
2016
2017
2015
23,025
22,992
22,934
96
63
23,184
85
65
23,142
123
63
23,120
Derivatives and Hedging Activities - The Company recognizes all derivatives in the consolidated balance sheets at
their fair value. Derivatives that are not hedges are adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in
fair value of assets, liabilities, or firm commitments through income or recognized in other comprehensive income
until the hedged item is recognized in income. The ineffective portion of a derivative’s change in fair value is
immediately recognized in income. From time to time, the Company’s foreign subsidiaries enter into foreign currency
exchange contracts to mitigate exposure to fluctuation in currency exchange rates. See Note 13, Derivative Financial
Instruments, regarding foreign exchange contracts outstanding at December 31, 2017 and 2016.
84 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Shipping and Handling Fees and Cost - The Company records revenues earned for shipping and handling as
revenue, while the cost of shipping and handling is classified as cost of sales.
Business Combinations - The Company accounts for business combinations using the acquisition method.
Accordingly, intangible assets are recorded apart from goodwill if they arise from contractual or legal rights or if they
are separable from goodwill. Related third-party acquisition costs are expensed as incurred and contingent
consideration is booked at its fair value as part of the purchase price. See Note 20, Business Combinations,
regarding acquisitions completed by the Company in the years ended December 31, 2017 and 2016.
Subsequent Events Review - Management has evaluated events occurring between December 31, 2017 and the
date these consolidated financial statements were filed with the Securities and Exchange Commission for proper
recording or disclosure therein.
Recent Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board (‘FASB”) issued
Accounting Standards Update (“ASU”) No. 2014-09, "Revenue from Contracts with Customers", which supersedes
existing revenue guidance under U.S. GAAP. The standard's core principle is that a company will recognize revenue
when it transfers promised goods or services to customers in an amount that reflects the consideration to which the
company expects to be entitled in exchange for those goods or services. The implementation of this new standard will
require companies to use more judgment and to make more estimates than under current guidance and to expand
their disclosures to include information regarding contract assets and liabilities as well as a more disaggregated view
of revenue. The standard, as amended, is effective for public companies for annual periods beginning after
December 15, 2017. The Company adopted the new standard effective January 1, 2018 using the modified
retrospective transition method and will expand its disclosures in the first quarter 2018 consolidated financial
statements to comply with the disclosure provisions of the new rule. The Company does not expect the adoption of
the standard to have a material impact on its financial position, results of operations or cash flows.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10)”, which
requires, among other things, equity investments with readily determinable fair values, except those accounted for
under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair
value with changes in fair value recognized in net income. The standard is effective for public companies in fiscal
years beginning after December 15, 2017, and the Company adopted the standard effective January 1, 2018. The
Company does not expect the adoption of this standard to have a material impact on the Company's financial
position, cash flows or results of operations.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which significantly changes the
accounting for operating leases by lessees. The accounting applied by lessors is largely unchanged from that applied
under previous guidance. The new guidance requires lessees to recognize lease assets and lease liabilities in the
balance sheet, initially measured at the present value of the lease payments, for leases which were classified as
operating leases under previous guidance. Lease cost included in the statement of income will be calculated so that
the cost of the lease is allocated over the lease term, generally on a straight-line basis. Lessees may make an
accounting policy election to exclude leases with a term of 12 months or less from the requirement to record related
assets and liabilities. The new standard is effective for public companies for fiscal years beginning after December
15, 2018. The Company plans to adopt the new standard effective January 1, 2019. The Company does not expect
the adoption of this standard to have a material impact on its results of operations or cash flows; however, the
Company has not determined the impact the adoption of this new standard will have on its financial position.
In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606)”, which
does not change the core principles of ASU No. 2014-09 discussed above, but rather clarifies the implementation
guidance in order to eliminate the potential for diversity in practice arising from inconsistent application of the principal
versus agent guidance. Under the new guidance, when an entity determines it is a principal in a transaction, the entity
recognizes revenue in the gross amount of consideration; however, in transactions where an entity determines it is an
agent, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled. The
standard is effective for public companies for annual periods beginning after December 15, 2017. The Company
adopted the new standard effective January 1, 2018. The Company does not expect the adoption of this new
standard to have a material impact on the Company’s financial position, results of operations or cash flows.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement
of Credit Losses on Financial Instruments”. The standard changes how credit losses are measured for most financial
assets and certain other instruments that currently are not measured through net income. The standard will require
an expected loss model for instruments measured at amortized cost as opposed to the current incurred loss
approach. In valuing available for sale debt securities, allowances will be required to be recorded, rather than the
current approach of reducing the carrying amount, for other than temporary impairments. A cumulative adjustment to
retained earnings is to be recorded as of the beginning of the period of adoption to reflect the impact of applying the
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
provisions of the standard. The standard is effective for public companies for periods beginning after December 15,
2019 and the Company expects to adopt the new standard as of January 1, 2020. The Company has not yet
determined what impact, if any, the adoption of this new standard will have on the Company's financial position,
results of operations or cash flows.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain
Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” which clarifies how certain
cash receipts and cash payments should be presented on the statement of cash flows. The statement also addresses
how the predominance principle should be applied when cash payments have aspects of more than one class of cash
flows. The standard is effective for public companies in fiscal years beginning after December 15, 2017, and the
Company adopted the standard effective January 1, 2018. The Company does not expect the adoption of this new
standard to have a material impact on the Company's consolidated statements of cash flows.
In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740), Intra-Entity Transfers of Assets
Other Than Inventory” which requires companies to account for the income tax effects of intercompany sales and
transfers of assets other than inventory, such as intangible assets, when the transfer occurs. This is a change from
current guidance, which requires companies to defer the income tax effects of intercompany transfers of assets until
the asset has been sold to an outside party or otherwise recognized by being depreciated, amortized, or impaired.
The new guidance will require companies to defer the income tax effects of only intercompany transfers of inventory.
The standard is effective for public companies in fiscal years beginning after December 15, 2017. The Company
adopted the new standard effective January 1, 2018. The Company does not expect the application of this standard
to have a material impact on the Company's financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805), Clarifying the Definition of
a Business,” which provides additional guidance to assist entities with evaluating whether transactions should be
accounted for as acquisitions (or disposals) of assets or businesses. The standard is effective for public companies
for annual or interim periods beginning after December 15, 2017. The Company adopted the new standard effective
January 1, 2018. The Company does not expect the application of this standard to have a material impact on its
financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350), Simplifying the
Test for Goodwill Impairment,” which eliminates Step 2 from the goodwill impairment test for public companies.
Previously, Step 2 measured a goodwill impairment loss by comparing the implied fair value of a reporting unit’s
goodwill with the carrying amount of that goodwill. The new guidance stipulates that an entity should perform its
annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An
impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair
value, up to the amount of goodwill allocated to the reporting unit. The standard is effective for annual or interim
goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted. The
Company elected to adopt this standard as of December 31, 2017. The application of this standard did not have a
material impact on the Company’s financial position, results of operations or cash flows.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815), Targeted Improvements
to Hedging Activities”, to improve the financial reporting of hedging relationships to better portray the economic
results of an entity’s risk management activities in its financial statements. The new guidance is effective for public
companies for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with early
adoption permitted in any interim period after its issuance. The Company plans to adopt the new standard effective
January 1, 2019. The Company does not expect the application of this standard to have a material impact on its
financial position, results of operations or cash flows.
