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2018 ANNUAL REPORT
Corporate Headquarters:
1725 Shepherd Road
Chattanooga, Tennessee 37421 USA
Tel: 423.899.5898 • Fax: 423.899.4456
www.astecindustries.com
29932_Astec_2018AnnReport_Cvr.indd 1
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FINANCIAL OVERVIEW
(in thousands, except as noted*)
OPERATING RESULTS
Net sales
Net income (loss) attributable to controlling interest
2018
2017
2016
2015
2014
$1,171,599
$1,184,739
$1,147,431
$983,157
$975,595
(60,449)
37,795
$55,159
$32,797
$34,458
FINANCIAL POSITION
Total assets
Working capital
Equity
PER COMMON SHARE*
Net income (loss) 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*
$855,457
$889,579
$843,601
$777,353
$802,265
371,760
585,290
423,823
686,765
407,972
648,841
399,785
609,858
388,862
596,152
$(2.64)
(2.64)
25.53
$1.64
1.63
29.58
$2.40
2.38
27.99
$ 1.43
1.42
26.30
$1.51
1.49
25.62
22,902
22,902
4,401
23,025
23,184
4,437
22,992
23,142
4,218
22,934
23,120
3,740
22,819
23,105
3,952
CONTENTS
Our Industry-Leading Footprint . . . . . . . . . 1
Letter to Shareholders . . . . . . . . . . . . . . . 2 New Technologies . . . . . . . . . . . . . . . . . 4
INFRASTRUCTURE GROUP
AGGREGATE & MINING GROUP
ENERGY GROUP
Astec . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Astec do Brasil . . . . . . . . . . . . . . . . . . . 16
CEI Enterprises . . . . . . . . . . . . . . . . . . . 32
Astec Australia . . . . . . . . . . . . . . . . . . . 10
Astec Mobile Screens . . . . . . . . . . . . . . 18
GEFCO . . . . . . . . . . . . . . . . . . . . . . . . 34
Carlson Paving Products . . . . . . . . . . . . 12
Breaker Technology . . . . . . . . . . . . . . . 20
Heatec . . . . . . . . . . . . . . . . . . . . . . . . 36
Roadtec . . . . . . . . . . . . . . . . . . . . . . . . 14
Johnson Crushers International . . . . . . . . 22
Peterson Pacific Corp. . . . . . . . . . . . . . . 38
Kolberg-Pioneer . . . . . . . . . . . . . . . . . . 24
Power Flame . . . . . . . . . . . . . . . . . . . . 40
Osborn Engineered Products . . . . . . . . . 26
RexCon . . . . . . . . . . . . . . . . . . . . . . . . 42
Telestack . . . . . . . . . . . . . . . . . . . . . . . 28
Telsmith . . . . . . . . . . . . . . . . . . . . . . . . 30
CORPORATE INFORMATION
Corporate Executive Officers . . . . . . . . . 44
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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 25, 2019, at 10:00 A.M. EST in
the Training Center of Astec, Inc.
located at 4101 Jerome Avenue,
Chattanooga, TN 37407.
29932_Astec_2018AnnReport_Cvr.indd 2
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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
3
8
16
9
17
14
13
7
12
18
6
1
15
4
SOUTH AMERICA
EUROPE
AFRICA
AUSTRALIA
5
11
2
10
I NF RAS TRUCTURE GROUP
AGGREGATE & MINING GROUP
ENERGY GROUP
1 Astec
2 Astec Australia
3 Carlson Paving Products
4 Roadtec
5 Astec do Brasil
6 Astec Mobile Screens
7 Breaker Technology
13 CEI Enterprises
14 GEFCO
15 Heatec
8 Johnson Crushers International
16 Peterson Pacific Corp.
9 Kolberg-Pioneer
10 Osborn Engineered Products
17 Power Flame
18 RexCon
11 Telestack
12 Telsmith
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT
1
Richard J. Dorris
Interim CEO & President, COO
FELLOW SHAREHOLDERS:
2018 was a year of mixed results. Our end markets and core products
performed well, yet our overall financial performance was substandard
due to several non-recurring items. The tough decisions made in 2018 will
help clear the path for much improved performance in 2019 and beyond.
Although it was the best long-term decision for our shareholders and
customers, our decision to exit the pellet plant business had a major
short-term negative impact. This action, as well as the decision to close
Astec Mobile Machinery in Germany, evidences our commitment to improve
the company’s performance in the future. Non-cash goodwill impairment
charges at RexCon and Power Flame also detracted from the bottom
line in 2018.
We are confident 2019 will be a much better year as we move forward
with our strategic plans to improve our operational performance. In July
of 2019, we will complete the strategic procurement effort we began in
August of 2018 to reduce the number of suppliers, reduce material cost,
establish new procurement procedures, and improve our margins through
a centrally led procurement effort that leverages the strength of our
overall spending and establishes strategic partnerships with fewer
suppliers. This effort is already providing results in reduced material cost,
improved corporate-wide data and improved procurement procedures.
We will also complete the Sales & Operational Planning training in July
that is expected to improve our production planning process and reduce
our inventory levels through a more consistent and more robust
forecasting and planning process.
2
In addition to the training and guidance we received from
Our customers tell us that they expect a good year in 2019;
external consultants on the strategic procurement and sales
however, the current U.S. federal highway bill will expire in
and operational planning initiatives, we have also begun
2020. We are encouraged that Congress and President
our own internal training programs on quality and
Trump seem to agree on the need to increase infrastructure
operational improvements. These programs are establishing
spending. In order to help promote a new highway bill, we
a new set of key performance indicators that will be used
have reestablished our letter writing campaign called Don’t
to monitor the performance at each subsidiary on quality,
Let America Dead End that allows our employees, customers,
customer responsiveness, productivity, inventory
vendors and anyone else interested in a new highway bill
management and other operational areas.
to send letters to their federal representatives and the
The plan to increase our international sales that began in
2018 is expected to begin to show results in 2019. Our
new regional sales office for Latin America is open for
President to encourage them to pass new highway legislation.
A new highway bill and increased infrastructure spending
is important for the United States and for Astec Industries.
business in Santiago, Chile. We have an experienced team
We are excited about the outlook for Astec Industries
of sales and service professionals to support our existing
and we believe we have solid plans in place to return to
customers and dealers as well as establish relationships
profitability in 2019, improve our operational performance
with new customers in the region that extends from the
and grow the company.
US – Mexico border to the southern tip of South America.
Additional regional offices will be established in 2019
to further expand our ability to reach and serve international
customers. This effort will also better utilize our international
manufacturing capabilities and encourage our subsidiaries
to develop products that are more suited to different regions
around the world. This effort has already resulted in the
development of a new batch type asphalt plant design for
international customers. It can be transported across the
In closing, we want to thank Ben Brock for his years of
service to the company, most recently as President and
Chief Executive Officer. During his tenure we made three
great additions to our family of companies. We wish Ben
the very best in his future endeavors. We would also like to
thank all our associates at Astec Industries for their hard
work and dedication throughout the year.
Thank you for your support during a difficult year and for
ocean in shipping containers to reduce transportation cost
your continued support in the future.
and can be built at lower cost manufacturing facilities
around the world.
As a result of various retirements during 2018, we have
had changes to our corporate management group that
include new group presidents in all three of our segments.
Jeff Schwarz, formerly President of JCI, is the new Group
President of the Aggregate and Mining Group, Jaco van
der Merwe, former Group President of the Energy Group, is
now the Group President of the Infrastructure Group and
Scott Barker, former President of Gefco, is now Group
Richard J. Dorris
Interim CEO & President, COO
President of the Energy Group. All of these individuals
W.D. Gehl
are proven performers and we are confident they will
Chairman of the Board
all do a great job leading their respective groups.
3
ASTEC INDUSTRIES, INC. | 2018 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 our customers.
CARLSON PAVING PRODUCTS
JOHNSON CRUSHERS INTERNATIONAL
EZR208 Rear-Mount Screed
K350+ Cone Crusher
Unveiled at the 2018 World of Asphalt Show,
the EZR208 marks Carlson’s entry into the 8-foot,
highway-class, rear-mount market and features a
standard paving width of 8’ to 15’6”. Through
its class-exclusive extension support system and
class-leading screed plate depth, the EZR208
achieves superior ride uniformity, award winning
mat quality, and enhanced component lifecycle.
Similar to the larger 10-foot EZR2 platform,
Carlson’s 8-foot rear-mount screed is available
for nearly all current 8-foot North American
tractors built by the major paver manufacturers,
as well as retrofit on to older tractor models.
Johnson Crushers International has expanded its Kodiak®
Plus cone crusher series with the new K350+. This mid-range
model offers higher production with a smaller footprint.
In comparison to the K300+, the K350+ increases drive train,
stroke, horsepower, weight, head diameter and hold-down
force, resulting in an increased capacity of up to 10%.
With the same bolt pattern, the new cone can be mounted in
most current K300+ applications.
Like other cones in the Kodiak® Plus cone crusher series,
the K350+ will feature an industry-leading tramp iron relief
system, fully-protected internal counterweights, precision roller
bearing design, patented liner retention system and 360°
thread locking ring for consistent product quality.
4
TELESTACK
Shiploading System
This four unit system is comprised of two x TB60 All Wheel Travel Shiploaders fed by two x Titan dual-feed, all wheel
travel, 800-6 Bulk Reception Feeders loading limestone, gypsum and cement.
ASTEC MOBILE SCREENS
KOLBERG-PIONEER
High Frequency Screen
SuperStacker® Telescoping Radial Stacker
Astec Mobile Screens built its first, 6’ x 24’
high frequency screen. These larger screens offer ideal
gradation control for reclaiming fines in both wet
and dry applications. All high frequency screen decks
are driven by variable-speed hydraulic vibrators for
optimal screen efficiency.
Kolberg-Pioneer now offers an expanded line
of SuperStacker® telescoping stackers with
the launch of the 190 foot model with 42-inch
belt. The complete line offers safe and efficient
stockpiling due to tail end counterweights and a
wider operating footprint. The updated, patent-
pending Wizard Touch® automation software
provides application flexibility with configurable
stockpiles. KPI offers SuperStacker® telescoping
stackers from 130 to 190 feet in length and
30- to 42-inch belt widths, depending on model.
5
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT NEW TECHNOLOGIES
Within our culture of innovation, ideas are shared among employees
and with customers. Providing these opportunities to share and grow
ideas, creates an environment where innovation thrives.
HEATEC
Dish Bottom Asphalt Tanks
REXCON
600 BBL
Heatec has developed a new line of asphalt storage
tanks to reduce or even eliminate the material build up
that commonly accumulates in the bottom of tanks. This
build up causes owners to spend thousands of dollars and
significant man hours cleaning tanks. The new dish bottom
tanks drain from the bottom of the tank instead of the side
like other models and competitor tanks do. This design also
produces better agitation and heating of the liquid asphalt.
Heatec’s new asphalt storage tanks will save the owner
significant time and money in maintenance.
RexCon’s new 600 BBL – 112 Ton, self-erecting auxiliary
cement bin offers crane-less setup in a single load of freight.
Unveiled in 2018, the integral sub-frame design enables
concrete producers to install the cement bin without the need
for installing or removing concrete foundations typically
required (assuming proper soil conditions). The unit features
a single 40 HP direct-drive screw and pre-plumbed aeration
blower for quick delivery of cementitious materials to the
batch plant. When coupled with RexCon’s flagship Mobile
12 SE concrete plant or the Model S concrete paving plant,
the unit offers a combination of installation flexibility and
large capacity unique to the industry.
6
ASTEC, INC.
Silobot™ Inspection Device
ASTEC, INC.
Voyager Series Plant
In 2018, the Astec Silobot inspection service for testing
silo wall thickness made its in-field debut. 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.
Astec is building on the success of the Voyager 120 portable
asphalt plant and expanding its offerings in the highly portable
segment with the development of the Voyager 140 portable
asphalt plant. These highly portable plants from Astec are
built to move quickly from site to site and start operating at
each new site without delay. Unique for this market segment
is the Voyager plants’ ability to produce mix with reclaimed
asphalt pavement (RAP).
7
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Portable Asphalt Plants
• Relocatable Asphalt Plants
• Stationary Asphalt Plants
• Soil Remediation Equipment
• Control Systems
REPORTING GROUP: INFRASTRUCTURE
LOCATIONS:
CHATTANOOGA, TENNESSEE, USA
PRAIRIE DU CHIEN, WISCONSIN, USA
ASTEC, INC.
Astec offers a complete line of portable, relocatable and stationary
asphalt plant equipment and operates three manufacturing facilities:
Chattanooga, Tennessee, USA, Rossville, Georgia, USA, and
Prairie Du Chien, Wisconsin, USA.
Core products include the Double Barrel® drum mixer, the Dillman Unidrum®
counter flow drum mixer, the Phoenix® burner series, the Six Pack® portable
asphalt plant, the highly portable Voyager series asphalt plants, Astec’s
patented warm mix system, and New Generation long-term storage silos.
Key milestones for Astec in 2018 include: participation in an enhanced
QED (Quality Education and Development) program; the launch of new
Sales and Operation Planning procedures; exhibiting at the Intermat
tradefair in Paris, France; and the completion of the inaugural Silobot
in-field silo inspections.
Astec established a new safety benchmark by ending the year with a 0.77
recordable incident rate, an accomplishment well below the 4.0 industry
average incident rate.
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.
ASTEC offers a complete line of
portable, relocatable and stationary
asphalt plant equipment.
8
INFRASTRUCTURE
PHOENIX® TALON II™ BURNER
PHOENIX® TALON II™ BURNER
DOUBLE BARREL® PLANT
DOUBLE BARREL® PLANT
SILOBOTTM
SILOBOTTM
PORTABLE DOUBLE BARREL® PLANT
PORTABLE DOUBLE BARREL® PLANT
DILLMAN UNIDRUM® PLANT
UNIDRUM® PLANT
PLANT PROCESS CONTROL SYSTEMS
PLANT PROCESS CONTROL SYSTEMS
9
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
INFRASTRUCTURE
AGGREGATE AND MINING
ASTEC AUSTRALIA
Proudly one of Astec Industries’ key global companies, Astec Australia
continues to grow business internationally for Astec’s Infrastructure,
Aggregate and Mining, and Energy Groups.
INFRASTRUCTURE GROUP
2018 was Australia’s second record sales year in a row for Roadtec and
ENERGY
Carlson paving products. The first new ‘narrow width’ Roadtec RP170ex
PRODUCTS AND SERVICES:
• Asphalt Plants
• Milling Machines
• Cold In-Place Asphalt Recyclers
• Commercial-Class Asphalt Pavers
• Highway-Class Asphalt Pavers
• Material Transfer Vehicles
• Self-Propelled Brooms
• Aggregate Processing Equipment
and the first new Carlson CP130 were delivered.