2. Inventories
Inventories consist of the following:
Raw materials and parts
Work-in-process
Finished goods
Used equipment
Total
86 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
December 31
2017
146,144 $
129,441
94,571
21,223
391,379 $
$
$
2016
137,763
115,613
84,898
22,130
360,404
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
3. Fair Value Measurements
The Company has various financial instruments that must be measured at fair value on a recurring basis, including
marketable debt and equity securities held by Astec Insurance, and marketable equity securities held in an
unqualified Supplemental Executive Retirement Plan (“SERP”). The financial assets held in the SERP also constitute
a liability of the Company for financial reporting purposes. The Company’s subsidiaries also occasionally enter into
foreign currency exchange contracts to mitigate exposure to fluctuations in currency exchange rates.
For cash and cash equivalents, trade receivables, other receivables, revolving debt and accounts payable, the
carrying amount approximates the fair value because of the short-term nature of these instruments. Investments are
carried at their fair value based on quoted market prices for identical or similar assets or, where no quoted prices
exist, other observable inputs for the asset. The fair values of foreign currency exchange contracts are based on
quotations from various banks for similar instruments using models with market based inputs.
As indicated in the tables below, the Company has determined that its financial assets and liabilities at December 31,
2017 and 2016 are level 1 and level 2 in the fair value hierarchy:
Financial Assets:
Trading equity securities:
SERP money market fund
SERP mutual funds
Preferred stocks
Trading debt securities:
Corporate bonds
Municipal bonds
Floating rate notes
U.S. Treasury bills
Asset-backed securities
Other
Total financial assets
Financial Liabilities:
SERP liabilities
Derivative financial instruments
Total financial liabilities
Level 1
December 31, 2017
Level 2
Total
$
$
124
4,839
364
$
--
--
--
5,661
--
753
1,030
--
--
12,771
--
--
--
$
$
$
$
$
$
--
1,912
--
--
526
968
3,406
8,552
112
8,664
$
$
$
124
4,839
364
5,661
1,912
753
1,030
526
968
16,177
8,552
112
8,664
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Financial Assets:
Trading equity securities:
SERP money market fund
SERP mutual funds
Preferred stocks
Trading debt securities:
Corporate bonds
Municipal bonds
Floating rate notes
U.S. Treasury bills
Asset-backed securities
Other
Derivative financial instruments
Total financial assets
Financial Liabilities:
SERP liabilities
Derivative financial instruments
Total financial liabilities
Level 1
December 31, 2016
Level 2
Total
$
$
$
$
92
3,335
475
5,413
--
118
388
--
--
--
9,821
--
--
--
$
$
$
$
$
--
--
--
--
2,248
--
--
637
2,283
144
5,312
7,882
89
7,971
$
$
$
92
3,335
475
5,413
2,248
118
388
637
2,283
144
15,133
7,882
89
7,971
The Company reevaluates the volume of trading activity for each of its investments at the end of each reporting
period and adjusts the level within the fair value hierarchy as needed.
4. Investments
The Company’s trading securities consist of the following:
December 31, 2017
Trading equity securities
Trading debt securities
Total
December 31, 2016
Trading equity securities
Trading debt securities
Total
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
(Net Carrying
Amount)
$
$
$
$
4,964 $
10,971
15,935 $
3,980 $
11,312
15,292 $
394 $
58
452 $
40 $
23
63 $
31 $
179
210 $
118 $
248
366 $
5,327
10,850
16,177
3,902
11,087
14,989
Trading equity investments are valued at their estimated fair value based on their quoted market prices and trading
debt securities are valued based upon a mix of observable market prices and model driven prices derived from a
matrix of observable market prices for assets with similar characteristics obtained from a nationally recognized third-
party pricing service. Additionally, a significant portion of the trading equity securities are in equity money market and
mutual funds and also comprise a portion of the Company’s liability under its SERP. See Note 12, Pension and
Retirement Plans, for additional information on these investments and the SERP.
Trading debt securities are comprised mainly of marketable debt securities held by Astec Insurance. Astec Insurance
has an investment strategy that focuses on providing regular and predictable interest income from a diversified
portfolio of high-quality fixed income securities.
Net unrealized gains or losses incurred on investments still held as of the end of each reporting period amounted to
losses of $319, $107 and $429 in 2017, 2016 and 2015, respectively.
88 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
5. Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in
business combinations. Current U.S. accounting guidance provides that goodwill and indefinite-lived intangible assets
be tested for impairment at least annually. The Company performs the required valuation procedures each year as of
December 31 after the following year’s forecasts are submitted and reviewed. The valuations performed in 2017,
2016 and 2015 indicated no impairment of goodwill.
The changes in the carrying amount of goodwill by reporting segment during the years ended December 31, 2017
and 2016 are as follows:
Balance, December 31, 2015
Acquisition
Foreign currency translation
Balance, December 31, 2016
Acquisition
Foreign currency translation
Balance, December 31, 2017
6. Intangible Assets
Infrastructure
Group
$
$
8,481
--
(33)
8,448
--
125
8,573
Aggregate and
Mining Group Energy Group
$
$
22,354
--
(2,630)
19,724
--
1,315
21,039
$
$
--
12,632
--
12,632
3,488
--
16,120
Total
30,835
12,632
(2,663)
40,804
3,488
1,440
45,732
$
$
Intangible assets consisted of the following at December 31, 2017 and 2016:
2017
2016
Gross Carrying
Value
Accumulated
Amortization
Net Carrying
Value
Gross Carrying
Value
Accumulated
Amortization
Net Carrying
Value
Dealer network and customer
relationships
Trade names
Other
Total
$ 31,376
9,650
6,821
$ 47,847
$ 10,856
1,914
4,125
$ 20,520
7,736
2,696
$ 16,895 $ 30,952
$ 26,035
7,021
5,764
$ 38,820
$
7,584
1,362
3,231
$ 18,451
5,659
2,533
$ 12,177 $ 26,643
Amortization expense on intangible assets was $4,064, $3,562 and $2,953 for 2017, 2016 and 2015, respectively.
Intangible asset amortization expense is expected to be $5,172, $4,069, $3,628, $3,191 and $2,686 in the years
ending December 31, 2018, 2019, 2020, 2021 and 2022 respectively, and $12,206 thereafter.
7. Property and Equipment
Property and equipment consist of the following:
Land
Building and land improvements
Manufacturing and office equipment
Aviation equipment
Less accumulated depreciation
Total
December 31
2017
2016
$
$
15,568
154,019
244,324
14,227
(237,742)
190,396
$
$
14,768
140,229
231,816
14,169
(220,444)
180,538
Depreciation expense was $21,312, $20,818 and $20,744 for the years ended December 31, 2017, 2016 and 2015,
respectively.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
8. Leases
The Company leases certain land, buildings and equipment for use in its operations under various operating leases.