AGGREGATE AND MINING GROUP
The Aggregate and Mining Group had a strong year in materials processing
products for JCI, AMS and KPI. Astec will supply all the crushers and
screens, from the primary jaw to the finishing screens, for a new 500tph
aggregate plant in Victoria.
PARTS AND SERVICE
Committed to providing customers with the best service and support in
REPORTING GROUP: INFRASTRUCTURE
the industries we serve, the company again recorded its strongest ever
LOCATION:
ACACIA RIDGE, QUEENSLAND, AUSTRALIA
sales year in after-market products.
DIS TRIBUTION AND SERVI CE C ENTERS
Adding to existing centers in Brisbane and Perth, a sales, parts and
service center was opened in Melbourne, Victoria in July 2018. In May
2019, a sales, parts and service center will be established in Sydney,
New South Wales.
New products planned for promotion and introduction to the market in
2019 are Astec Inc’s International Batch Plant, Carlson’s new 6’ paver,
and Astec Mobile Screens ProSizer purpose-built for the Australian/
International market.
Exclusively representing Astec Industries
family of companies, Astec Australia
continues to grow business internationally
for Astec’s Infrastructure, Aggregate and
Mining and Energy Groups.
10
INFRASTRUCTURE
VOYAGER 120
GT205MF
RP190EX
RX600EX
FT2618VM
HEATEC TANK PLANT
11
ASTEC INDUSTRIES, INC. | 2018 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
Located in Tacoma, Washington, 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.
The established market leader among asphalt screed manufacturers
in North America and Australia, Carlson achieved a new milestone
with the release of the company’s first 8-foot, rear-mount screed in
the EZR208. In conjunction with the company’s six other highway-
class screed models and the ability to mount to all North American
tractors built by the major paver manufacturers, Carlson’s line of the
EZIII, EZIV, EZV and EZR2 platforms remain the contractor’s most
demanded screed regardless of the tractor decal.
Carlson continues to emerge as one of the fastest growing small
paver brands in the commercial-class market and has quickly
become the contractor’s choice for performance, machine lifecycle
and mat quality. With a full line of four commercial pavers for the
North American market, Carlson followed up a historic 2017 with
the release and delivery of export oriented variants of its CP100 II
and CP130 platforms.
With its continuously growing product line and increasing demand,
Carlson broke ground in 2018 on a massive 80,000 sq. ft.
expansion to the company’s existing factory that will come online by
2020. With enhanced manufacturing space and continued
dedication to our customers, Carlson enters 2019 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.
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.
12
INFRASTRUCTURE
CARLSON
PAVING PRODUCTS
EZR210
CP100
LED BLADE LIGHT
EZR210
EZR208
EZIV10
13
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Milling Machines
• Cold In-Place Asphalt Recyclers
• Highway Class Asphalt Pavers
• Material Transfer Vehicles
• Self-Propelled Brooms
• Soil Stabilizers
ROADTEC
Roadtec was founded almost four decades ago as a manufacturer of
asphalt pavers. Today Roadtec continues to lead the industry in asphalt
pavers and material transfer vehicles. Roadtec is also the consistent
frontrunner in cold planers, soil stabilizers, and brooms.
In 2018, Roadtec maximized growth by updating and upgrading
machines, expanding their dealer network, and refining the industry-
leading GuardianTM Telematics System. Customer-focused service and
support enabled the company to gain competitor market share.
The Roadtec product line grew with the addition of the RP-250e
REPORTING GROUP: INFRASTRUCTURE
Asphalt Paver and the SX-5e Soil Stabilizer/Reclaimer. The RX-700
LOCATION: CHATTANOOGA, TENNESSEE, USA
and RX 900 Cold Planers were upgraded to increase horsepower
and productivity.
The Roadtec dealer network, initiated in 2016, saw continued expansion
in 2018. The dealer network allows the company to grow sales, while
providing responsive local service, reinforcing trust and brand loyalty.
Guardian Telematics, the industry’s only two-way telematics system,
was enhanced to provide increased functionality, faster speeds, and
better maneuverability. Guardian continues to deliver best in class
fleet management through real time reporting, saving customers time
and money.
In 2019 Roadtec will continue to lead the
industry in innovative design, rugged
dependability, and unmatched service.
14
INFRASTRUCTURE
MATERIAL TRANSFER VEHICLES
2612V VARI VIBE SCREEN
COLD IN-PLACE ASPHALT RECYCLERS
GUARDIAN TELEMATICS
HIGHWAY CLASS ASPHALT PAVERS
HIGHWAY CLASS ASPHALT PAVERS
MILLING MACHINES
15
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
Located in Vespasiano, Minas Gerais, Brasil, Astec do Brasil produces
ASTEC DO BRASIL
AGGREGATE AND MINING
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Mobile Screening Plants
• Portable Screening Plants
• Stationary Screen Structures
• High-Frequency Screens
• Crushing and Vibrating Equipment
• Asphalt Production Equipment
REPORTING GROUP: AGGREGATE AND MINING
LOCATION:
VESPASIANO, MINAS GERAIS, BRASIL
a complete line of equipment including crushers, vibrating screens,
portable plants and asphalt plants. Astec do Brasil also markets and
supports the equipment of other Astec Industries’ companies such as
track mounted equipment, material transfer vehicles and scalers.
With the delivery and startup of complete crushing plants manufactured
in the new facility, Astec do Brasil has became an important supplier
for the aggregate, mining and infrastructure segments of the market.
The goal is to become the leader in the Brazilian market, while
expanding throughout the Latin American market. Shipment of
equipment to Argentina and Colombia has already begun.
Astec do Brasil continues to increase its line of products and, in 2018,
began making the AMS Vari Vibe® Screen in Brazil. The Vari Vibe
Screen is a success with customers and an important product for
Astec do Brasil.
Parts sales are growing and represent an opportunity for Astec do
Brasil going forward.
To complement its existing products, Astec do Brasil has expanded its
offering of wear parts and liners for the mining industry, including
liners and parts for competitive equipment.
After a multi-year economic downturn Astec do Brasil is experiencing
the return of existing customers for its equipment, including Telsmith
crushers, screens, and now AMS high frequency screens. Improved local
stability is expected to assist in providing opportunites for Astec do Brasil.
Astec do Brasil continues to increase its line
of products, with a focus on safety, quality,
productivity and customer satisfaction.
16
AGGREGATE AND MINING
2612V VARI VIBE SCREEN
H3244 JAW CRUSHER
V120 ASPHALT PLANT
44SBS CONE CRUSHERS
HFS20 SCALER
SPARE AND WEAR PARTS
2612V VARI VIBE SCREEN
17
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
ASTEC
MOBILE SCREENS
AGGREGATE AND MINING
Astec Mobile Screens, Inc. is recognized as a global leader in
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
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.
Astec Mobile Screens was founded in 1976 in Sterling, Illinois.
The company has grown to employ over 125 people and to occupy
70,000 square feet of manufacturing space, as well as another
7,500 square feet of recently-added parts storage.
In 2018, Astec Mobile Screens expanded its popular, multi-frequency
screen line. After the successful launch of the GT205, Astec Mobile
Screens designed and began manufacturing multi-frequency
technology for its portable PTSC205 plants, GT145 track screens and
the rest of its 5’ wide, two deck screens.
Astec Mobile Screens also built its first 6’ x 24’ high frequency screen
in 2018. High frequency screen decks are driven by variable-speed
hydraulic vibrators for optimal screen efficiency and offer ideal
gradation control for reclaiming fines in both wet and dry applications.
Astec Mobile Screens provides fast, precise parts and service support
thanks to an integrated relationship with sales, engineering,
manufacturing, and dealer personnel. Producers can expect unparalleled
customer service that is demonstrated every day through the company’s
continuous devotion to meeting the needs of its customers.
Astec Mobile Screens, Inc. is recognized
as a global leader in screening solutions.
18
AGGREGATE AND MINING
FT3620 SCREEN
PTSC205 MULTI-FREQUENCY SCREEN
RAP PROCESSING PLANT
HFS20 SCALER
GT104 SCREEN
GT145 MULTI-FREQUENCY SCREEN
19
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Mine, Quarry and Construction Equipment
• Stationary Rockbreaker Systems
• Hydraulic Breakers
• Underground Mobile Rockbreakers
• Underground Mechanized Scalers
• Underground Utility Vehicles
• Demolition and Construction Attachments
BREAKER TECHNOLOGY
Breaker Technology is the worldwide rockbreaking expert in the
mining and quarrying industries. For 60 years, Breaker Technology
has been helping companies power their productivity and break into
profitability. BTI offers over a dozen different rockbreaker system
models for breaking oversize at large gyratories, grizzlies, jaw and
impact crushers in stationary and portable applications. With over
2,000 successful installations, Breaker Technology’s rockbreaker
systems are custom fitted to the application for maximum endurance.
Manufacturing and distributing a wide-range of underground mining
vehicles is at the core of Breaker Technology’s product line. The latest
additions, ScaleBOSS 3D/3DE and Mine Runner, continue to grow in
the marketplace where comfort and reliability are key to operator
REPORTING GROUP: AGGREGATE AND MINING
adoption and productivity.
LOCATION: THORNBURY, ONTARIO, CANADA
RIVERSIDE, CALIFORNIA, USA
SOLON, OHIO, USA
BTI also distributes a wide 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 south shore of Georgian Bay in Thornbury, Ontario,
Breaker Technology has a highly qualified sales and dealer network, a
depth of engineering experience, dedicated and professional service
and support and a commitment to superior customer service, remaining
a trusted brand in today’s aggregate and mining industries.
For nearly 60 years, BTI has been helping
companies power their productivity and
break into profitability.
20
AGGREGATE AND MINING
SCALEBOSS 3D/ 3DE
MRH25 ROCKBREAKER SYSTEM
BX20 BREAKER
EXC80 MECHANICAL PULVERIZER
MBS12S ROCKBREAKER SYSTEM
21
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
JOHNSON CRUSHERS
INTERNATIONAL
AGGREGATE AND MINING
Johnson Crushers International, Inc. (JCI) is a global leader in
INFRASTRUCTURE
ENERGY
PRODUCTS AND SERVICES:
• Crushing Equipment
• Screening Equipment
• Stationary, Portable and Modular Systems
• Track-mounted Equipment
• Rebuild and Repair Centers
REPORTING GROUP: AGGREGATE AND MINING
engineering and manufacturing full lines of cone crushers, combo,
horizontal and incline vibrating screens, as well as 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 in the
aggregate, construction, mining, industrial and recycling industries.
Johnson Crushers International, located in Eugene, Oregon, was
founded in 1995. Its operation consists of nearly 300 employees and
145,000 square feet of manufacturing space. At the start of 2018,
JCI was honored by the Springfield, Oregon Chamber of Commerce
as the Business of the Year for the positive impact it has had on the
LOCATION: EUGENE, OREGON, USA
city of Springfield and its residents.
JCI is introducing a new model, the K350+ to its line of Kodiak® Plus
cone crushers. Like other cones in the Kodiak® Plus cone crusher
series, the K350+ will feature an industry-leading tramp iron relief
system, fully-protected internal counterweights, precision roller
bearing design, patented liner retention system and 360° thread
locking ring for consistent product quality.
JCI provides fast, precise parts and service support thanks to an
integrated relationship with sales, engineering, manufacturing and
dealer personnel. Producers can expect unparalleled customer
service that is demonstrated every day through the company’s
continuous devotion to meeting the needs of its customers.
Manufacturing full lines of cone crushers,
horizontal and incline vibrating screens
and track-mounted, portable and stationary
crushing and screening plants.
22
AGGREGATE AND MINING
COMBO SCREENS
2612V VARI VIBE SCREEN
HORIZONTAL SCREEN
FT3000DF
KODIAK® K400+ CONE CRUSHER
KODIAK® K200+ CONE CRUSHER
KODIAK® K500+ PM CONE CRUSHER PLANT
23
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
INFRASTRUCTURE
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
KOLBERG-PIONEER
Kolberg-Pioneer, Inc. (KPI) has led the marketplace 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.
Kolberg-Pioneer, founded in 1928, is headquartered in Yankton, South
Dakota. The company employs a staff of nearly 500 employees and
utilizes over 300,000 square feet of manufacturing space.
KPI offers a full line of crushing and screening equipment including jaw
crushers, horizontal shaft impactors, vertical shaft impactors and a variety
of vibrating screens. KPI also produces a variety of washing and classifying
equipment from coarse and fine material washers to blademills, classifying
tanks, dewatering screens, log washers and complete washing systems.
The company also manufactures material handling equipment including
LOCATION: YANKTON, SOUTH DAKOTA, USA
pugmills, radial stackers, SuperStacker® telescoping conveyors, transfer
conveyors, feed systems, truck unloaders and stationary conveying systems.
Kolberg-Pioneer also offers a variety of track-mounted crushing plants.
Kolberg-Pioneer provides fast, precise parts and service support thanks to
an integrated relationship with sales, engineering, manufacturing and
dealer personnel. Producers can expect unparalleled customer service that
is demonstrated every day through the company’s continuous devotion to
meeting the needs of its customers.
KPI manufactures complete lines of crushing,
screening, material handling and washing
and classifying equipment in stationary,
portable and mobile configurations.
24
AGGREGATE AND MINING
SUPERSTACKER
TELESCOPING STACKER
FINE MATERIAL WASHER
RAILCAR UNLOADER WITH TRIPPER SYSTEM
RAP PROCESSING PLANT
WASHING SPREAD
25
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
OSBORN
ENGINEERED PRODUCTS
AGGREGATE AND MINING
Osborn designs, engineers, manufactures, markets, and provides full
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
aftermarket 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 has been recommended for ISO:9001:2015 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, apron feeders as well as modular and
“containerized” crusher and screening systems. Complementing its own
designed range of products Osborn also manufactures, markets and
LOCATION: JOHANNESBURG, SOUTH AFRICA
supports, under license, products from Telsmith and Kolberg-Pioneer.
Three units of Osborn’s new D3 apron feeder range, which were
developed in 2017, were successfully commissioned at the largest iron
ore mine in South Africa. The performance of the three units, the
smallest offering within Osborn’s apron feeder range, bodes well for
future sales in difficult to access applications.
Osborn designs, engineers, manufactures,
markets and provides full after-market
support for a well-established range of
mineral processing equipment.
26
AGGREGATE AND MINING
38 CONE MODULAR
SCREEN MODULAR
OSBORN 36 X 16 FEEDER
6 X 20 DOUBLE DECK SCREEN MODULAR
38 CONE MODULAR AND 25 X 40 JAW CRUSHER
27
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
INFRASTRUCTURE
ENERGY
PRODUCTS AND SERVICES:
• Shiploaders and Unloaders
• Bulk Reception Feeders
• Radial Telescopic Stackers
• Mobile Truck Unloaders
• Track-Mounted Conveyors
• Reclaim Hoppers
• Mobile Truck Unloaders
TELESTACK
Telestack’s products include shiploaders, ship unloaders, bulk reception
feeders, radial telescopic stackers, mobile hopper feeders, track
mounted conveyors and reclaim hoppers and 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.