Total rental expense charged to operations under operating leases was approximately $3,211, $2,792 and $2,786 for
the years ended December 31, 2017, 2016 and 2015, respectively.
Minimum rental commitments for all noncancelable operating leases at December 31, 2017 are as follows:
2018
2019
2020
2021
2022
Thereafter
$
$
2,146
1,965
1,006
634
279
233
6,263
9. Debt
On April 12, 2017, the Company and certain of its subsidiaries entered into an amended and restated credit
agreement whereby the lender extended to the Company an unsecured line of credit of up to $100,000, including a
sub-limit for letters of credit of up to $30,000. There were no outstanding revolving or term loan borrowings under the
credit facility at December 31, 2017 or 2016. Letters of credit totaling $9,757, including $3,200 of letters of credit
issued to banks in Brazil to secure the local debt of Astec do Brasil Fabricacao de Equipamentos Ltda. (“Astec
Brazil”), were outstanding under the credit facility as of December 31, 2017, resulting in additional borrowing ability of
$90,243 under the credit facility. The credit agreement has a five-year term expiring in April 2022. Borrowings under
the agreement are subject to an interest rate equal to the daily one-month LIBOR rate plus a 0.75% margin, resulting
in a rate of 2.32% as of December 31, 2017. The unused facility fee is 0.125%. Interest only payments are due
monthly. The amended and restated credit agreement contains certain financial covenants, including provisions
concerning required levels of annual net income and minimum tangible net worth.
The Company’s South African subsidiary, Osborn Engineered Products SA (Pty) Ltd (“Osborn”), has a credit facility of
$7,672 with a South African bank to finance short-term working capital needs, as well as to cover performance letters
of credit, advance payment and retention guarantees. As of December 31, 2017, Osborn had no outstanding
borrowings but had $813 in performance, advance payment and retention guarantees outstanding under the facility.
The facility has been guaranteed by Astec Industries, Inc., but is otherwise unsecured. A 0.75% unused facility fee is
charged if less than 50% of the facility is utilized. As of December 31, 2017, Osborn had available credit under the
facility of $6,859. The interest rate is 0.25% less than the South Africa prime rate, resulting in a rate of 10.0% as of
December 31, 2017.
The Company's Brazilian subsidiary has outstanding working capital loans totaling $3,402 from Brazilian banks with
interest rates ranging from 10.4% to 11.0%. The loans’ maturity dates ranging from November 2018 to April 2024 and
are secured by Astec Brazil’s manufacturing facility and also by letters of credit totaling $3,200 issued by Astec
Industries, Inc. Additionally, Astec Brazil has various five-year equipment financing loans outstanding with Brazilian
banks in the aggregate of $642 as of December 31, 2017 that have interest rates ranging from 3.5% to 16.3%. These
equipment loans have maturity dates ranging from September 2018 to April 2020. Astec Brazil's loans are included in
the accompanying consolidated balance sheets as current maturities of long-term debt of $2,469 and long-term debt
of $1,575 as of December 31, 2017.
Long-term debt maturities are expected to be $2,469, $729, $251, $251 and $251 in the years ending December 31,
2018, 2019, 2020, 2021 and 2022, respectively, and $93 thereafter.
10. Product Warranty Reserves
The Company warrants its products against manufacturing defects and performance to specified standards. The
warranty period and performance standards vary by product, but generally range from three months to two years or
up to a specified number of hours of operation. The Company estimates the costs that may be incurred under its
warranties and records a liability at the time product sales are recorded. The warranty liability is primarily based on
historical claim rates, nature of claims and the associated costs.
90 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Changes in the Company’s product warranty liability during 2017, 2016 and 2015 are as follows:
Reserve balance, beginning of year
Warranty liabilities accrued
Warranty liabilities settled
Other
Reserve balance, end of year
11. Accrued Loss Reserves
2017
2016
2015
$
$
13,156
16,725
(14,642)
171
15,410
$
$
9,100
18,912
(15,125)
269
13,156
$
$
10,032
13,743
(14,177)
(498)
9,100
The Company accrues reserves for losses related to known workers’ compensation and general liability claims that
have been incurred but not yet paid or are estimated to have been incurred but not yet reported to the Company. The
undiscounted reserves are actuarially determined based on the Company’s evaluation of the type and severity of
individual claims and historical information, primarily its own claim experience, along with assumptions about future
events. Changes in assumptions, as well as changes in actual experience, could cause these estimates to change in
the future. Total accrued loss reserves at December 31, 2017 were $8,119 and $7,892 at December 31, 2016, of
which $5,615 and $5,040 were included in other long-term liabilities at December 31, 2017 and 2016, respectively.
12. Pension and Retirement Plans
Prior to December 31, 2003, all employees of the Company’s Kolberg-Pioneer, Inc. subsidiary were covered by a
defined benefit pension plan. After December 31, 2003, all benefit accruals under the plan ceased and no new
employees could become participants in the plan. Benefits paid under this plan are based on years of service
multiplied by a monthly amount. The Company’s funding policy for the plan is to make at least the minimum annual
contributions required by applicable regulations.
The Company’s investment strategy for the plan is to earn a rate of return sufficient to match or exceed the long-term
growth of pension liabilities. The investment policy states that the Plan Committee in its sole discretion shall
determine the allocation of plan assets among the following four asset classes: cash equivalents, fixed-income
securities, domestic equities and international equities. The Plan Committee attempts to ensure adequate
diversification of the invested assets through investment in an exchange traded mutual fund that invests in a
diversified portfolio of stocks, bonds and money market securities.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
The following provides information regarding benefit obligations, plan assets and the funded status of the plan:
Change in benefit obligation
Benefit obligation, beginning of year
Interest cost
Actuarial loss
Benefits paid
Benefit obligation, end of year
Accumulated benefit obligation
Change in plan assets
Fair value of plan assets, beginning of year
Actual gain on plan assets
Employer contribution
Benefits paid
Fair value of plan assets, end of year
Funded status, end of year
Amounts recognized in the consolidated balance sheets
Noncurrent liabilities
Net amount recognized
Amounts recognized in accumulated other comprehensive loss
consist of
Net loss
Net amount recognized
Weighted average assumptions used to determine benefit obligations as of
December 31
Discount rate
Expected return on plan assets
Rate of compensation increase
$
$
$
$
$
$
Pension Benefits
2017
2016
$
16,104
630
867
(685)
16,916
16,916
13,241
1,746
415
(685)
14,717
(2,199) $
15,565
650
514
(625)
16,104
16,104
12,688
763
415
(625)
13,241
(2,863)
(2,199) $
(2,199) $
(2,863)
(2,863)
5,463
5,463
$
$
6,152
6,152
3.50%
6.25%
N/A
4.00%
6.25%
N/A
The measurement date used for the plan was December 31. In determining the expected return on plan assets, the
historical experience of the plan assets, the current and expected allocation of the plan assets and the expected long-
term rates of return were considered.