Externally audited quality procedures ensure Telestack has the
processes in place to deliver what the customer ordered on time, within
budget and to the high 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
REPORTING GROUP: AGGREGATE AND MINING
competitive globally.
LOCATION: OMAGH, NORTHERN IRELAND
Telestack continues to invest heavily in their Northern Ireland facility as
part of a long term strategy to future proof their capacity and to support
the development of an extensive range of world-class, innovative and
quality products. Demonstrating enviable year on year growth,
Telestack is now globally regarded as one of the world’s leading
manufacturers in the global material handling industry; designing,
manufacturing, and exporting from their base in Northern Ireland.
One of the world’s leading manufacturers
in the global material handling industry.
28
AGGREGATE AND MINING
TB42 RADIAL TELESCOPIC SHIPLOADER
TS2060 RADIAL TELESCOPIC
TS1550 RADIAL TELESCOPIC
TS650 RADIAL TELESCOPIC SHIPLOADER
LF520 STOCKPILING
TS850 STOCKPILING FROM TC621 & TU815
TB58 ALL WHEEL TRAVEL EXPORT SHIPLOADER
OLYMPIAN W1800 DRIVE OVER TRUCK UNLOADER
29
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
AGGREGATE AND MINING
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Cone, Jaw and Impact Crushers
• Inclined and Horizontal Screens
• Vibrating Feeders
• Track and Wheel Mobile Plants
• Modular Crushing & Screening Plants
• Stationary Conveyors
• Motor Control Systems
• Processing Plant Design, Build and Installation
• Existing Crushing Plant Optimization
• Equipment Rebuild & Service
REPORTING GROUP: AGGREGATE AND MINING
LOCATION: MEQUON, WISCONSIN, USA
TELSMITH
For over 110 years, Telsmith, Inc. has provided integrated minerals
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
served include precious metals mining, processing of aggregates for
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.
Over the last eight years, Telsmith has developed two completely new
product lines consisting of our Hydra-Jaw® crushers and our T-Series™
cone crushers. Together these two product lines consist of eight different
crushers currently being sold throughout the world. Developing these
crusher lines at an unprecedented rate puts Telsmith in the enviable
position to leverage true product differentiation. The Hydra-Jaw® crusher
provides industry leading use of hydraulics to adjust the crusher setting,
provide overload relief and crush/clear the chamber. The T-Series™
cone utilizes an industry first hybrid bearing which reduces the cost of
ownership and allows for the highest crushing forces.
Telsmith designs and manufactures
processing equipment for the reduction
and sizing of raw material.
30
AGGREGATE AND MINING
IRON GIANT JAW CRUSHER
H2250 PORTABLE JAW PLANT
T300 PORTABLE CONE CRUSHER
H3244 PORTABLE JAW PLANT
38SBS CONE CRUSHER CLOSED CIRCUIT PLANT
MODULAR CRUSHING PLANT
31
ASTEC INDUSTRIES, INC. | 2018 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
Founded in 1969, CEI Enterprises is an American manufacturer of
equipment used in various aspects of the construction industry.
CEI’s 50-year manufacturing history includes equipment used for
heating and storing liquid asphalt, asphalt production, modified
bitumen blending, water heating and storage, and concrete
production. CEI also provides manufacturing and fabrication
services to numerous other Astec companies.
One of CEI’s core product lines is the circulating hot oil heater.
These heat and circulate heat transfer oil, which then provides
heat to other equipment, such as asphalt storage tanks, fuel
preheaters, and other components found at asphalt mixing plants.
CEI has remained a well-known and trusted brand of these heaters
for a half-century. Today, CEI produces hot oil heaters in both
helical coil and jacketed firebox designs.
Another core product for CEI is the company’s line of storage
tanks for liquid asphalt. These heated tanks are available in a
variety of configurations, including portable models as well as
horizontal and vertical stationary models. Capacities range from
5,000 to 40,000 gallons. Heating options include thermal oil,
electric, and direct-fired.
CEI is an industry leader in asphalt-rubber blending systems. These
systems mix ground rubber from recycled tires with liquid asphalt in
a high-specification process that results in better, longer-lasting roads.
In addition to these and many other products, CEI Enterprises
offers worldwide parts and service support, as well as training.
CEI Enterprises of Albuquerque, NM
designs, produces and services mixing
equipment for both concrete and
modified asphalt materials.
32
ENERGY
CEI ENTERPRISES
ECOHEAT™ DIRECT-CONTACT WATER HEATER
ASPHALT-RUBBER BLENDING SYSTEM
COMBINATION TANK FOR STORING BOTH LIQUID ASPHALT AND FUEL OIL
HELICAL COIL HOT OIL HEATER
JACKETED FIREBOX HEATERS
ASPHALT STORAGE TANKS
33
ASTEC INDUSTRIES, INC. | 2018 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
GEFCO
GEFCO, Inc. 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 eight decades, GEFCO is well known in
the industry for our reliability and exceptional customer service.
Our 260,000 sq. ft. plant is located in Enid, Oklahoma. Our
LOCATION: ENID, OKLAHOMA, USA
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, we are 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.
GEFCO, Inc. is a known leader in the
development and manufacture of
reliable and safe drilling equipment
and related products.
34
ENERGY
40K DRILLING RIG
50K TRAILER MOUNT DRILLING RIG
TITAN, DOUBLE PUMPER 2000
50K DRILLING RIG
15 POWER SWIVEL
SS 135 DRILLING RIG
50K DRILLING RIG
FRAC PUMP 2500
DOUBLE PUMPER 2000
35
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
ENERGY
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Thermal Fluid Heaters
• Process Heaters
• Asphalt Storage, Heating, and
Blending Equipment
• Instantaneous Water Heaters
HEATEC
Heatec designs, manufactures and services heating and storage
equipment. Helical coil heaters and asphalt storage tanks are its core
products. Other products include electric heaters, water bath heaters,
industrial tankless water heaters, convection heaters, thermal oxidizers,
waste heat recovery units, polymer blending systems, emulsion blending
plants, control systems, and more. 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
• Engineering Services for Asphalt Terminals
configure the products for easy transport overseas.
and Emulsion Plants
REPORTING GROUP: ENERGY
LOCATION: CHATTANOOGA, TENNESSEE, USA
In 2018, Heatec added new technologies to its manufacturing process to
aid in building asphalt storage tanks with more efficiency, better quality,
and a higher level of safety. The company continues to develop new
computerized control systems that make it easier for its customers to be
more productive. Its Recon® monitoring system continues to evolve. The
newest version can transmit detailed information about a customer’s
asphalt tank farm through a cellular signal without having to hardwire
into their network. A new line of dish bottom asphalt storage tanks was
created. The dish bottom allows the tanks to be fully drained which
drastically reduces the costs and time spent involved in cleaning the tanks.
The company is committed to offering training for its customers. The
company offers several customer schools throughout the year at its
training center to train operators and technicians that use Heatec
products. In addition, the company continues to participate in Astec
customer schools held in Chattanooga and to provide on-site training for
operators at their facilities.
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.
36
ENERGY
GAS REGEN HEATER AND THERMAL FLUID HEATER
PROCESS BATH HEATERS
THERMAL FLUID HEATER
HMO HEATERS
EMULSION MILL SKID
ASPHALT TERMINAL
37
ASTEC INDUSTRIES, INC. | 2018 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
CORP.
Peterson Pacific Corp. is a Eugene, Oregon based 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 low value wood 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.
Since 1981, Peterson has specialized in producing machines that turn
low-grade organic materials into high value products.
Peterson Pacific Corp. is a Eugene, Oregon
based manufacturer of grinders, chippers,
debarkers, screens, and blower trucks that
serve a wide variety of markets.
38
ENERGY
5700D HORIZONTAL GRINDER
HORIZONTAL GRINDER
3310 DRUMCHIPPER
BT60C BLOWER TRUCK
2700D HORIZONTAL GRINDER
5000H WHOLE TREE CHIPPER
39
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
ENERGY
INFRASTRUCTURE
PRODUCTS AND SERVICES:
• Forced Draft Burners
• Direct Fired Applications
• Indirect Fired Applications
• Control Systems
• Pump Sets
• Custom Engineered Systems
REPORTING GROUP: ENERGY
LOCATION: PARSONS, KANSAS, USA
POWER FLAME
Power Flame is nestled in the rich farmlands of Southeast Kansas in the
town of Parsons. The hallmark of our 70 year-old company is the skilled
craftsmen who design and hand-build our environmentally conscious
burners from quality materials. The average length of service of our 182
employees is 12.5 years, which lends credibility to the quality of our
products and the solid knowledge base that has developed strong
customer relationships.
Our “design and build” product line is capable of converting liquid or
gaseous fuels into useable energy and cover input capacities from
400,000 to 120,000,000 BTU/HR. Our combustion systems are offered
through manufacturer representatives for retrofit to replace existing
combustion equipment with new, state-of-the-art systems 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 these state-of-the-art combustion systems, Power Flame
offers a wide range of operation control systems, which vary from
simple relay-based logic to microprocessor-based controls to
sophisticated PLC applications.
Our products consist of “design and build”
burners capable of converting liquid or
gaseous fuels into usable energy.
40
ENERGY
STRAIGHT OIL TYPE C BURNER
CMAX BURNERS
UCM SUB 15 ULTRA LOW NOX BURNER
UCM ULTRA LOW NOX BURNERS
UCM 600 ULTRA LOW NOX GAS ONLY BURNER
CMAX BURNERS
41
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT INDUSTRIES SERVED:
ENERGY
INFRASTRUCTURE
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
• Concrete Placing Equipment
REPORTING GROUP: ENERGY
LOCATION: BURLINGTON, WISCONSIN, USA
REXCON
RexCon manufactures a complete line of stationary and portable central
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.
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 capable of
producing approximately 250 cubic yards per hour.
RexCon was tasked with designing a highly custom concrete batch plant.
The result: a batch plant that can produce 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.
RexCon manufactures a complete line of
stationary and portable central mix and
ready mix concrete batch plants.
42
ENERGY
MODEL S BATCH PLANT WITH HORIZONTAL MIXER
REXBATCH 150 DUAL LANE WET/DRY PLANT
LOGO 12 TRANSIT MIX BATCH PLANT
MOBILE 5 CENTRAL MIX BATCH PLANT
MOBILE 12 SELF-ERECTING CENTRAL MIX PLANT
LOGO 12 CENTRAL MIX
BATCH PLANT
43
ASTEC INDUSTRIES, INC. | 2018 ANNUAL REPORT BOARD OF DIRECTORS
William D. Gehl
Chairman of the Board of
Astec Industries, Inc.
Chairman of the Board of
IBD Southeastern Wisconsin
Chairman of the Board of
FreightCar America
Member—Compensation Committee
Member—Audit Committee
James B. Baker
Co-Managing Director of
River Associates Investments, LLC
Chairman—Audit Committee
Member—Compensation Committee
Tracey H. Cook
President, (AMECO) American
Equipment Company, Inc.
Member—Audit 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
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
Charles F. Potts
Chairman of the Board
of Heritage Construction
and Materials
Member—Audit Committee
Member—Compensation 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
Brad Southern
CEO, Louisiana-Pacific Corp.
Member—Audit Committee
Glen E. Tellock
President and CEO of
Lakeside Foods
Member—Audit Committee
Member—Nominating and
Corporate Governance Committee
ASTEC INDUSTRIES' CORPORATE EXECUTIVE OFFICERS
Richard J. Dorris
Interim CEO
Chief Operating Officer
Jaco van der Merwe
Group President
Infrastructure
Jeff Schwarz
Group President
Aggregate and Mining
Scott Barker
Group President
Energy
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
44
FINANCIAL
INFORMATION
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except as noted*)
2018
2017
2016
2015
2014
$ 1,171,599 $ 1,184,739 $ 1,147,431 $ 983,157 $ 975,595
215,316
22.1%
135,766
11.6%
218,843
22.3%
265,269
23.1%
243,129
20.5%
180,795
28,332
160,775
26,817
153,145
24,969
145,180
23,676
141,490
22,129
13,060
(86,421)
(1,045)
536
(60,744)
--
55,537
(840)
1,218
37,590
--
87,155
(1,395)
529
54,988
--
49,987
(1,611)
3,055
31,966
--
51,697
(720)
1,207
34,206
(60,449)
37,795
55,159
32,797
34,458
(2.64)
(2.64)
1.64
1.63
2.40
2.38
1.43
1.42
1.51
1.49
$
371,760 $
855,457
423,823 $
889,579
--
413
59,709
585,290
--
2,469
1,575
686,765
407,972 $ 399,785 $ 388,862
802,265
843,601
777,353
2,814
4,632
1,027
2,538
7,061
4,116
596,152
648,841
--
4,528
5,154
609,858
0.42
0.40
0.40
0.40
0.40
25.53
29.58
27.99
26.30
25.62
Consolidated Statement of
Operations Data
Net sales
Gross profit
Gross profit %
Selling, general and administrative
expenses
Research and development
Restructuring and asset impairment
charges
Income (loss) from operations
Interest expense
Other income
Net income (loss)
Net income (loss) attributable to
controlling interest
Earnings (loss) per common share*:
Net income (loss) 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)*
46 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
SUPPLEMENTARY FINANCIAL DATA
(in thousands, except as noted*)
Quarterly Financial Highlights
(Unaudited)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2018 Net sales
Gross profit (loss)
Net income (loss)
Net income (loss) attributable to controlling
interest
Earnings (loss) per common share*
Net income (loss) attributable to controlling
interest:
Basic
Diluted
Dividends paid
2017 Net sales
Gross profit
Net income (loss)
Net income (loss) attributable to controlling
interest
Earnings (loss) per common share*
Net income (loss) attributable to controlling
interest:
Basic
Diluted
Dividends paid
Common Stock Price*
2018 High
2018 Low
2017 High
2017 Low
$ 325,453
78,005
20,216
$ 272,528
1,108
(40,768)
$ 256,613
58,284
6,903
$ 317,005
(1,631)
(47,095)
20,267
(40,674)
6,995
(47,037)
0.88
0.87
0.10
(1.76)
(1.76)
0.10
0.31
0.30
0.11
(2.08)
(2.08)
0.11
$ 318,401
75,771
15,080
$ 301,909
65,524
14,359
$ 252,054
39,084
(2,703)
$ 312,375
62,750
10,854
15,120
14,420
(2,667)
10,922
0.66
0.65
0.10
0.63
0.62
0.10
(0.12)
(0.12)
0.10
0.47
0.47
0.10
$
$
$
$
64.80
53.89
73.37
59.02
$
$
61.61
52.84
66.66
52.35
$
$
63.69
44.92
58.06
45.70
52.88
27.86
59.22
48.44
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. As determined by the proxy search on
the record date for the Company’s 2019 annual shareholders’ meeting, the number of holders of record is
approximately 210.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 47
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 64.