All assets in the plan are invested in an exchange traded mutual fund (level 1 in the fair value hierarchy). The
allocation of assets within the mutual fund as of December 31 and the target asset allocation ranges by asset
category are as follows:
Asset Category
Equity securities
Debt securities
Cash and Equivalents
Total
Actual Allocation
2017
2016
49.4%
43.2%
7.4%
100.0%
63.6%
33.5%
2.9%
100.0%
2017 & 2016 Target
Allocation Ranges
40 - 65%
30 - 50%
0 - 15%
92 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Net periodic benefit cost for 2017, 2016 and 2015 included the following components:
Components of net periodic benefit cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Net periodic benefit cost
Other changes in plan assets and benefit obligations recognized in
other comprehensive income (loss)
Net actuarial gain (loss) for the year
Amortization of net loss
Total recognized in other comprehensive income (loss)
Total recognized in net periodic benefit cost and other comprehensive income
(loss)
Weighted average assumptions used to determine net periodic benefit
cost for years ended December 31
Discount rate
Expected return on plan assets
No contributions are expected to be funded by the Company during 2018.
Pension Benefits
2017
2016
2015
$
$
630
(720)
530
440
$
650
(782)
480
348
596
(840)
500
256
(159)
(530)
(689)
533
(480)
53
702
(500)
202
$
(249)
$
401
$
458
4.00%
6.25%
4.28%
7.00%
3.81%
7.00%
Amounts in accumulated other comprehensive loss expected to be recognized in net periodic benefit cost in 2018 for
the amortization of a net loss is $466.
The following estimated future benefit payments are expected in the years indicated:
2018
2019
2020
2021
2022
2023 - 2027
Pension Benefits
800
$
830
860
890
9,100
4,810
The Company sponsors a 401(k) defined contribution plan to provide eligible employees with additional income upon
retirement. The Company’s contributions to the plan are based on employee contributions. The Company’s
contributions totaled $7,182, $5,943 and $5,292 in 2017, 2016 and 2015, respectively.
The Company maintains a SERP for certain of its executive officers. The plan is a non-qualified deferred
compensation plan administered by the Board of Directors of the Company, pursuant to which the Company makes
quarterly cash contributions of a certain percentage of executive officers’ compensation. Investments are self-directed
by participants and can include Company stock. Upon retirement, participants receive their apportioned share of the
plan assets in the form of cash.
Assets of the SERP consist of the following:
Company stock
Equity securities
Total
December 31, 2017
Market
Cost
December 31, 2016
Market
Cost
$
$
1,960
4,589
6,549
$
$
3,589
4,963
8,552
$
$
1,958
3,474
5,432
$
$
4,455
3,427
7,882
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
The Company periodically adjusts the deferred compensation liability such that the balance of the liability equals the
total fair market value of all assets held by the trust established under the SERP. Such liabilities are included in other
long-term liabilities on the consolidated balance sheets. The equity securities are included in investments in the
consolidated balance sheets and classified as trading equity securities. See Note 4, Investments, for additional
information. The cost of the Company stock held by the plan is included as a reduction in shareholders’ equity in the
consolidated balance sheets.
The change in the fair market value of Company stock held in the SERP results in a charge or credit to selling,
general and administrative expenses in the consolidated statements of income because the acquisition cost of the
Company stock in the SERP is recorded as a reduction of shareholders’ equity and is not adjusted to fair market
value; however, the related liability is adjusted to the fair market value of the stock as of each period end. The
Company recognized income of $575 in 2017 and expense of $1,742 and $241 in 2016 and 2015, respectively,
related to the change in the fair value of the Company stock held in the SERP.
13. Derivative Financial Instruments
The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by
using derivative instruments is foreign currency risk. From time to time, the Company’s foreign subsidiaries enter into
foreign currency exchange contracts to mitigate exposure to fluctuations in currency exchange rates. The fair value of
the derivative financial instrument is recorded on the Company’s consolidated balance sheets and is adjusted to fair
value at each measurement date. The changes in fair value are recognized in the consolidated statements of income
in the current period. The Company does not engage in speculative transactions nor does it hold or issue derivative
financial instruments for trading purposes. The average U.S. dollar equivalent notional amount of outstanding foreign
currency exchange contracts was $11,099 during 2017. At December 31, 2017, the Company reported $112 of
derivative liabilities in other current liabilities. The Company reported $144 of derivative assets in other current assets
and $89 of derivative liabilities in other current liabilities at December 31, 2016. The Company recognized, as a
component of cost of sales, a net loss on the change in fair value of derivative instruments of $663 and $336 for the
years ended December 31, 2017 and 2016, respectively. The Company recognized a net gain on the change in fair
value of derivative instruments of $606 for the year ended December 31, 2015. There were no derivatives that were
designated as hedges at December 31, 2017 or 2016.
14. Income Taxes
For financial reporting purposes, income before income taxes includes the following components:
Year Ended December 31
2016
87,326
(231)
87,095
2017
55,980
1,237
57,217
$
$
$
$
2015
57,846
(5,873)
51,973
United States
Foreign
Income before income taxes
$
$
94 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
The provision for income taxes consists of the following:
Current provision:
Federal
State
Foreign
Total current provision
Deferred provision (benefit):
Federal
State
Foreign
Total deferred benefit
Total provision (benefit):
Federal
State
Foreign
Total income tax provision
Year Ended December 31
2017
2016
2015
$
$
16,178
2,866
874
19,918
$
30,623
4,098
907
35,628
107
(455)
57
(291)
(2,653)
(1,213)
345
(3,521)
16,285
2,411
931
19,627
$
27,970
2,885
1,252
32,107
$
$
19,758
2,553
255
22,566
(1,183)
(275)
(1,101)
(2,559)
18,575
2,278
(846)
20,007
The Company’s income tax provision is computed based on the domestic and foreign federal statutory rates and the
average state statutory rates, net of related federal benefit.
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to
income before income taxes. A reconciliation of the provision for income taxes at the statutory federal income tax rate
to the amount provided is as follows:
Year Ended December 31
2016
2017
Tax at the statutory federal income tax rate
Qualified production activity deduction
State income tax, net of federal income tax
Other permanent differences
Research and development tax credits
Valuation allowance impact
U.S. Tax Reform impact
Other items
Total income tax provision
$
$
20,026
(1,661)
1,520
551
(855)
1,585
(1,056)
(483)
19,627
$
$
30,483
(1,641)
1,876
673
(785)
1,638
--
(137)
32,107
$
$
2015
18,191
(1,174)
1,386
393
(291)
2,036
--
(534)
20,007
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Significant components of the Company’s deferred tax assets and liabilities are as follows:
Deferred tax assets:
Inventory reserves
Warranty reserves
Bad debt reserves
State tax loss carryforwards
Accrued vacation
SERP
Deferred compensation
Restricted stock units
Pension and post-employment benefits
Foreign net operating losses
Other
Valuation allowances
Total deferred tax assets
Deferred tax liabilities:
Property and equipment
Intangibles
Goodwill
Pension
Outside basis differences
Total deferred tax liabilities
Total net deferred assets
December 31
2017
2016
$
$
4,287
3,560
299
2,710
1,712
367
1,293
1,664
1,448
6,310
2,478
(8,318)
17,810
14,562
769
654
758
--
16,743
1,067
$
$
8,507
4,527
456
3,403
2,351
299
2,124
1,845
2,530
5,461
2,516
(8,280)
25,739
20,167
1,244
1,605
1,205
511
24,732
1,007
As of December 31, 2017, the Company has state net operating loss carryforwards of $17,579 and foreign net
operating loss carryforwards of approximately $19,876, which will be available to offset future taxable income. If not
used, these carryforwards will expire between 2018 and 2030. A significant portion of the valuation allowance for
deferred tax assets relates to the future utilization of state and foreign net operating loss and state tax credit
carryforwards. Future utilization of these net operating loss and state tax credit carryforwards is evaluated by the
Company on a periodic basis and the valuation allowance is adjusted accordingly. In 2017, the valuation allowance
on these carryforwards was increased by $7 due to the uncertainty about whether certain entities will realize their
state and foreign net operating loss carryforwards. The Company has also determined that the recovery of certain
other deferred tax assets is uncertain. The valuation allowance for these deferred tax assets was increased by $31
during 2017.
The following table represents a roll forward of the deferred tax asset valuation allowance for the years ended
December 31, 2017, 2016 and 2015:
Year Ended December 31
2016
2017
2015
Allowance balance, beginning of year
Provision
Write-offs
Other
Allowance balance, end of year
$
$
8,280
1,585
(1,862)
315
8,318
$
$
8,065
1,639
(289)
(1,135)
8,280
$
$
6,029
2,036
--
--
8,065
Undistributed earnings of the Company’s Canadian subsidiary, Breaker Technology Ltd. (“BTL”) and South African
subsidiary, Osborn Engineered Products SA, (PTY), Ltd. (“Osborn”) are considered to be indefinitely reinvested;
accordingly, no provision for U.S. federal and state income taxes has been provided thereon. As of December 31,
2017, the cumulative amounts of undistributed GAAP earnings for BTL and Osborn are $4,026 and $28,249,
respectively. A portion of these amounts may be subject to taxation under the one-time transition tax included in the
Tax Cuts and Jobs Act of 2017. Based upon the provisions in the Tax Cuts and Jobs Act of 2017, any future qualified
dividends out of these amounts will not be subject to U.S. income taxes. However, upon any future inclusion as
96 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Subpart F income or capital gains, the Company would be subject to additional U.S. income taxes (subject to an
adjustment for foreign tax credits). Upon any repatriation, withholding taxes due to the foreign jurisdictions may have
to be paid. At this time, it is not practicable to determine the amount of the unrecognized deferred tax liability for
temporary differences related to investments in foreign subsidiaries.
The Company files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions.
The Company is no longer subject to U.S. federal income tax examinations by authorities for years prior to 2014. With
few exceptions, the Company is no longer subject to state and local or non-U.S. income tax examinations by
authorities for years prior to 2012.
The Company has a liability for unrecognized tax benefits of $365 and $238 (excluding accrued interest and
penalties) as of December 31, 2017 and 2016, respectively. The Company recognizes interest and penalties accrued
related to unrecognized tax benefits in tax expense. The Company recognized tax benefits of $22 and $16 in 2017
and 2016, respectively, for penalties and interest related to amounts that were settled for less than previously
accrued. The net total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective
tax rate is $370 and $238 at December 31, 2017 and 2016, respectively. The Company does not expect a significant
increase or decrease to the total amount of unrecognized tax benefits within the next twelve months.
A reconciliation of the beginning and ending unrecognized tax benefits excluding interest and penalties is as follows:
Balance, beginning of year
Additions for tax positions related to the current year
Additions for tax positions related to prior years
Reductions due to lapse of statutes of limitations
Decreases related to settlements with tax authorities
Balance, end of year
Year Ended December 31
2017
2016
2015
$
$
238
127
--
--
--
365
$
$
603
73
162
(16)
(584)
238
$
$
2,585
206
549
(162)
(2,575)
603
The December 31, 2017 balance of unrecognized tax benefits includes no tax positions for which the ultimate
deductibility is highly certain but the timing of such deductibility is uncertain. Accordingly, there is no impact to the
deferred tax accounting for certain tax benefits.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant
changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease
from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S international taxation from a
worldwide tax system to a territorial system and a one-time transition tax on the mandatory deemed repatriation of
foreign earnings. The Company’s fourth quarter 2017 provision for income taxes was reduced by $1,056, (comprised
of a $1,548 reduction in income tax expense recorded in connection with the remeasurement of deferred tax assets
and liabilities and $492 of additional income tax expense recorded in connection with the transition tax on the
mandatory deemed repatriation of foreign earnings) due to applying the provisions of the Tax Act.
On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of U.S.
GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed
(including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act.
In accordance with SAB 118, the Company determined that the $492 additional 2017 income tax expense is a
provisional amount and constitutes a reasonable estimate at December 31, 2017, based upon the best information
currently available. The ultimate impact may differ from the provisional amount, possibly materially, due to, among
other things, additional analysis, changes in interpretations and assumptions the Company has made, additional
regulatory guidance that may be issued and actions the Company may take as a result of the Tax Act. Any
subsequent adjustment to the amount will be recorded to current income tax expense when the analysis is complete,
which is expected in 2018 shortly after the filing of the Company’s 2017 U.S. income tax return.
While the Tax Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion
provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax
(“BEAT”) provisions.
The GILTI provisions require the Company to include, in its U.S. income tax return, foreign subsidiary earnings in
excess of an allowable return on the foreign subsidiary’s tangible assets. The Company has elected to account for
GILTI tax in the period in which it is incurred, and therefore, has not provided any deferred tax impacts of GILTI in its
consolidated financial statements for the year ended December 31, 2017.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
The BEAT provisions in the Tax Act eliminates the deduction of certain base-erosion payments made to related
foreign corporations, and impose a minimum tax, if greater than regular tax. The Company does not expect it will be
subject to this tax, and therefore, has not included any tax impacts of BEAT in its consolidated financial statements
for the year ended December 31, 2017.
The changes to existing U.S. tax laws as a result of the Tax Act, which we believe have the most significant impact
on the Company’s federal income taxes are as follows:
Reduction of the U.S. Corporate Income Tax Rate: The Company measures deferred tax assets and liabilities using
enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid.
Accordingly, the Company recognized a deferred tax benefit and related increase in deferred tax assets of $1,548 in
its 2017 consolidated financial statements due to the remeasurement necessitated by the Tax Act’s provision
reducing the reduction in the U.S. corporate income tax rate from 35% to 21%. This benefit is attributable to the
Company being in a net deferred tax liability position when considering only U.S. federal deferred items. The
Company has significant deferred tax assets related to foreign jurisdictions and U.S. state income taxes.
Transition Tax on Foreign Earnings: The Company recognized a provisional income tax expense of $492 for the year
ended December 31, 2017 related to the one-time transition tax on certain foreign earnings. The determination of the
transition tax requires further analysis regarding the amount and composition of the Company’s historical foreign
earnings and foreign taxes, which is expected to be completed in 2018.
Repeal of Domestic Production Activities Deduction: While not effective until 2018, the Tax Act repeals the Domestic
Production Activities Deduction (“DPAD”) previously provided under IRC §199. The DPAD benefit has historically
been very material to the Company’s federal income taxes. The DPAD benefits included in the effective tax rate
reconciliations for 2017, 2016 and 2015 were $1,661, $1,641 and $1,174, respectively.