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,
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 22 companies that are consolidated in our financial
statements, which include 17 manufacturing companies, three companies that operate as dealers for the
manufacturing companies, a captive insurance company and the parent company. 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 and related components and ancillary equipment. The
two remaining companies in the Infrastructure Group are Company-owned dealers which sell, service and install
equipment produced by the manufacturing subsidiaries of the Company, with the majority of sales to the
infrastructure industry. The Company-owned dealer in Germany is being closed in 2019 and its assets liquidated.
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 (which is being dissolved in 2019).
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 and RexCon, Inc. Power Flame Incorporated was acquired and added to the group in
August 2016. RexCon, Inc. was added to the group upon its formation and acquired substantially all of
the assets and liabilities of RexCon LLC in October 2017.
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”), Astec Industries LatAm SpA, a Company-owned distributor in Chile in the start-up phase of operations and
Astec Industries, Inc., the parent company.
48 I ASTEC INDUSTRIES, INC. I 2018 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 prices of liquid asphalt, oil and natural gas and steel.
Federal funding provides a significant portion of all highway, street, roadway and parking construction in the United
States. 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.
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 allows its customers to plan and execute longer-term projects. 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. Proposals being considered may 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 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 liquid asphalt, the
price of oil and natural gas, 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 has
increased the Federal Funds Rate several times in recent quarters, beginning in December 2016 and future rate
increases are expected; however, the current Federal Funds Rate is still considered in the historically low range.
Significant portions of the Company’s revenues from the Infrastructure Group relate to the sale of equipment involved
in the production, handling, recycling or application of asphalt mix. Liquid asphalt is a by-product of oil refining. 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. 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 began rising in early 2016 and have
continued to fluctuate during 2017 and 2018. 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. The Company believes the continued funding of the FAST Act federal highway bill passed in
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 49
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
December 2015 has a greater potential to impact the buying decisions of the Company’s customers than does the
fluctuation of oil prices in 2019.
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 demand for the Company’s oil and gas related products.
Steel is a major component in the Company’s equipment. Steel prices rose significantly during the first half of 2018
and were impacted by the Section 232 and 301 tariffs enacted. Steel prices have stabilized at the elevated levels,
and the Company anticipates prices to remain in this range for the first half of 2019. 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 continue to review the trends in steel prices in 2019
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. The continued strengthened U.S. dollar
since mid-2012 has negatively impacted pricing in certain foreign markets the Company serves. The Company
expects the U.S. dollar to remain strong 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 further 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 2018, approximately 60% of the Company’s sales were to the end user. The Company
expects this ratio to be between 60% and 70% for 2019.
The Company is operated on a centrally led, but decentralized basis, with a complete operating management team
for each operating subsidiary. Finance, insurance, legal, shareholder relations, corporate accounting and other
corporate matters are primarily managed at the corporate level (i.e., Astec Industries, Inc., the parent company). The
engineering, design, sales, manufacturing and basic accounting functions are the responsibility of each individual
subsidiary. Standard accounting procedures are prescribed and followed in all reporting.
The Company’s current profit sharing plans allow corporate officers, subsidiary presidents and other key
management employees at each subsidiary 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
target incentive compensation. Each subsidiary also 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’s current long-term incentive plans allow corporate officers, subsidiary presidents and other corporate
or subsidiary management employees to 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 target incentive compensation. Additional RSUs may be granted to other
key subsidiary management employees based upon individual subsidiary profits.
Beginning in 2018 and continuing through mid-2019, the Company retained the services of a specialized consulting
firm to assist with the accumulation of company-wide purchasing data and a system for maintaining similar data in the
future for management to utilize in negotiations with suppliers or potential suppliers in order to obtain reduced prices
on raw materials and equipment components purchased. The firm is also assisting with the development of sales and
operational planning procedures designed to achieve significant reductions in inventory levels maintained for normal
production needs and to reduce existing excess inventories. The Company expects the results of these efforts to
positively impact its gross margins and inventory levels in 2019 and the future.
50 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Results of Operations: 2018 vs. 2017
Pellet Plant Agreement
The Company was party to a 2015 sales contract with the purchaser of a large wood pellet plant, on which $143,300
of cumulative revenue had previously been recorded based on the over-time method. The contract contained certain
production output and operational provisions, which if not timely met, could have resulted in the Company having to
refund the purchase price to the customer. Additional contract provisions could have required the Company to
compensate the customer for production shortfalls caused by the Company and other potential costs (depending on
the market price of wood pellets). The plant did not meet the production output and operational specifications by the
deadline set forth in the contract, and the Company subsequently entered into an agreement with the customer on
July 20, 2018 whereby the Company agreed to pay the customer $68,000 and to forgive $7,315 in accounts
receivable to obtain a full release of all the Company’s contractual obligations under the sales contract. The terms of
the pellet plant agreement resulted in the Company’s Infrastructure Group recording reductions in sales of $75,315
and gross margins of $71,029 in 2018. The Company paid the scheduled $68,000 during 2018. The pellet plant
agreement also stipulates that the customer will pay the Company $7,000 if the wood pellet plant’s performance
satisfies certain emissions targets prior to May 1, 2019.
Georgia Pellet Plant
The Company manufactured its first wood pellet plant for a customer under a Company-financed arrangement
whereby the Company deferred the recognition of revenue as payment under the arrangement was not assured. The
original customer is attempting to obtain financing to purchase the plant at a reduced price; however, the Company
believes the ultimate consummation of the sale to this customer is uncertain. After considering the uncertainty of
completing the sale to the existing customer; the lack of success in attempting to market the plant to other pellet plant
operators; the cost of repossessing the plant; and the Company’s decision to exit the pellet plant business line, the
pellet plant inventory’s net realizable value has been written down to zero, resulting in a charge to costs of sales of
$65,706 in the fourth quarter of 2018.
Net Realizable Value Inventory Adjustment
Inventories are valued at the lower of cost or net realizable value which requires the Company to make specific
estimates, assumptions and professional judgement to determine if adjustments of inventories values to their net
realizable value are necessary. In the fourth quarter of 2018, after an in-depth analysis of the age, quantities on hand,
market acceptance of the equipment, management’s inventory and working capital control objectives, and other
related factors, it was determined that various specific equipment models of the Company’s Energy Group
inventories, primarily related to oil and gas equipment, required an adjustment of $7,487 to cost of sales to reduce
inventories to their net realizable values.
Liquidation of Subsidiary
While reviewing performance criteria against actual results of all Astec companies during a strategic planning meeting
held by management in late 2018, it was determined that Astec Mobile Machinery GmbH (“AMM”) did not meet the
desired performance metrics. Documents were filed by the Company in the German court system in December 2018
to begin the process of liquidating AMM. The Company expects the liquidation of AMM to be completed in 2019. A
restructuring charge of $1,870 was recorded by the Infrastructure Group in December 2018 related to the liquidation
of AMM.
Goodwill Impairment
The Company tests goodwill at least annually for impairment. Goodwill testing and valuation procedures were
performed by the Company in the fourth quarter of 2018 using actual financial results and forecasts approved by the
Company. The testing resulted in impairments at two of the businesses recently acquired by the Company, RexCon,
Inc. and Power Flame Incorporated. As a result, the Energy Group recorded goodwill impairment of $11,190 in the
fourth quarter of 2018.
Net Sales
Net sales decreased $13,140 or 1.1% to $1,171,599 in 2018 from $1,184,739 in 2017. 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 the $75,315 one-time pellet plant sales
reduction described above, total net sales increased $62,175 between years.
Domestic sales for 2018 were $915,814 or 78.2% of net sales compared to $932,294 or 78.7% of net sales for 2017,
a decrease of $16,480 or 1.8%. The decrease in domestic sales was due to the one-time pellet plant charge
described above. This sales decrease was offset by increased non-pellet related equipment sales of $58,835 from
2017 to 2018 resulting from sales increases in most of the Company’s Energy and Aggregate and Mining major
product lines due to the continuing positive economic conditions in the domestic markets and the impact of the FAST
Act funding.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 51
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
International sales for 2018 were $255,785 or 21.8% of net sales compared to $252,445 or 21.3% of net sales for
2017, an increase of $3,340 or 1.3%. The Company experienced improved international sales for its aggregate and
mining equipment during 2018 and decreased sales of infrastructure related equipment during 2018, while equipment
sold by the Energy Group remained relatively flat between 2017 and 2018. Sales reported by the Company for 2018
would have been $750 higher had 2018 foreign exchange rates been the same as 2017 rates. The increase in
international sales occurred primarily in South America, Africa, Europe and the Middle East, offset by sales decline in
Asia, Brazil, Russia, Canada and China. The Company continues its efforts to grow its international business by
increasing its presence in the markets it serves and the opening of Company-owned distributors.
Parts sales for 2018 were $308,703 or 26.3% of net sales compared to $283,361 or 23.9% of net sales for 2017, an
increase of $25,342 or 8.9%. All of the Company’s major product lines experienced increased parts sales in 2018 as
compared to 2017.
Gross Profit
Gross profit for 2018 was $135,766 or 11.6% of net sales as compared to $243,129 or 20.5% of net sales in 2017, a
decline of $107,363 or 44.2%. The decrease in gross profit was primarily due to the pellet plant charges discussed
above, which resulted in a decrease in gross margins of $136,735. These decreases were offset by increases of
$29,372 in gross profit (non-pellet related) in all other product lines.
Selling, General and Administrative Expense
Selling, general and administrative expense for 2018 was $180,795 or 15.4% of net sales compared to $160,775 or
13.6% of net sales for 2017, an increase of $20,020 or 12.5% primarily due to increases in payroll and related
expense of $10,005, consulting expense of $7,032, commissions and travel expenses of $6,745 and legal and
professional fee expense of $3,039, offset by a decrease in ConExpo expense of $4,363.
Research and Development
Research and development expenses increased $1,515 or 5.6% to $28,332 in 2018 from $26,817 in 2017. During
2018, 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.
Impairment and Restructuring Charges
Impairment and restructuring charges total $13,060 in 2018 and include a goodwill impairment charge of $11,190 and
a charge of $1,870 related to the closing of the Company-owned distributor in Germany, which is expected to be
completed in 2019.
Interest Expense
Interest expense in 2018 increased $205 or 24.4% to $1,045 from $840 in 2017 due to an increase in debt levels of
the Company in 2018.
Interest Income
Interest income decreased $350 or 26.9% to $952 in 2018 from $1,302 in 2017 due primarily to a reduction in interest
received in 2018 from a wood pellet plant customer compared to amounts received in 2017.
Other Income
Other income decreased $682 or 56.0% to $536 in 2018 from $1,218 in 2017. The decrease in other income is
primarily due to the reclassification of licensing fees to sales under new accounting guidance adopted in 2018.
Income Tax
Income tax benefit for 2018 was $25,234, compared to income tax expense of $19,627 for 2017. The effective tax
rates for 2018 and 2017 were 29.3% and 34.3%, respectively. The Company’s tax rates are affected by recurring
items which are generally consistent from period to period, as well as discrete items that may occur in any given
period but are not consistent from period to period. In addition to the federal tax rate reduction from 35% to 21% for
tax years beginning in 2018 and state income tax expense or benefit items, the items having the most significant
impact on the effective tax rate for 2018 include a benefit of $4,660 for research and development tax credits, a
benefit of $1,403 for the liquidation of a foreign subsidiary, expense of $978 for domestic and foreign valuation
allowance changes and expense of $1,856 related to unrecognized tax benefits for tax positions taken in 2018.
Net Income Attributable To Controlling Interest
The Company had a net loss attributable to controlling interest of $60,449 in 2018 compared to net income of
$37,795 in 2017, a decrease of $98,244. Earnings per diluted share decreased $4.27 to a loss of $2.64 in 2018 from
income of $1.63 in 2017. Weighted average diluted shares outstanding for the years ended December 31, 2018
decreased to 22,902 from 23,184 in 2017, due primarily to the Company repurchasing 582 shares of its common
stock in late 2018 under the Company’s stock buy-back program partially offset by stock incentive plan activity.
52 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Backlog
The backlog of orders at December 31, 2018 was $344,962 compared to $411,469 at December 31, 2017, a
decrease of $66,507 or 16.2%. The decrease in the backlog of orders was due to a decrease in domestic backlog of
$75,161, including a $60,249 reduction of pellet plant related backlog, partially offset by an increase in international
backlog of $8,654 or 11.5%. The Infrastructure Group backlog decreased $90,058, including $60,249 of pellet plant
related backlog, or 37.6% from 2017. The Aggregate and Mining Group backlog increased $13,704 or 11.7% from
2017, and the backlog in the Energy Group increased $9,847 or 17.9% over the 2017 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
2018
2017
$ Change % Change
$
442,289 $
453,164
276,146
553,691 $
403,720
227,328
(111,402)
49,444
48,818
(20.1)%
12.2%
21.5%
Infrastructure Group: Sales in this group decreased $111,402 or 20.1%. Domestic sales for the Infrastructure Group
decreased $92,643 or 19.9% in 2018 compared to 2017. The decrease in domestic sales was due primarily to the
one-time pellet plant sales reduction of $75,315 discussed above. International sales for the Infrastructure Group
decreased $18,759 or 21.5% in 2018 compared to 2017. The decrease in international sales for the Infrastructure
Group occurred mainly in Canada, Russia, the West Indies, Mexico and Post-Soviet States. Parts sales for the
Infrastructure Group increased 4.5% in 2018 compared to 2017. The Company expects to introduce new asphalt
plant models in 2019 that are designed to better meet the needs of the international market.
Aggregate and Mining Group: Sales in this group increased $49,444 or 12.2%. Domestic sales for the Aggregate and
Mining Group increased $24,592 or 8.9% in 2018 compared to 2017 primarily due to improved sales into the
Company’s traditional rock quarry markets and increased sales of the Company’s larger aggregate equipment.
International sales for the Aggregate and Mining Group increased $24,852 or 19.7% in 2018 compared to 2017. The
increase in international sales is due to increased sales by the Company’s Northern Ireland subsidiary due to an
improved mix of project machines compared to highly customized equipment, and the Company’s continued sales
efforts in the international markets. The increase in international sales for the Aggregate and Mining Group occurred
primarily in South America, Africa, Europe, the Middle East, Mexico and Russia and was offset by sales declines in
Asia, Brazil, Post-Soviet States, Japan and China. Parts sales for the Aggregate and Mining Group increased 12.1%
in 2018 compared to 2017 due to an increase in parts packages sold with equipment orders, improved sales by the
Company’s South African subsidiary and sales into the traditional rock quarry markets.
Energy Group: Sales in this group increased $48,818 or 21.5%. Domestic sales for the Energy Group increased
$51,571 or 27.4% in 2018 compared to 2017 due to an increase in RexCon (acquired in October 2017) concrete plant
sales of $31,200 compared to 2017 and improved sales of oil and gas pumpers, industrial heaters and related
equipment. International sales for the Energy Group decreased $2,753 or 7.0% in 2018 compared to 2017. The
decrease in international sales was due primarily to decreased sales of oil and gas drilling rigs. The decrease in
international sales occurred in Australia, China, Brazil and the Middle East and was offset by increased sales in
Canada and South America (excluding Brazil). Parts sales for the Energy Group increased 14.8% in 2018 compared
to 2017 due to increased sales in all major product lines.
Segment Profit (Loss)
Infrastructure Group
Aggregate and Mining Group
Energy Group
Corporate
2018
2017
$ Change
$
(112,954) $
45,464
3,070
1,586
26,641 $
35,748
16,219
(40,963)
(139,595)
9,716
(13,149)
42,549
% Change
(524.0)%
27.2%
(81.1)%
103.9%
Infrastructure Group: Profit for this group decreased $139,595 from 2017. This group’s profits were impacted by a
decrease in gross profit of $130,384 (including a decrease in gross margins of $136,735 due primarily to the pellet
plant charges discussed above).
Aggregate and Mining Group: Profit for this group increased $9,716 or 27.2% from 2017. This group’s profits were
impacted by an increase in gross profit of $19,180 on increased sales of $49,444 and by a 170 basis point increase in
gross margin due to product mix considerations and increased margins at the Company’s Canadian, South African
and certain domestic subsidiaries.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 53
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Energy Group: Profit for this group decreased $13,149 or 81.1% from 2017. This group’s profits were impacted by a
290 basis point decrease in gross margins (due partially to the $7,487 net realizable value adjustments discussed
above), which was offset by an increase of $3,977 in gross margin dollars on an increase in sales of $48,818. The
group’s profits were negatively impacted by a $17,335 increase in selling, general and administrative expenses, of
which $11,190 relates to goodwill impairments recorded by Power Flame and RexCon, which were acquired in 2016
and 2017, respectively.
Corporate: Net corporate expenses decreased $42,549 from 2017, primarily due to decreased income taxes of
$46,125 offset by increased repairs and maintenance of $2,225 (primarily a major plane engine overhaul) and
increased accounting fees of $1,413.
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
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 financed the sale of the $60,249
Georgia wood pellet plant, no revenue from the sale has been recorded.
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.
54 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
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.
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 which
was later cancelled in mid-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.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 55
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
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.
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. The Company experienced an overall reduction in wood
pellet plant margins of $60,107 between years 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. As the Company
financed the original sale of the Georgia wood pellet plant, no revenue from the sale has been recorded. 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.
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 $25,821 (of which
$21,933 was held by our foreign subsidiaries) of cash available for operating purposes at December 31, 2018. The
Company had borrowings of $58,778 and outstanding letters of credit of $11,044 resulting in additional borrowing
availability of $30,178 under the credit facility as of December 31, 2018. 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 3.27% at December 31, 2018. 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, 2018.
In February 2019, the $100,000 amended and restated credit agreement discussed above was again amended to
increase the unsecured line of credit to a maximum of $150,000 and to extend the maturity date of the agreement to
December 29, 2023. Upon disposition of the Georgia wood pellet plant, the Company is required to apply the
proceeds, if any, as a payment against any outstanding balance on the line of credit. Other significant terms were left
unchanged.
56 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
The Company’s South African subsidiary, Osborn Engineered Products SA (Pty) Ltd (“Osborn”), has a credit facility of
$6,600 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, 2018, Osborn had no outstanding
borrowings, but had $397 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, 2018, Osborn had available credit under the
facility of $6,203. The interest rate is 0.25% less than the South Africa prime rate, resulting in a rate of 10.0% as of
December 31, 2018.
The Company's Brazilian subsidiary, Astec do Brasil Fabricacao de Equipamentos Ltda. ("Astec Brazil"), has
outstanding working capital loans totaling $1,207 from Brazilian banks with interest rates ranging from 10.4% to
11.0%. The loans’ maturity dates range from January 2019 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 $137 as of
December 31, 2018 that have interest rates ranging from 3.5% to 16.3%. These equipment loans have maturity dates
ranging from January 2019 to April 2020.
Cash Flows from Operating Activities
Net income (loss)
Depreciation and amortization
Provision for warranties
Deferred income tax benefits
Restructuring and asset impairment charges
Increase in receivables
(Increase) decrease in inventories
Increase in prepaid expenses
Increase in accounts payable
Increase (decrease) in customer deposits
Decrease in accrued product warranties
Other, net
Net cash provided (used) by operating activities
$
2018
(60,744) $
27,913
13,219
(25,385)
13,060
(16,189)
30,757
(11,943)
9,843
(522)
(17,539)
7,745
$
(29,785) $
2017
37,590
25,802
16,725
(291)
--
(7,749)
(19,618)
(5,181)
630
9,379
(14,642)
(764)
41,881
$
$
Increase /
Decrease
(98,334)
2,111
(3,506)
(25,094)
13,060
(8,440)
50,375
(6,762)
9,213
(9,901)
(2,897)
8,509
(71,666)
Net cash provided by operating activities decreased $71,666 in 2018 compared to 2017. The primary reason for the
decrease in operating cash flows relates to the payment of a $68,000 settlement agreement with a pellet plant
customer in 2018.
Cash Flows from Investing Activities
Expenditures for property and equipment
Business acquisition, net of cash acquired
Other
Net cash used by investing activities
2018
(27,440) $
--
15
(27,425) $
2017
(20,046) $
(26,443)
(411)
(46,900) $
$
$
Increase /
Decrease
(7,394)
26,443
426
19,475
Net cash used by investing activities decreased by $19,475 in 2018 compared to 2017 due primarily to the reductions
in cash expenditures for business acquisitions offset by an increase in expenditures for property and equipment.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 57
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Cash Flows from Financing Activities
Payment of dividends
Borrowings under bank loans
Repayments of bank loans
Repurchase of Company stock
Other, net
Net cash provided (used) by financing activities
2018
2017
$
(9,625) $
148,504
(91,964)
(24,138)
(83)
22,694
$
$
(9,226) $
--
(7,242)
--
(324)
(16,792) $
Increase /
Decrease
(399)
148,504
(84,722)
(24,138)
241
39,486
Financing activities provided cash of $22,694 in 2018 and used cash of $16,792 in 2017, resulting in a total increase
between periods of $39,486. The change is primarily due to an increase of $58,778 in borrowings under the
Company’s $100,000 line of credit and $24,138 expended under the Company’s stock buy-back program.
Approved capital expenditures for 2019 total $39,477. Capital expenditures are for various purchases of machinery
and equipment, automobiles and technology 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 decreased to $560,991 at December 31, 2018 from $602,969 at December 31, 2017,
a decrease of $41,978. The decrease is due to decreases in cash and cash equivalents of $36,459 and inventories of
$35,435, offset by increases in trade receivables of $15,783. Additionally, accounts receivable days outstanding
increased from 34.3 in 2017 to 38.2 in 2018.
The Company’s current liabilities increased to $189,231 at December 31, 2018 from $179,146 at December 31, 2017,
an increase of $10,085. The increase is primarily due to increases in accounts payable of $10,197.
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) would increase interest expense by approximately $600 annually if current
debt levels are maintained. The Company does not hedge variable interest.
The Company is subject to foreign exchange risk at its foreign operations. Foreign operations represent 16.1% and
15.9% of total assets at December 31, 2018 and 2017, respectively, and 11.6% and 10.8% of total net sales for the
years ended December 31, 2018 and 2017, 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.
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, 2018 or 2017 would not have a material impact on the Company’s consolidated financial statements.
58 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
Contractual Obligations
Contractual obligations and the period in which payments are due as of December 31, 2018 are as follows:
Contractual Obligations
Operating lease obligations
Inventory purchase obligations
Debt obligations
Interest on debt obligations
Total
Payments Due by Period
Years
2 to 3
Years
4 to 5
Less Than
1 Year
More Than
5 Years
Total
$
3,702 $
5,453
60,122
6,303
$ 75,580
$
1,992
5,359
413
1,922
9,686
$
$
1,488
87
431
3,844
5,850
$
210
6
59,206
537
$ 59,959
$
$
12
1
72
--
85
The above table excludes the Company’s liability for unrecognized tax benefits, which totaled $2,048 at December
31, 2018, since the timing of cash settlements to the respective taxing authorities cannot be reliably predicted.
Interest obligations represent interest on the Company’s line of credit outstanding at December 31, 2018 assuming
the interest rate remained constant until the maturity date of the loan. Interest on debt in Brazil was ignored due to its
immateriality.
In 2018 and 2017, the Company made contributions of approximately $1,376 and $415, respectively, to its pension
plan. Currently, the Company has not planned any contributions to the pension plan in 2019. 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 in the aggregate amount of $2,247 at December 31, 2018. These obligations
have average remaining terms of 1.6 years. The Company has recorded a liability of $1,183 related to these
guarantees at December 31, 2018.
The Company is contingently liable under letters of credit of approximately $11,044, primarily for performance
guarantees to customers, banks or insurance carriers, 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,
2018, the Company’s foreign subsidiaries are contingently liable for a total of $2,016 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 $13,060 as of December 31, 2018.
The Company manufactured its first wood pellet plant for a customer under a Company-financed arrangement
whereby the Company deferred the recognition of revenue as payment under the arrangement was not assured. The
original customer is attempting to obtain financing to purchase the plant at a reduced price; however, the Company
believes the ultimate consummation of the sale to this customer is uncertain. After considering the uncertainty of
completing the sale to the existing customer; the lack of success in attempting to market the plant to other pellet plant
operators; the cost of repossessing the plant; and the Company’s decision to exit the pellet plant business line, the
pellet plant inventory’s net realizable value has been written down to zero.
The Company and certain of its current and former executive officers have been named as defendants in a putative
shareholder class action lawsuit filed on February 1, 2019, in the United States District Court for the Eastern District
of Tennessee. The action is styled City of Taylor General Employees Retirement System v. Astec Industries, Inc., et
al., Case No. 1:19-cv-00024-PLR-CHS. The complaint generally alleges that the defendants violated the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder by making
allegedly false and misleading statements and that the individual defendants are control person under Section 20(a)
of the Exchange Act. The complaint was filed on behalf of shareholders who purchased shares of the Company’s
stock between July 26, 2016 and October 22, 2018 and seeks monetary damages on behalf of the purported class.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 59
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
We dispute these allegations and intend to defend this lawsuit vigorously. The Company is unable to estimate the
possible loss or range of loss at this time.
Off-balance Sheet Arrangements
As of December 31, 2018, the Company does not have off-balance sheet arrangements as defined by Item 303(a)(4)
of Regulation S-K.
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 (including tariffs recently enacted)
are subject to volatility and 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, of the Notes to
Consolidated Financial Statements included in this Annual Report, 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.
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. Revenue is measured as the amount
of consideration the Company expects to receive in exchange for transferring goods or providing services. 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. Significant down payments are required on many equipment
orders with other terms allowing for payment shortly after shipment, typically 30 days. 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, are excluded from revenue. Expected warranty
costs for our standard warranties are expensed at the time the related revenue is recognized. Costs of obtaining
sales contracts with an expected duration of one year or less are expensed as incurred. As contracts are typically
fulfilled within one year from the date of the contract, revenue adjustments for a potential financing component or the
costs to obtain the contract are not made. Other contract assets are not material.
Depending on the terms of the arrangement with the customer, recognition of a portion of the consideration received
may be deferred and recorded as a contract liability if we have to satisfy a future obligation, such as to provide
installation assistance, service work to be performed in the future without charge, floor plan interest to be reimbursed
to our dealer customers, payments for extended warranties, for annual rebates given to certain high volume
customers or for obligations for future estimated returns to be allowed based upon historical trends.
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 transfer of control 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 containing multiple performance obligations, 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 observable market prices from stand-alone performance obligations or a cost plus margin
60 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
approach when one is not available. 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
performance obligations 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.
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, of
the Notes to Consolidated Financial Statements included in this Annual Report, for a description of testing performed
by the Company to determine if the recorded value of intangible assets or goodwill has been impaired. See Note 5,
Goodwill, of the Notes to Consolidated Financial Statements included in this Annual Report for a detail of goodwill by
segment and impairment charges recorded in 2018.
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, which 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
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 61
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
connection with the transition tax on the mandatory deemed repatriation of foreign earnings) due to applying the
provisions of 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. Certain provisions of the standard were clarified in March 2016 with the issuance of ASU
No. 2016-08, “Revenue from Contracts with Customers (Topic 606)”, which provided additional 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. These
new standards require companies to use more judgment and to make more estimates than under previous guidance
and expand required disclosures to include information regarding contract assets and liabilities as well as a more
disaggregated view of revenue. The standards are effective for public companies for annual periods beginning after
December 15, 2017 and, as such, the Company adopted the new standards effective January 1, 2018, using the
modified retrospective transition method. See Note 17, Revenue Recognition, of the Notes to Consolidated Financial
Statements included in this Annual Report, for additional disclosures required by the standards. The adoption of the
standards did not have a material impact on the Company’s financial position, results of operations or cash flows, and
no cumulative effect adjustment to retained earnings was necessitated.
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 new standard was further clarified by the issuance of
ASU No. 2018-03, “Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10),
Recognition and Measurement of Financial Assets and Financial Liabilities” in February 2018. The standards are
effective for public companies in fiscal years beginning after December 15, 2017, and the Company adopted the
standard effective January 1, 2018. The adoption of these standards did not 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 establishes a right-of-use (“ROU”) model and 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 operations will be calculated so that the cost of the lease is allocated over the lease term, generally on a
straight-line basis. The Company has made an accounting policy election to exclude leases with a term of 12 months
or less from the requirement to record related assets and liabilities. Certain provisions of ASU No. 2016-02 were later
modified or clarified by the issuance of ASU 2018-11, “Leases (Topic 842): Targeted Improvements” and ASU 2018-
10, “Codification Improvements to Topic 842, Leases”. A modified retrospective transition approach is required by the
ASU and its provisions must be applied to all leases existing at the date of initial application. An entity may choose to
use either (1) the standard’s effective date or (2) the beginning of the earliest comparative period presented in the
financial statements as its date of initial application. The new standards are effective for public companies for fiscal
years beginning after December 15, 2018. The Company adopted the new standards effective January 1, 2019 using
the effective date as the date of initial application. Consequently, financial information will not be updated and the
disclosures required under the new standards will not be provided for periods before January 1, 2019. The standards
provide a number of optional practical expedients in transition which the Company is continuing to evaluate. The
Company does not expect the adoption of these standards to have a material impact on its results of operations or
cash flows; however, the Company continues to evaluate the impact the adoption of the new standards will have on
its financial position. While the Company continues to assess all of the effects of adoption, it currently believes the
most significant effects relate to the recognition of new ROU assets and lease liabilities on its consolidated balance
sheet for its operating leases and new disclosures about its leasing activities.
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
62 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
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 adoption of this standard did not 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
previous guidance, which required 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 requires 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 application of this standard did not 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 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 adopted 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.