15. Contingent Matters
Certain customers have financed purchases of Company products through arrangements in which the Company is
contingently liable for customer debt of $3,805 at December 31, 2017. These arrangements expire at various dates
through December 2020 and provide that the Company will receive the lender's full security interest in the equipment
financed if the Company is required to fulfill its contingent liability under these arrangements. The Company has
recorded a liability of $836 related to these guarantees as of December 31, 2017.
In addition, the Company is contingently liable under letters of credit issued by a lender totaling $9,757 as of
December 31, 2017, including $3,200 of letters of credit guaranteeing certain Astec Brazil bank debt. The outstanding
letters of credit expire at various dates through October 2020. As of December 31, 2017, the Company’s foreign
subsidiaries are contingently liable for a total of $3,557 in performance letters of credit, advance payments and
retention guarantees. The maximum potential amount of future payments under these letters of credit and guarantees
for which the Company could be liable is $13,314 as of December 31, 2017.
The Company has a sales contract with the purchaser of a large wood pellet plant, on which revenues of $7,987 and
$135,187 were recorded in 2017 and 2016, respectively. As the plant has not yet met the production output and the
operational specifications set forth in the original contract, as amended through December 31, 2017, the Company
entered into a contract amendment in February 2018, whereby the Company agreed to compensate the customer for
production shortfalls caused by the Company and other potential costs (depending upon the market price of wood
pellets), from January 1, 2018 through June 15, 2018. The Company incurred production shortfalls in January and
February 2018.
The Company is currently a party to various claims and legal proceedings that have arisen in the ordinary course of
business. If management believes that a loss arising from such claims and legal proceedings is probable and can
reasonably be estimated, the Company records the amount of the loss (excluding estimated legal fees) or the
minimum estimated liability when the loss is estimated using a range and no point within the range is more probable
than another. As management becomes aware of additional information concerning such contingencies, any potential
liability related to these matters is assessed and the estimates are revised, if necessary. If management believes that
a loss arising from such claims and legal proceedings is either (i) probable but cannot be reasonably estimated or (ii)
reasonably possible but not probable, the Company does not record the amount of the loss, but does make specific
disclosure of such matter. Based upon currently available information and with the advice of counsel, management
believes that the ultimate outcome of its current claims and legal proceedings, individually and in the aggregate, will
not have a material adverse effect on the Company's financial position, cash flows or results of operations. However,
claims and legal proceedings are subject to inherent uncertainties and rulings unfavorable to the Company could
occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse effect on the
Company's financial position, cash flows or results of operations.
98 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
16. Shareholders’ Equity
The Company rewards key members of management with restricted stock units (“RSUs”) each year based upon the
financial performance of the Company and its subsidiaries. Under the terms of the Company’s shareholder-approved
2011 Incentive Plan, up to 700 shares of newly-issued Company stock is available for awards. Awards granted in
2016 and prior vest at the end of five years from the date of grant, or at the time a recipient retires after reaching age
65, if earlier, while awards granted after 2016 are scheduled to have a three-year vesting period. Additional RSUs are
granted to the Company’s outside directors under the Company’s Non-Employee Directors Compensation Plan with a
one-year vesting period. The fair value of the RSUs vested during 2017, 2016 and 2015 was $1,991, $3,289 and
$2,785, respectively. The grant date tax benefit was increased by $290, $220 and $336, respectively, upon the
vesting of RSUs in 2017, 2016 and 2015.
Compensation expense of $2,978, $2,426 and $1,019 was recorded in the years ended December 31, 2017, 2016
and 2015, respectively, to reflect the fair value of RSUs granted (or anticipated to be granted for 2017 performance)
amortized over the portion of the vesting period occurring during the period. Related income tax benefits of $1,132,
$934 and $362 were recorded in 2017, 2016 and 2015, respectively. Based upon the grant date fair value of RSUs, it
is anticipated that $5,210 of additional compensation costs will be recognized in future periods through 2021 for
RSUs earned through December 31, 2017. The weighted average period over which this additional compensation
cost will be expensed is 2.6 years. RSUs do not participate in Company-paid dividends.
Changes in restricted stock units during the year ended December 31, 2017 are as follows:
Unvested restricted stock units, beginning of year
Units granted
Units forfeited
Units vested
Unvested restricted stock units, end of year
Weighted Average
Grant Date
Fair Value
2017
$
112
83
(3)
(31)
161
41.48
65.20
53.11
43.51
53.09
The grant date fair value of the restricted stock units granted during 2017, 2016 and 2015 was $5,399, $1,946 and
$937, respectively.
17. Operations by Industry Segment and Geographic Area
The Company has three reportable segments, each of which is comprised of multiple business units that offer similar
products and services and meet the requirements for aggregation. A brief description of each segment is as follows:
Infrastructure Group - This segment consists of five business units, three of which design, engineer, manufacture
and market a complete line of portable, stationary and relocatable hot-mix asphalt plants, wood pellet plants, asphalt
pavers, material transfer vehicles, soil stabilizing – reclaiming machinery, milling machines, paver screeds and
related ancillary equipment. The other two business units in this segment primarily operate as Company-owned
dealers in the foreign countries in which they are domiciled. These two business units sell, service and install
products produced by the manufacturing subsidiaries of the Company, and a majority of their sales are to customers
in the infrastructure industry. The principal purchasers of the products produced by this group are asphalt producers,
highway and heavy equipment contractors, wood pellet processors and foreign and domestic governmental agencies.
The Infrastructure Group had sales to one pellet plant customer totaling $7,987, or 0.7% of total Company sales in
2017 and $135,187, or 11.8% of total Company sales in 2016. Portions of the equipment sold to this customer were
manufactured by each of the Company’s segments.
Aggregate and Mining Group - This segment consists of eight business units that design, engineer, manufacture
and market a complete line of jaw crushers, cone crushers, horizontal shaft impactors, vertical shaft impactors,
material handling, roll rock crushers and stationary rockbreaker systems, vibrating feeders and high frequency
vibrating screens, conveyors, inclined, vertical and horizontal screens and sand classifying and washing equipment.
The principal purchasers of products produced by this group are distributors, open mine operators, quarry operators,
port and inland terminal operators, highway and heavy equipment contractors and foreign and domestic
governmental agencies.
Energy Group - This segment consists of six business units that design, engineer, manufacture and market a
complete line of drilling rigs for the oil and gas, geothermal and water well industries, high pressure diesel pump
trailers for fracking and cleaning oil and gas wells, concrete plants, commercial and industrial burners, combustion
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
control systems, a variety of industrial heaters to fit a broad range of applications including heating equipment for
refineries, roofing material plants, chemical processing, rubber plants, oil sands and energy related processing, heat
transfer processing equipment, thermal fluid storage tanks, waste heat recovery equipment, whole-tree pulpwood and
biomass chippers and horizontal grinders. The principal purchasers of products produced by this group are oil, gas
and water well drilling industry contractors, processors of oil, gas and biomass for energy production, ready mix
concrete producers and contractors in the construction and demolition recycling markets. This group includes the
operations of RexCon, Inc., which was acquired in October 2017.