In February 2018, the FASB issued ASU No. 2018-02, “Income Statement – Reporting Comprehensive Income
(Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, which permits
companies to reclassify tax effects stranded in accumulated other comprehensive income (“OCI”) as a result of tax
reform impacting tax rates or other items, such as changing from a worldwide tax system to a territorial system, from
OCI to retained earnings. Other tax effects stranded in OCI due to other reasons, such as prior changes in tax laws or
changes in valuation allowances, may not be reclassified. Additional disclosures will also be required upon adoption
of the new standard. The new standard is effective for fiscal years beginning after December 15, 2018, with early
adoption permitted. The Company adopted this new standard effective January 1, 2019. The Company does not
expect the adoption of this standard to have a material impact on its financial position, results of operations or cash
flows.
In March 2018, the FASB issued ASU No. 2018-05 “Income Taxes (Topic 740), amendments to SEC Paragraphs
Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update)”, which addresses the accounting and disclosures
around the enactment of the Tax Cuts and Jobs Act and the Securities and Exchange Commission’s Staff Accounting
Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”). The Company
adopted this new standard in the first quarter of 2018. See Note 14, Income Taxes, of the Notes to Consolidated
Financial Statements included in this Annual Report, for the disclosures related to this amended guidance.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework –
Changes to the Disclosure Requirements for Fair Value Measurement” which aims to improve the overall usefulness
of disclosures to financial statement users and reduce unnecessary costs to companies when preparing fair value
measurement disclosures. The standard is effective for annual and interim periods beginning after December 15,
2019 with early adoption permitted. The Company expects to adopt this new standard effective January 1, 2020. The
Company does not expect the adoption of this new standard to have a material impact on its financial position, results
of operations or cash flows.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 63
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
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:
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execution of the Company’s growth and operation strategy;
plans for technological innovation;
compliance with covenants in our credit facility;
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 introduction of new products and 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;
obligations with respect to pellet plants and other products;
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;
inventories;
plans to reduce indebtedness; 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.
64 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
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 on Form 10-K for the year ended December 31, 2018.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 65
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 U.S. 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.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis.
Management, under the supervision and with the participation of the Company’s principal executive officer and
principal financial officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2018 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control - Integrated Framework (2013) (“COSO 2013 Framework”).
Based on this assessment, the following control deficiencies in internal control over financial reporting were identified
as of December 31, 2018.
Corporate
Goodwill Impairment
We did not design effective management review controls over the annual goodwill impairment test. Specifically, (i)
management’s corroboration of assumptions used in the third-party valuation analyses was not conducted at a
sufficient level of precision and (ii) we did not have effective controls over the methods and accuracy of calculations
performed by a third-party valuation specialist retained by the Company.
These deficiencies were due to insufficient knowledge and experience of the Company’s personnel with a Step 1
quantitative goodwill impairment assessment in accordance with FASB ASC Topic 350, Intangibles – Goodwill and
Other, and the fact that the Company did not perform an effective risk assessment process to evaluate relevant risks
of material misstatement associated with the valuation of goodwill.
Income Taxes
We did not operate effective controls over (i) the completeness and accuracy of the data used in the determination of
the current and deferred income tax balances at a sufficient level of precision and (ii) the formulas embedded in the
spreadsheets used in the income tax calculations.
These deficiencies resulted from an ineffective risk assessment process to evaluate the relevant risks inherent in the
determination of the year-end income tax provision and related disclosures.
Business Units
We did not have sufficient trained resources that were knowledgeable and experienced in the application of the
COSO 2013 Framework to our financial reporting processes and related internal controls at certain business units.
We did not have sufficient Corporate monitoring activities over certain business units that resulted in the following
control deficiencies:
66 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
ASTEC INDUSTRIES, INC.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING (CONTINUED)
General Information Technology Controls
We did not design and maintain effective general information technology controls (“GITCs”) related to the newly
implemented enterprise resource planning (“ERP”) system at Roadtec, Inc. (“Roadtec”), a subsidiary which operates
as a business unit in the Infrastructure segment. Specifically, we did not:
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design and maintain an effective systems development plan to test and approve the pre-production and post-
production implementation of the Roadtec ERP system aligned with the business and information technology
requirements;
design and implement effective program change management controls over the Roadtec ERP system; and
design and implement effective user access controls in the Roadtec ERP system to ensure appropriate
segregation of duties and to adequately restrict user and privileged access to appropriate Roadtec personnel.
These deficiencies resulted from the lack of experience on the part of Roadtec’s IT personnel with the implementation
of a complex IT system and insufficient understanding of the risks presented by such implementation. In addition,
users of the new ERP system were not sufficiently trained in the system’s functionalities to ensure their appropriate
use and operation. As a result of these GITC deficiencies, the automated controls across substantially all financial
reporting processes of the Roadtec business unit that depend on the effective operation of the GITCs and manual
controls that are dependent upon the completeness and accuracy of information derived from the Roadtec ERP
system were also considered to be ineffective.
Revenue Recognition
We did not design and operate effective controls over the accuracy and disclosure of revenue recognized from the
Company’s contracts with customers at certain of the Company’s business units. Specifically, we did not:
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design, implement and operate effective controls at a sufficient level of precision over the identification and
allocation of the transaction price to multiple performance obligations in accordance with FASB ASC Topic 606,
Revenue from Contracts with Customers (“ASC 606”);
design, implement and operate effective controls over the accuracy of pricing of parts sales; and
design, implement and effectively perform controls over the identification of sales transactions by category for
purposes of preparing disclosures required by ASC 606 and elimination of intercompany transactions.
These deficiencies were due to management of certain business units not sufficiently understanding the requirements
of ASC 606 and changes required to the business units’ specific revenue recognition policies and transaction
processes. The Company did not perform an effective risk assessment process to understand the changes necessary
to the financial reporting process and related controls at these business units to address the risks relating to the
recognition, measurement and presentation of revenue in accordance with the new accounting standard.
Inventories
We did not design and operate effective controls over the existence, accuracy and valuation of inventories at certain
of the Company’s business units. Specifically, we did not have effective operation of controls ensuring that all
inventory counts were performed, over the accuracy of capitalized labor costs and the review of the inventory reserve
calculations at certain business units.
These deficiencies were due to management of certain business units not sufficiently understanding the risks of
material misstatement related to these inventory assertions.
The control deficiencies described above resulted in several misstatements to the Company’s preliminary
consolidated financial statements that were corrected prior to the issuance of the annual consolidated financial
statements. These control deficiencies create a reasonable possibility that a material misstatement to the
consolidated financial statements will not be prevented or detected on a timely basis, and, therefore, we concluded
that the deficiencies represent material weaknesses in our internal control over financial reporting and therefore that
our internal control over financial reporting was not effective as of December 31, 2018.
Our independent registered public accounting firm, KPMG LLP, who audited the consolidated financial statements
included in this annual report, has expressed an adverse opinion on the operating effectiveness of the Company's
internal control over financial reporting. KPMG LLP's report appears on page 69 of this annual report.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 67
ASTEC INDUSTRIES, INC.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING (CONTINUED)
Management’s Remediation Plan
Management has been implementing and continues to implement measures designed to ensure that control
deficiencies contributing to the material weaknesses are remediated, such that these controls are designed,
implemented and operating effectively. The remediation actions include:
1. designing and implementing enhanced controls for the goodwill impairment analysis, including control
activities associated with the review of data provided to third-party valuation specialists and the
appropriateness of the assumptions and methodology used to measure the fair value of reporting units and
the reasonableness of the conclusions in the third-party valuation specialists’ reports;
2. evaluating the assignment of responsibilities associated with the accounting for goodwill impairment,
3.
including considering hiring additional resources or providing additional training to existing resources;
implementing income tax software to automate the calculation of our income tax expense (benefit) and the
impact on the income tax related balance sheet accounts;
4. educating and re-training employees at certain business units on our business processes and internal
controls such that employees are aware of the importance of designing and operating effective internal
controls to mitigate the risks identified;
5. hiring additional employees, with the appropriate expertise and competence, to assume assigned
responsibility and accountability for monitoring the financial reporting processes and internal controls at
business units;
6. designing and implementing additional Corporate monitoring activities over internal controls at certain
business units;
7. developing and providing additional training to employees at Roadtec to enhance their understanding of
Roadtec’s new ERP system so that they can effectively operate the system and have sufficient knowledge
about GITCs, with a focus on those related to program change management and user access over systems
impacting financial reporting;
8. designing and implementing enhanced controls at Roadtec related to program change management and
user access over systems impacting financial reporting;
9. designing and implementing enhanced controls to monitor the effectiveness of the underlying business
process controls at Roadtec that are dependent on the data and financial reports generated from the ERP
system;
10. developing a training program for management at certain business units to increase their knowledge of
revenue recognition and the related disclosures in accordance with ASC 606;
11. Corporate management performing site visits at certain business units and evaluating revenue recognition
for certain equipment contracts in accordance with ASC 606;
12. designing and implementing enhanced controls over the accuracy of pricing for parts sales and
completeness and accuracy of intercompany sales transactions at certain business units; and
13. designing and implementing enhanced controls over the existence, accuracy and valuation of inventories at
certain business units.
Management believes that these actions, and the improvements achieved as a result, will effectively remediate the
material weaknesses. However, the material weaknesses in our internal control over financial reporting will not be
considered remediated until the remediated controls operate for a sufficient period of time and management has
concluded, through testing, that these controls are operating effectively.
Management is committed to implementing the planned remediation actions as promptly as possible and will provide
regular updates (at least on a quarterly basis) to the Audit Committee of the Board of Directors regarding the
progress of its remediation efforts.
As a result of the material weaknesses noted above, the Company completed additional substantive procedures prior
to issuing its annual report for the year ended December 31, 2018. Based on these procedures, management
believes that the Company’s consolidated financial statements included in this annual report have been prepared in
accordance with generally accepted accounting principles. In addition, these material weaknesses did not result in
any restatement of prior-period consolidated financial statements and there were no changes in previously released
financial results. The Company’s principal executive officer and principal financial officer have certified that, based on
such officer’s knowledge, the consolidated financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of the
Company as of, and for, the periods presented in this annual report. In addition, management developed a
remediation plan for these material weaknesses, which is described above.
68 I ASTEC INDUSTRIES, INC. I 2018 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, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the
material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has
not maintained effective internal control over financial reporting as of December 31, 2018, 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, 2018 and 2017, and the
related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the
years in the three-year period ended December 31, 2018, and related notes (collectively, the “consolidated financial
statements”), and our report dated March 15, 2019 expressed an unqualified opinion on those consolidated financial
statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis. The following material weaknesses have been
identified and included in management’s assessment:
•
•
•
•
•
•
Ineffective management review controls over the annual goodwill impairment assessment due to insufficient
knowledgeable and experienced personnel and ineffective risk assessment;
Ineffective controls over the completeness and accuracy of data and formulas embedded in the spreadsheets
used in income tax calculations due to ineffective risk assessment;
Insufficient trained personnel knowledgeable and experienced in the application of the COSO 2013 Framework at
certain business units and insufficient corporate monitoring of certain business units;
Ineffective general information technology controls over the newly implemented enterprise resource planning
system at the Roadtec subsidiary due to the lack of experienced personnel in implementing complex IT systems
and insufficient training on the IT system’s functionalities;
Ineffective controls over the accuracy and disclosure of revenue at certain business units due to insufficient
understanding of the requirements of revenue recognition and not performing an effective risk assessment; and
Ineffective controls over the existence, accuracy and valuation of inventories at certain business units due to
insufficient understanding of relevant risks of material misstatement.
The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our
audit of the 2018 consolidated financial statements, and this report does not affect our report on those consolidated
financial statements.
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
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(CONTINUED)
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 15, 2019
70 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
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, 2018 and 2017, the related consolidated statements of operations, comprehensive
income (loss), equity and cash flows for each of the years in the three-year period ended December 31, 2018, 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, 2018 and
2017, and the results of its operations and its cash flows for each of the years in the three-year period ended
December 31, 2018, 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, 2018, 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 15, 2019 expressed an adverse 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 15, 2019
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 71
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
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, net
Deferred tax assets
Other long-term assets
Total assets
Liabilities and Equity
Current liabilities:
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 – 22,513 in 2018 and 23,070 in 2017
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
72 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
December 31
2018
2017
$
$
$
25,821
1,946
130,569
3,409
355,944
24,459
18,843
560,991
192,448
14,890
32,748
25,370
27,490
1,520
855,457
413
70,614
48,069
10,928
24,126
1,832
33,249
189,231
59,709
1,020
20,207
270,167
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
--
--
4,503
120,601
(33,883)
(1,886)
495,245
584,580
710
585,290
855,457
$
4,614
141,931
(24,243)
(1,960)
565,330
685,672
1,093
686,765
889,579
$
$
$
$
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Research and development expenses
Restructuring and asset impairment charges
Income (loss) from operations
Other income:
Interest expense
Interest income
Other income
Income (loss) before income taxes
Income tax provision (benefit)
Net income (loss)
Net loss attributable to non-controlling interest
Net income (loss) attributable to controlling interest
Earnings (loss) per Common Share:
Net income (loss) 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
2017
2018
2016
$
1,171,599
1,035,833
135,766
180,795
28,332
13,060
(86,421)
1,184,739
941,610
243,129
160,775
26,817
--
55,537
(1,045)
952
536
(85,978)
(25,234)
(60,744)
295
(60,449) $
(2.64) $
(2.64)
22,902
22,902
(840)
1,302
1,218
57,217
19,627
37,590
205
37,795
1.64
1.63
23,025
23,184
$
$
$
1,147,431
882,162
265,269
153,145
24,969
--
87,155
(1,395)
806
529
87,095
32,107
54,988
171
55,159
2.40
2.38
22,992
23,142
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 73
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Net income (loss)
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 on foreign currency translation adjustments
Other comprehensive income (loss)
Comprehensive loss attributable to non-controlling interest
Comprehensive income (loss) attributable to controlling
interest
See Notes to Consolidated Financial Statements
Year Ended December 31
2017
2018
2016
$
(60,744) $
37,590
$
54,988
(162)
689
(80)
38
(9,516)
--
(9,640)
439
(69)
6,699
--
7,319
232
29
(2,420)
(5,527)
(7,998)
137
$
(69,945)
$
45,141
$
47,127
74 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows from Operating Activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash
provided (used) 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
Stock-based compensation
Restructuring and asset impairment charges
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 (used) 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
2017
2016
2018
$
(60,744) $
37,590
$
54,988
22,411
5,502
223
13,219
(1,554)
(25,385)
(71)
2,182
13,060
(767)
(758)
(16,189)
30,757
(11,943)
(3,698)
9,843
(522)
(17,539)
3,683
(1,100)
(125)
8,887
843
(29,785)
--
375
(27,440)
(360)
(27,425)
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)
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 75
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands)
Year Ended December 31
2017
2018
2016
$
(9,625) $
148,504
(91,964)
(28)
377
(432)
(24,138)
22,694
(1,943)
(36,459)
62,280
25,821
$
(9,226) $
--
(7,242)
(106)
289
(507)
--
(16,792)
1,720
(20,091)
82,371
62,280
$
(9,217)
5,973
(5,903)
(696)
(153)
(1,024)
--
(11,020)
(250)
57,309
25,062
82,371
856
8,523
$
$
588
26,917
$
$
1,407
28,455
$
$
$
Cash Flows from Financing Activities
Payment of dividends
Borrowings under bank loans
Repayment of bank loans
Purchase of shares of subsidiaries
Sale (purchase) of Company shares by SERP, net
Withholding tax paid upon vesting of restricted stock units
Repurchase of Company stock
Net cash provided (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
76 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Common
Stock
Shares
Common
Stock
Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Company
Shares Held
by SERP
Retained
Earnings
Non-
Controlling
Interest
Total
Equity
Balance December 31, 2015
22,988 $ 4,598 $ 137,883
$ (23,564) $ (1,778) $ 490,933 $ 1,786 $ 609,858
Net income
Dividends ($0.40 per share)
Other comprehensive loss
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
55,159
(171)
54,988
9
(9,226)
(7,998)
(9,217)
(7,998)
(1,322)
(1,322)
5
53
1
10
2,935
(10)
(1,024)
27
150
2,936
--
(1,024)
(153)
55
718
(180)
(95)
718
Balance December 31, 2016
23,046
4,609
139,970
(31,562)
(1,958)
536,771
1,011
648,841
Net income
Dividends ($0.40 per share)
Other comprehensive income
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
37,795
(205)
37,590
10
(9,236)
7,319
(9,226)
7,319
(43)
(43)
1
23
2,172
5
(5)
(507)
291
2,172
--
(507)
289
330
(2)
330
Balance December 31, 2017
23,070
4,614
141,931
(24,243)
(1,960)
565,330
1,093
686,765
(60,449)
(295)
(60,744)
Net loss
Dividends ($0.42 per share)
Other comprehensive loss
Change in ownership percentage of subsidiary
Stock-based compensation
RSU vesting
Withholding tax on vested RSUs
Sale of Company stock held by SERP, net
11
(9,636)
(9,640)
2
23
2,815
5
(5)
(432)
303
74
(9,625)
(9,640)
(159)
(159)
2,815
--
(432)
377
(24,138)
71
71
Repurchase of Company stock
(582)
(116)
(24,022)
Other
Balance December 31, 2018
22,513 $ 4,503 $ 120,601 $ (33,883) $ (1,886) $ 495,245
$ 710 $ 585,290
See Notes to Consolidated Financial Statements
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 77
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, 2018 are as follows:
Astec Australia Pty Ltd
Astec, Inc.