Corporate - This category consists of business units that do not meet the requirements for separate disclosure as an
operating segment or inclusion in one of the other reporting segments and includes the Company's parent company,
Astec Industries, Inc., and a captive insurance company. The Company evaluates performance and allocates
resources to its operating segments based on profit or loss from operations before U.S. federal income taxes and
corporate overhead and thus these costs are included in the Corporate category.
The accounting policies of the reportable segments are the same as those described in the summary of significant
accounting policies. Intersegment sales and transfers are valued at prices comparable to those for unrelated parties.
Segment information for 2017
Revenues from external customers
Intersegment revenues
Interest expense
Depreciation and amortization
Income taxes
Profit (loss)
Infrastructure
Group
$ 553,691
25,965
49
7,581
1,318
26,641
Aggregate
and Mining
Group
$ 403,720
16,209
634
9,363
462
35,748
Energy
Group
$ 227,328
24,877
9
7,904
491
16,219
Corporate
$ --
--
148
954
17,356
(40,963)
Total
$ 1,184,739
67,051
840
25,802
19,627
37,645
Assets
Capital expenditures
666,651
7,424
558,684
9,194
304,158
3,540
390,300
604
1,919,793
20,762
Segment information for 2016
Revenues from external customers
Intersegment revenues
Interest expense
Depreciation and amortization
Income taxes
Profit (loss)
Infrastructure
Group
$ 608,908
16,957
31
7,205
3,033
71,482
Aggregate
and Mining
Group
$ 359,760
35,031
948
10,033
664
34,877
Energy
Group
$ 178,763
24,946
4
6,655
437
4,145
Corporate
$ --
--
412
920
27,973
(55,992)
Total
$ 1,147,431
76,934
1,395
24,813
32,107
54,512
Assets
Capital expenditures
657,225
14,451
518,351
7,437
271,121
5,018
417,351
178
1,864,048
27,084
100 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Segment information for 2015
Revenues from external customers
Intersegment revenues
Interest expense
Depreciation and amortization
Income taxes
Profit (loss)
Infrastructure
Group
$ 428,737
22,947
258
6,907
1,224
33,890
Aggregate
and Mining
Group
$ 370,813
28,701
1,005
10,719
764
30,690
Energy
Group
$ 183,607
16,010
10
5,553
(129)
3,609
$
Corporate
$ --
--
338
899
18,148
(36,623)
Total
983,157
67,658
1,611
24,078
20,007
31,566
Assets
Capital expenditures
567,936
8,043
496,089
8,807
256,978
4,049
306,511
389
1,627,514
21,288
The totals of segment information for all reportable segments reconciles to consolidated totals as follows:
Net income attributable to controlling interest
Total profit for reportable segments
Corporate expenses, net
Net loss attributable to non-controlling interest
Recapture (elimination) of intersegment profit
Total consolidated net income attributable to controlling interest
Assets
Total assets for reportable segments
Corporate assets
Elimination of intercompany profit in inventory
Elimination of intercompany receivables
Elimination of investment in subsidiaries
Other eliminations
Total consolidated assets
2017
2016
2015
$
$
78,608
(40,963)
205
(55)
$
110,504
(55,992)
171
476
68,189
(36,623)
831
400
$
37,795
$
55,159
$
32,797
$ 1,529,493
390,300
(7,075)
(717,873)
(303,209)
(2,057)
$ 1,446,697
417,351
(7,020)
(688,369)
(272,766)
(52,292)
$ 1,321,003
306,511
(7,496)
(583,834)
(223,500)
(35,331)
$
889,579
$
843,601
$
777,353
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Sales into major geographic regions were as follows:
United States
Canada
Australia and Oceania
Africa
Other European Countries
South America (excluding Brazil)
Russia
Brazil
Other Asian Countries
Mexico
China
Post-Soviet States (excluding Russia)
Middle East
Japan and Korea
West Indies
Central America (excluding Mexico)
India
Other
Total foreign
Total consolidated sales
Long-lived assets by major geographic region are as follows:
United States
Brazil
Northern Ireland
South Africa
Australia
Canada
Germany
Total foreign
Total
$
$
$
Year Ended December 31
2016
941,273
37,539
29,948
31,557
19,198
28,204
3,185
4,300
2017
932,294
65,509
40,201
36,847
18,679
18,562
13,609
10,478
10,286
6,926
8,508
6,113
5,951
4,881
4,760
3,421
2,929
1,026
685
252,445
$ 1,184,739
13,489
4,595
3,293
3,403
10,825
2,994
5,904
318
480
206,158
$ 1,147,431
$
2015
722,287
54,321
29,995
45,671
23,867
32,454
8,466
8,376
9,513
6,990
1,330
8,345
18,995
3,574
1,532
4,404
2,706
331
260,870
983,157
December 31
2017
158,683
11,114
6,342
5,684
4,532
2,893
1,148
31,713
190,396
$
$
2016
151,470
11,288
4,279
5,372
4,234
2,860
1,035
29,068
180,538
$
$
18. Accumulated Other Comprehensive Loss
The after-tax components comprising accumulated other comprehensive loss is summarized below:
Foreign currency translation adjustment
Unrecognized pension and post-retirement benefit cost, net of tax of
$2,192 and $2,261, respectively
Accumulated other comprehensive loss
December 31
2017
2016
$
(21,140) $
(27,839)
(3,103)
$
(24,243) $
(3,723)
(31,562)
See Note 12, Pension and Retirement Plans, for discussion of the amounts recognized in accumulated other
comprehensive loss related to the Company’s Kolberg-Pioneer, Inc. defined pension plan.
102 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
19. Other Income
Other income consists of the following:
Investment loss
Licensing fees
Income from life insurance policies
Other
Total
20. Business Combinations
Year Ended December 31
2016
2017
2015
$
$
(96) $
651
--
663
1,218
$
(276) $
546
--
259
529
$
(381)
641
1,204
1,591
3,055
In October, 2017, the Company acquired substantially all of the assets and liabilities of RexCon, Inc. (“RexCon”) for a
total purchase price of $26,443. The purchase price was paid in cash with $3,000 deposited into escrow for a period
of time not to exceed 18 months pending final resolution of certain post-closing adjustments and any indemnification
claims. The Company’s preliminary allocation of the purchase price includes the recognition of $3,488 of goodwill and
$7,778 of other intangible assets consisting of non-compete agreements (5-year useful life), technology (19-year
useful life), trade names (15-year useful life), and customer relationships (18-year useful life). The revenues and
results of operations of RexCon were not significant in relation to the Company’s consolidated financial statements for
the period ended December 31, 2017 and would not have been material on a proforma basis to any earlier period.
RexCon’s operating results are included in the Company’s Energy Group beginning in the fourth quarter of 2017.
RexCon, located in Burlington, Wisconsin was founded in 2003 through an asset acquisition with the original
company founded over 100 years ago. RexCon is a manufacturer of high-quality stationary and portable, central mix
and ready mix concrete batch plants, concrete mixers and concrete paving equipment. RexCon specializes in
providing portable, high-production concrete equipment to contractors and producers worldwide in a totally integrated
turnkey production system, including customized site layout and design engineering, batch plants, mixers, water
heaters and chillers, ice production and delivery systems, material handling conveyors, gensets and power
distribution, cement silos and screws, central dust collection, aggregate heating and cooling systems, batch
automation controls and batch office trailers.
In August 2016, the Company acquired substantially all of the assets and certain liabilities of Power Flame
Incorporated (“PFI”) for a total purchase price of $39,765. The purchase price was paid in cash with $4,000 deposited
into escrow for a period of time not to exceed two years pending final resolution of certain post-closing adjustments
and any indemnification claims. The Company’s allocation of the purchase price resulted in the recognition of
$12,632 of goodwill and $17,990 of other intangible assets consisting of technology (19 year useful life), trade names
(15 year useful life) and customer relationships (18 year useful life). The revenues and results of operations of PFI
were not significant in relation to the Company’s consolidated financial statements for the period ended December
31, 2016 and would not have been material on a proforma basis to any earlier period. PFI’s operating results are
included in the Energy Group beginning in the third quarter of 2016.
PFI, located in Parsons, Kansas, began operations in 1948 and manufactures and sells gas, oil and combination
gas/oil and low NOx burners with outputs ranging from 400 thousand BTU’s per hour to 120 million BTU’s per hour as
well as combustion control systems designed for commercial, industrial and process heating applications.
ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT I 103
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100 Performance Graph
for Astec Industries, Inc.
300.00
250.00
200.00
150.00
100.00
50.00
0.00
Astec Industries, Inc.
NYSE/AMEX/NASDAQ
Market (US Companies)
NYSE/AMEX/NASDAQ
Stocks (SIC 3530-3537 US
Comp) Construction, Mining,
and Materials Handling
Machinery and Equipment
2012
100.00
2013
116.81
2014
120.06
2015
125.56
2016
209.76
2017
183.24
100.00
133.51
149.59
148.86
168.77
191.20
100.00
121.19
110.82
81.96
108.34
141.34
Notes:
A. Data complete through last fiscal year.
B. Corporate Performance Graph with peer group uses peer group only performance (excludes
only company).
C. Peer group indices use beginning of period market capitalization weighting.
D. Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved
Copyright 1980-2018.
E. Calculated (or Derived) based from CRSP NYSE/AMEX/NASDAQ Market (US Companies),
Center for Research in Security Prices (CRSP®), Graduate School of Business, The University
of Chicago. Copyright 2018. Used with permission. All rights reserved.
F. The graph assumes $100 invested at the closing price of the Company’s common stock on
December 31, 2012 and assumes that all dividends were invested on the date paid.
104 I ASTEC INDUSTRIES, INC. I 2017 ANNUAL REPORT
FINANCIAL OVERVIEW
(in thousands, except as noted*)
OPERATING RESULTS
Net sales
Net income attributable to controlling interest
FINANCIAL POSITION
Total assets
Working capital
Equity
PER COMMON SHARE*
Basic
Diluted
OTHER DATA
shares outstanding
Basic
Diluted
Associates*
Net income attributable to controlling interest
Book value per common share at year end
Weighted average number of common
2017
2016
2015
2014
2013
$1,184,739
$1,147,431
$983,157
$975,595
$932,998
37,795
$55,159
$32,797
$34,458
$39,042
$889,579
$843,601
$777,353
$802,265
$749,291
423,823
686,765
407,972
648,841
399,785
609,858
388,862
596,152
385,680
577,311
$1.64
1.63
29.58
$2.40
2.38
27.99
$ 1.43
1.42
26.30
$1.51
1.49
25.62
$1.72
1.69
24.85
23,025
23,184
4,437
22,992
23,142
4,218
22,934
23,120
3,740
22,819
23,105
3,952
22,749
23,081
3,708
CONTENTS
Our Industry-Leading Footprint . . . . . . . . . 1
Letter to Shareholders . . . . . . . . . . . . . . . 2 New Technologies . . . . . . . . . . . . . . . . . 6
INFRASTRUCTURE GROUP
AGGREGATE & MINING GROUP
ENERGY GROUP
Astec and Dillman Equipment . . . . . . . . . 12
Astec do Brasil . . . . . . . . . . . . . . . . . . . 22
CEI Enterprises . . . . . . . . . . . . . . . . . . . 38
Astec Australia . . . . . . . . . . . . . . . . . . . 14
Astec Mobile Screens . . . . . . . . . . . . . . 24
GEFCO . . . . . . . . . . . . . . . . . . . . . . . . 40
Astec Mobile Machinery . . . . . . . . . . . . 16
Breaker Technology . . . . . . . . . . . . . . . 26
Heatec . . . . . . . . . . . . . . . . . . . . . . . . 42
Carlson Paving Products . . . . . . . . . . . . 18
Johnson Crushers International . . . . . . . . 28
Peterson Pacific Corp. . . . . . . . . . . . . . . 44
Roadtec . . . . . . . . . . . . . . . . . . . . . . . . 20
Kolberg-Pioneer . . . . . . . . . . . . . . . . . . 30
Power Flame . . . . . . . . . . . . . . . . . . . . 46
Osborn Engineered Products . . . . . . . . . 32
RexCon . . . . . . . . . . . . . . . . . . . . . . . . 48
Telestack . . . . . . . . . . . . . . . . . . . . . . . 34
Telsmith . . . . . . . . . . . . . . . . . . . . . . . . 36
CORPORATE INFORMATION
Corporate Executive Officers . . . . . . . . . 50
m
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.
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c
e
t
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.
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o
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A
OTHER INFORMATION
Transfer Agent
Computershare
250 Royall Street, Canton, MA 02021
800.617.6437
www.computershare.com/investor
Stock Exchange
NASDAQ, National Market—ASTE
Auditors
KPMG LLP, Knoxville, TN
General Counsel and Litigation
Chambliss, Bahner & Stophel, P.C.,
Chattanooga, TN
Securities Counsel
Alston & Bird LLP, Atlanta, GA
Investor Relations
Stephen C. Anderson,
423.553.5934
Corporate Office
Astec Industries, Inc.
1725 Shepherd Road
Chattanooga, TN 37421
Ph 423.899.5898 Fax 423.899.4456
www.astecindustries.com
The form 10-K, as filed with the
Securities and Exchange Commission,
may be obtained at no cost by any
shareholder upon written request to
Astec Industries, Inc., Attention
Investor Relations.
The Company’s Code of Conduct is
posted at www.astecindustries.com.
The Annual Meeting will be held on
April 26, 2018, at 10:00 A.M. EST in
the Training Center of Astec, Inc.
located at 4101 Jerome Avenue,
Chattanooga, TN 37407.
26620_Astec_2017AnnReport_Cvr.indd 2
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Corporate Headquarters:
1725 Shepherd Road
Chattanooga, Tennessee 37421 USA
Tel: 423.899.5898 • Fax: 423.899.4456
www.astecindustries.com
S A F E T Y , Q U A L I T Y , P R O D U C T I V I T Y
2 017 A N N U A L R E P O R T
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