Astec Industries LatAm SpA
Astec Mobile Screens, Inc.
Breaker Technology Ltd.
CEI Enterprises, Inc.
Heatec, Inc.
Kolberg-Pioneer, Inc.
Peterson Pacific Corp.
RexCon, Inc.
Telestack Limited
Astec do Brasil Fabricacao de Equipamentos Ltda. (93% owned)
Astec Insurance Company
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)
Power Flame Incorporated
Roadtec, Inc.
Telsmith, Inc.
All intercompany accounts and transactions have been eliminated in consolidation.
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, Chile, 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 income (loss). Foreign currency transaction gains and losses, net
are included in cost of sales and amounted to gains of $539 and $431 in 2018 and 2017, respectively and a loss of
$246 in 2016.
Fair Value of Financial Instruments - For cash and cash equivalents, trade receivables, other receivables 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, 2018 and 2017 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.
78 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
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.
Accounts Receivable - 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, 2018, 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, 2018, 2017 and 2016:
Allowance balance, beginning of year
Provision
Write offs
Other
Allowance balance, end of year
Year Ended December 31
2017
2018
2016
$
$
1,716
223
(696)
(59)
1,184
$
$
1,511
482
(308)
31
1,716
$
$
1,837
280
(560)
(46)
1,511
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
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 79
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 during the fourth quarter of each year or more
frequently if events or circumstances indicate that goodwill might be impaired. Beginning in 2018, the Company
changed its annual goodwill impairment testing date from December 31 to October 31 to better align the testing date
with its financial planning process and alleviate resource constraints. The Company would not expect a materially
different outcome in any given year as a result of testing on October 31 as compared to December 31. 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 with goodwill 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, 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
80 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
market, a regulatory or political development 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 and cash flows, or
entity specific changes in management, key personnel, strategy or customer base. If the fair value of a 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.
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”). 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. 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. 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 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.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 81
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 pervasive evidence of
an arrangement exists, the price is fixed and determinable, the product has been delivered or services have been
rendered and there is reasonable assurance of collection of the sales proceeds. Revenue is measured as the amount
of consideration the Company expects to receive in exchange for transferring goods or providing services. The
Company generally obtains purchase authorizations from its customers for a specified amount of products at a
specified price with specific delivery terms. A significant portion of the Company’s equipment sales represents
equipment produced in the Company’s manufacturing facilities under short-term contracts for a customer’s project or
equipment designed to meet a customer’s requirements. Most of the equipment sold by the Company is based on
standard configurations, some of which are modified to meet customer’s needs or specifications. The Company
provides customers with technical design and performance specifications and typically performs pre-shipment testing,
when feasible, to ensure the equipment performs according to the customer’s need, regardless of whether the
Company provides installation services in addition to selling the equipment. Significant down payments are required
on many equipment orders with other terms allowing for payment shortly after shipment, typically 30 days. 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, are excluded from revenue.
Expected warranty costs for our standard warranties are expensed at the time the related revenue is recognized.
Costs of obtaining sales contracts with an expected duration of one year or less are expensed as incurred. As
contracts are typically fulfilled within one year from the date of the contract, revenue adjustments for a potential
financing component or the costs to obtain the contract are not made.
Depending on the terms of the arrangement with the customer, recognition of a portion of the consideration received
may be deferred and recorded as a contract liability if we have to satisfy a future obligation, such as to provide
installation assistance, service work to be performed in the future without charge, floor plan interest to be reimbursed
to our dealer customers, payments for extended warranties, for annual rebates given to certain high volume
customers or for obligations for future estimated returns to be allowed based upon historical trends.
Certain contracts include terms and conditions pursuant to which the Company recognizes revenues upon the
completion of production, and the equipment 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, which
transfers control of the equipment, 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 had one large pellet plant sale on which revenue was recorded over time based upon the ratio of costs
incurred to estimated total costs. Penalties were accounted for as a reduction in sales.
Service and Equipment Installation Revenue – Purchasers of certain of the Company’s equipment often contract with
the Company to provide installation services. Installation is typically separately priced in the contract based upon
observable market prices for stand-alone performance obligations or a cost plus margin approach when one is not
available. The Company may also provide future services on equipment sold at the customer’s request, which may
be for equipment repairs after the warranty period expires. Service is billed on a cost plus margin approach or at a
standard rate per hour.
Used Equipment Sales - Used equipment is obtained by trade-in on new equipment sales, as a separate purchase in
the open market or from the Company’s equipment rental business. Revenues from the sale of used equipment are
recognized upon transfer of control to the customer at agreed upon pricing.
Freight Revenue – Under a practical expedient allowed under ASU 2014-09, the Company records revenues earned
for shipping and handling as revenue at the time of shipment, regardless of whether or not it is identified as a
separate performance obligation. The cost of shipping and handling is classified as cost of goods sold concurrently.
Other Revenues – Miscellaneous revenues and offsets not associated with one of the above classifications include
rental revenues, extended warranty revenues, early pay discounts and floor plan interest reimbursements.
Advertising Expense - The cost of advertising is expensed as incurred. The Company incurred $4,136, $3,793, and
$4,045 in advertising costs during 2018, 2017 and 2016, respectively, which is included in selling, general and
administrative expenses.
82 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
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.
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 and director 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 a recipient 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 (loss) per share is based on the weighted average number of common shares
outstanding and diluted earnings (loss) per share includes potential dilutive effects of restricted stock units and
shares held in the Company’s supplemental executive retirement plan.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
The following table sets forth a reconciliation of the number of shares used in the computation of basic and diluted
earnings (loss) per share:
Denominator:
Denominator for basic earnings (loss) per share
Effect of dilutive securities:
Restricted stock units
Supplemental executive retirement plan
Denominator for diluted earnings (loss) per share
Year Ended December 31
2017
2018
2016
22,902
23,025
22,992
--
--
22,902
96
63
23,184
85
65
23,142
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
(loss) 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, 2018 and 2017.
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 21, 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, 2018 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. Certain provisions of the standard were
clarified in March 2016 with the issuance of ASU No. 2016-08, “Revenue from Contracts with Customers (Topic
606)”, which provided additional 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. These new standards require companies to use more judgment
and to make more estimates than under previous guidance and expand required disclosures to include information
regarding contract assets and liabilities as well as a more disaggregated view of revenue. The standards are effective
for public companies for annual periods beginning after December 15, 2017 and, as such, the Company adopted the
new standards effective January 1, 2018, using the modified retrospective transition method. See Note 17, Revenue
Recognition, for additional disclosures required by the standards. The adoption of the standards did not have a
material impact on the Company’s financial position, results of operations or cash flows, and no cumulative effect
adjustment to retained earnings was recorded.
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 new standard was further clarified by the issuance of
ASU No. 2018-03, “Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10),
Recognition and Measurement of Financial Assets and Financial Liabilities” in February 2018. The standards are
effective for public companies in fiscal years beginning after December 15, 2017, and the Company adopted the
standard effective January 1, 2018. The adoption of these standards did not have a material impact on the
Company's financial position, results of operations or cash flows.
84 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
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 establishes a right-of-use (“ROU”) model and 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 operations will be calculated so that the cost of the lease is allocated over the lease term, generally on a
straight-line basis. The Company has made an accounting policy election to exclude leases with a term of 12 months
or less from the requirement to record related assets and liabilities. Certain provisions of ASU No. 2016-02 were later
modified or clarified by the issuance of ASU 2018-11, “Leases (Topic 842): Targeted Improvements” and ASU 2018-
10, “Codification Improvements to Topic 842, Leases”. A modified retrospective transition approach is required by the
ASU and its provisions must be applied to all leases existing at the date of initial application. An entity may choose to
use either (1) the standard’s effective date or (2) the beginning of the earliest comparative period presented in the
financial statements as its date of initial application. The new standards are effective for public companies for fiscal
years beginning after December 15, 2018. The Company adopted the new standards effective January 1, 2019 using
the effective date as the date of initial application. Consequently, financial information will not be updated and the
disclosures required under the new standards will not be provided for periods before January 1, 2019. The standards
provide a number of optional practical expedients in transition which the Company is continuing to evaluate. The
Company does not expect the adoption of these standards to have a material impact on its results of operations or
cash flows; however, the Company continues to evaluate the impact the adoption of the new standards will have on
its financial position. While the Company continues to assess all of the effects of adoption, it currently believes the
most significant effects relate to the recognition of new ROU assets and lease liabilities on its consolidated balance
sheet for its operating leases and new disclosures about its leasing activities.
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
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 adoption of this standard did not 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
previous guidance, which required 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 requires 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 application of this standard did not 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 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
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
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 adopted 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.
In February 2018, the FASB issued ASU No. 2018-02, “Income Statement – Reporting Comprehensive Income
(Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, which permits
companies to reclassify tax effects stranded in accumulated other comprehensive income (“OCI”) as a result of tax
reform impacting tax rates or other items, such as changing from a worldwide tax system to a territorial system, from
OCI to retained earnings. Other tax effects stranded in OCI due to other reasons, such as prior changes in tax laws or
changes in valuation allowances, may not be reclassified. Additional disclosures will also be required upon adoption
of the new standard. The new standard is effective for fiscal years beginning after December 15, 2018, with early
adoption permitted. The Company adopted this new standard effective January 1, 2019. The Company does not
expect the adoption of this standard to have a material impact on its financial position, results of operations or cash
flows.
In March 2018, the FASB issued ASU No. 2018-05 “Income Taxes (Topic 740), amendments to SEC Paragraphs
Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update)”, which addresses the accounting and disclosures
around the enactment of the Tax Cuts and Jobs Act and the Securities and Exchange Commission’s Staff Accounting
Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”). The Company
adopted this new standard in the first quarter of 2018. See Note 14, Income Taxes, for the disclosures related to this
amended guidance.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework –
Changes to the Disclosure Requirements for Fair Value Measurement” which aims to improve the overall usefulness
of disclosures to financial statement users and reduce unnecessary costs to companies when preparing fair value
measurement disclosures. The standard is effective for annual and interim periods beginning after December 15,
2019 with early adoption permitted. The Company expects to adopt this new standard effective January 1, 2020. The
Company does not expect the adoption of this new 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
3. Fair Value Measurements
December 31
2018
173,919 $
69,718
89,152
23,155
355,944 $
$
$
2017
146,144
129,441
94,571
21,223
391,379
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 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.
86 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
As indicated in the tables below, the Company has determined that its financial assets and liabilities at December 31,
2018 and 2017 are level 1 and level 2 in the fair value hierarchy:
Level 1
December 31, 2018
Level 2
Total
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
Total financial liabilities
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
$
$
229
4,755
248
$
--
--
--
5,398
--
1,300
2,210
--
--
--
14,140
--
--
$
$
$
--
1,546
--
--
442
708
333
3,029
6,641
6,641
$
$
$
229
4,755
248
5,398
1,546
1,300
2,210
442
708
333
17,169
6,641
6,641
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
$
$
$
$
$
$
$
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.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
4. Investments
The Company’s trading securities consist of the following:
December 31, 2018
Trading equity securities
Trading debt securities
Total
December 31, 2017
Trading equity securities
Trading debt securities
Total
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
(Net Carrying
Amount)
$
$
$
$
5,546 $
11,817
17,363 $
4,964 $
10,971
15,935 $
50 $
55
105 $
394 $
58
452 $
365 $
267
632 $
31 $
179
210 $
5,231
11,605
16,836
5,327
10,850
16,177
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.
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.
Goodwill impairment is the excess of the carrying amount of a reporting unit (that includes goodwill) over its fair value.
Impairment is limited to the carrying amount of goodwill allocated to the reporting unit. The Company estimated the
fair value of its reporting units as of December 31, 2018 based upon a combination of discounted cash flows and
market approaches. Weighted average cost of capital assumptions used in the calculations ranged from 23.9% to
25.8% and terminal growth rate of 3% was also assumed. The sum of the reporting units valuations determined by
the Company was reconciled to the Company’s overall market capitalization. The valuations performed in the fourth
quarter of 2018 indicated impairment in the amount of $11,190 in two of the Company’s reporting units in the Energy
Group. The valuations performed in 2017 and 2016 indicated no impairment of goodwill. In addition, as part of a
business unit restructuring, additional goodwill of $955 was written off.
88 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
The changes in the carrying amount of goodwill and accumulated impairment losses by reporting segment during the
years ended December 31, 2018 and 2017 are as follows:
Balance, December 31, 2016:
Goodwill
Accumulated impairment
Net
Acquisition
Foreign currency translation
Balance, December 31, 2017:
Goodwill
Accumulated impairment losses
Net
Restructuring write off
Foreign currency translation
Impairment
Balance, December 31, 2018:
Goodwill
Accumulated impairment
Net
6. Intangible Assets
Infrastructure
Group
Aggregate and
Mining Group Energy Group
Total
$
$
10,758
(2,310)
8,448
--
125
10,883
(2,310)
8,573
(955)
(49)
--
$
31,920
(12,196)
19,724
--
1,315
33,235
(12,196)
21,039
--
(790)
--
$
19,369
(6,737)
12,632
3,488
--
22,857
(6,737)
16,120
--
--
(11,190)
62,047
(21,243)
40,804
3,488
1,440
66,975
(21,243)
45,732
(955)
(839)
(11,190)
9,879
(2,310)
7,569
$
32,445
(12,196)
20,249
$
22,857
(17,927)
4,930
$
65,181
(32,433)
32,748
$
Intangible assets consisted of the following at December 31, 2018 and 2017:
Gross Carrying
Value
2018
Accumulated
Amortization
Net Carrying
Value
Gross Carrying
Value
2017
Accumulated
Amortization
Net Carrying
Value
Dealer network and customer
relationships
Trade names
Other
Total
$ 30,909
9,536
6,618
$ 47,063
$ 14,472
2,509
4,712
$ 16,437
7,027
1,906
$ 21,693 $ 25,370
$ 31,376
9,650
6,821
$ 47,847
$ 10,856
1,914
4,125
$ 20,520
7,736
2,696
$ 16,895 $ 30,952
Amortization expense on intangible assets was $5,125, $4,064 and $3,562 for 2018, 2017 and 2016, respectively.
Intangible asset amortization expense is expected to be $3,944, $3,511, $3,118, $2,660 and $2,178 in the years
ending December 31, 2019, 2020, 2021, 2022 and 2023, respectively, and $9,959 thereafter.
7. Property and Equipment
Property and equipment at cost, less accumulated depreciation, is as follows:
Land
Building and land improvements
Construction in progress
Manufacturing and office equipment
Aviation equipment
Less accumulated depreciation
Total
December 31
2018
2017
$
$
15,774
145,913
10,410
260,420
14,424
(254,493)
192,448
$
$
15,568
143,339
10,680
244,324
14,227
(237,742)
190,396
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Depreciation expense was $22,411, $21,312 and $20,818 for the years ended December 31, 2018, 2017 and 2016,
respectively.
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 $3,618, $3,211 and $2,792 for
the years ended December 31, 2018, 2017 and 2016, respectively.
Minimum rental commitments for all noncancelable operating leases at December 31, 2018 are as follows:
2019
2020
2021
2022
2023
Thereafter
$
$
1,992
1,100
388
144
66
12
3,702
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. As of December 31, 2018, outstanding borrowings under the agreement
totaled $58,778, which are included in long-term debt in the accompanying consolidated balance sheets. No amounts
were outstanding at December 31, 2017 under the agreement. Letters of credit totaling $11,044, 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, 2018, resulting in additional
borrowing ability of $30,178 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 3.27% as of December 31, 2018. 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.
In February 2019, the $100,000 amended and restated credit agreement discussed above was again amended to
increase the unsecured line of credit to a maximum of $150,000 and to extend the maturity date of the agreement to
December 29, 2023. Upon disposition of the Georgia wood pellet plant, the Company is required to apply the
proceeds, if any, as a payment against any outstanding balance on the line of credit. Other significant terms were left
unchanged.
The Company’s South African subsidiary, Osborn Engineered Products SA (Pty) Ltd (“Osborn”), has a credit facility of
$6,600 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, 2018 and 2017, Osborn had no
outstanding borrowings but had $397 in performance, advance payment and retention guarantees outstanding under
the facility at December 31, 2018. 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, 2018,
Osborn had available credit under the facility of $6,203. The interest rate is 0.25% less than the South Africa prime
rate, resulting in a rate of 10.0% as of December 31, 2018.
The Company's Brazilian subsidiary has outstanding working capital loans totaling $1,207 and $3,402 from Brazilian
banks with interest rates ranging from 10.4% to 11.0% at December 31, 2018 and 2017, respectively. The loans’
maturity dates ranging from January 2019 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 $137 and $642 as of December 31,
2018 and 2017, respectively, that have interest rates ranging from 3.5% to 16.3%. These equipment loans have
maturity dates ranging from January 2019 to April 2020. Astec Brazil's loans are included in the accompanying
consolidated balance sheets as current maturities of long-term debt of $413 and long-term debt of $931 as of
December 31, 2018.
Long-term debt maturities are expected to be $413, $217, $214, $58,992 and $214 in the years ending December 31,
2019, 2020, 2021, 2022 and 2023, respectively, and $72 thereafter.
90 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
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.
Changes in the Company’s product warranty liability during 2018, 2017 and 2016 are as follows:
Reserve balance, beginning of year
Warranty liabilities accrued
Warranty liabilities settled
Other
Reserve balance, end of year
11. Accrued Loss Reserves
2018
2017
2016
$
$
15,410
13,219
(17,539)
(162)
10,928
$
$
13,156
16,725
(14,642)
171
15,410
$
$
9,100
18,912
(15,125)
269
13,156
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, 2018 were $8,261 and $8,119 at December 31, 2017, of
which $6,429 and $5,615 were included in other long-term liabilities at December 31, 2018 and 2017, 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 2018 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 (gain)/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/(loss) 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
2018
2017
$
16,916
578
(1,021)
(732)
15,741
15,741
14,717
(909)
1,376
(732)
14,452
(1,289) $
16,104
630
867
(685)
16,916
16,916
13,241
1,746
415
(685)
14,717
(2,199)
(1,289) $
(1,289) $
(2,199)
(2,199)
5,687
5,687
$
$
5,463
5,463
4.10%
6.00%
N/A
3.50%
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
2018
2017
46.9%
46.2%
6.9%
100.0%
49.4%
43.2%
7.4%
100.0%
2018 & 2017 Target
Allocation Ranges
40 - 65%
30 - 50%
0 - 15%
92 I ASTEC INDUSTRIES, INC. I 2018 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 2018, 2017 and 2016 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
Net actuarial (gain) loss for the year
Amortization of net loss
Total recognized in other comprehensive income
Total recognized in net periodic benefit cost and other comprehensive income
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 2019.
Pension Benefits
2018
2017
2016
$
$
578
(802)
465
241
$
630
(720)
530
440
650
(782)
480
348
690
(465)
225
466
(159)
(530)
(689)
(249)
533
(480)
53
401
3.50%
6.25%
4.00%
6.25%
4.28%
7.00%
Amounts in accumulated other comprehensive loss expected to be recognized in net periodic benefit cost in 2019 for
the amortization of a net loss is $520.
The following estimated future benefit payments are expected in the years indicated:
2019
2020
2021
2022
2023
2024 - 2028
Pension Benefits
840
$
870
910
920
940
4,920
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 $7,451, $7,182 and $5,943 in 2018, 2017 and 2016, 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, 2018
Market
Cost
December 31, 2017
Market
Cost
$
$
1,886
5,262
7,148
$
$
1,658
4,983
6,641
$
$
1,960
4,589
6,549
$
$
3,589
4,963
8,552
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
At the end of each quarter, the Company 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 operations 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 $1,556 and $575 in 2018 and 2017, respectively, and expense of $1,742 in 2016,
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 balance sheet and is adjusted to fair value at each
measurement date. The changes in fair value are recognized in the consolidated statements of operations 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 $11,082 during 2018. At December 31, 2018, the Company reported $333 of
derivative assets in other current assets. The Company reported $112 of derivative liabilities in other current liabilities
at December 31, 2017. The Company recognized, as a component of cost of sales, a net gain on the change in fair
value of derivative instruments of $1,147 for the year ended December 31, 2018. The Company recognized net
losses on the change in fair value of derivative instruments of $663 and $336 for the years ended December 31, 2017
and 2016, respectively. There were no derivatives that were designated as hedges at December 31, 2018 or 2017.
14. Income Taxes
For financial reporting purposes, income (loss) before income taxes includes the following components:
Year Ended December 31
2017
55,980
1,237
57,217
2018
(86,874) $
896
(85,978) $
$
$
2016
87,326
(231)
87,095
United States
Foreign
Income (loss) before income taxes
$
$
94 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
The provision (benefit) for income taxes consists of the following:
Year Ended December 31
2018
2017
2016
Current provision (benefit):
Federal
State
Foreign
Total current provision
Deferred provision (benefit):
Federal
State
Foreign
Total deferred benefit
Total provision (benefit):
Federal
State
Foreign
$
$
(3,995) $
892
3,254
151
16,178
2,866
874
19,918
(19,142)
(5,788)
(455)
(25,385)
(23,137)
(4,896)
2,799
107
(455)
57
(291)
16,285
2,411
931
19,627
$
30,623
4,098
907
35,628
(2,653)
(1,213)
345
(3,521)
27,970
2,885
1,252
32,107
Total income tax provision (benefit)
$
(25,234) $
The Company’s income tax provision (benefit) is computed based on the domestic and foreign federal statutory rates
and the average state statutory rates, net of related federal benefit.
The provision (benefit) for income taxes differs from the amount computed by applying the statutory federal income
tax rate to income (loss) before income taxes. A reconciliation of the provision (benefit) for income taxes at the
statutory federal income tax rate to the amount provided is as follows:
Tax expense (benefit) at the statutory federal income tax rate
Domestic production activity deduction
State income tax, net of federal income tax
Research and development tax credits
FIN 48 impact
Liquidation of subsidiary
Valuation allowance impact
U.S. tax reform impact
Other items
Total income tax provision (benefit)
$
$
Year Ended December 31
2017
2018
(18,055) $
--
(2,976)
(4,660)
1,856
(1,403)
978
(193)
(781)
(25,234) $
20,026
(1,661)
1,520
(922)
124
--
1,585
(505)
(540)
19,627
$
$
2016
30,483
(1,641)
1,876
(785)
(240)
--
1,638
--
776
32,107
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 2018 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
Goodwill
Pension and post-employment benefits
Outside basis difference
Federal net operating loss
Foreign net operating losses
Other
Valuation allowances
Total deferred tax assets
Deferred tax liabilities:
Property and equipment
Intangibles
Goodwill
Pension
Total deferred tax liabilities
Total net deferred assets
December 31
2018
2017
$
$
4,513
2,275
182
7,265
1,612
364
881
1,728
2,157
1,536
4,496
15,655
5,069
5,025
(8,540)
44,218
16,156
541
--
1,051
17,748
26,470
$
$
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
As of December 31, 2018, the Company has a federal net operating loss carryforward of $74,548 from year 2018.
The Company expects to utilize the 2018 federal net operating loss against earnings in future years.
As of December 31, 2018, the Company has state net operating loss carryforwards of $261,673 and foreign net
operating loss carryforwards of approximately $16,759, which will be available to offset future taxable income. If not
used, these carryforwards will expire between 2019 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 2018, the valuation allowance
on these carryforwards was increased by $978 due to the unrealizable portion of certain entities’ state and foreign net
operating loss carryforwards. The Company has also determined that the recovery of certain other deferred tax
assets is realizable. The valuation allowance for these deferred tax assets was decreased by $756 during 2018.
The following table represents a roll forward of the deferred tax asset valuation allowance for the years ended
December 31, 2018, 2017 and 2016:
Year Ended December 31
2017
2016
2018
Allowance balance, beginning of year
Provision
Write-offs
Other
Allowance balance, end of year
$
$
8,318
978
--
(756)
8,540
$
$
8,280
1,585
(1,862)
315
8,318
$
$
8,065
1,639
(289)
(1,135)
8,280
96 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Undistributed earnings of the Company’s Canadian subsidiary, Breaker Technology Ltd. (“BTL”), South African
subsidiary, Osborn Engineered Products SA, (Pty), Ltd. (“Osborn”), Australian subsidiary, Astec Australia Pty, Ltd.
(“Astec Australia”), and Northern Ireland subsidiary, Telestack Limited (“Telestack”), 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, 2018, the cumulative amounts of undistributed GAAP earnings for BTL, Osborn, Astec Australia and
Telestack are $7,789, $29,800, $490 and $1,477, 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 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 2013.
The Company has a liability for unrecognized tax benefits of $2,048 and $365 (excluding accrued interest and
penalties) as of December 31, 2018 and 2017, respectively. The Company recognizes interest and penalties accrued
related to unrecognized tax benefits in tax expense. The Company recognized tax benefits of $66 and $22 in 2018
and 2017, 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 $2,243 and $370 at December 31, 2018 and 2017, 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 taken in current year
Reductions due to lapse of statutes of limitations
Decreases related to settlements with tax authorities
Balance, end of year
Year Ended December 31
2018
2017
2016
$
$
365
1,722
(39)
--
2,048
$
$
238
127
--
--
365
$
$
603
235
(16)
(584)
238
The December 31, 2018 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 was a
provisional amount and constituted a reasonable estimate at December 31, 2017, based upon the best information
then available. The final impact was $1,727 and differed from the provisional amount due to, among other things,
additional analysis, changes in interpretations and assumptions the Company made, additional regulatory guidance
issued and actions the Company took as a result of the Tax Act. The subsequent adjustment, $1,235, is included in
2018 income tax expense.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
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 recorded tax expense of $545 in its consolidated
financial statements for the year ended December 31, 2018.
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 to 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, 2018.
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 final determination
of the transition tax of $1,727 was 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 material to the Company’s federal income taxes. The DPAD benefits included in the effective tax rate
reconciliations for 2017 and 2016 were $1,661 and $1,641, 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 $2,247 at December 31, 2018. These arrangements expire at various dates
through July 2021 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 $1,183 related to these guarantees as of December 31, 2018.
In addition, the Company is contingently liable under letters of credit issued by a lender totaling $11,044 as of
December 31, 2018, 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, 2018, the Company’s foreign
subsidiaries are contingently liable for a total of $2,016 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 $13,060 as of December 31, 2018.
The Company manufactured its first wood pellet plant for a customer under a Company-financed arrangement
whereby the Company deferred the recognition of revenue as payment under the arrangement was not assured. The
original customer is attempting to obtain financing to purchase the plant at a reduced price; however, the Company
believes the ultimate consummation of the sale to this customer is uncertain. After considering the uncertainty of
completing the sale to the existing customer; the lack of success in attempting to market the plant to other pellet plant
operators; the cost of repossessing the plant; and the Company’s decision to exit the pellet plant business line, the
pellet plant inventory’s net realizable value has been written down to zero.
The Company and certain of its current and former executive officers have been named as defendants in a putative
shareholder class action lawsuit filed on February 1, 2019, in the United States District Court for the Eastern District
of Tennessee. The action is styled City of Taylor General Employees Retirement System v. Astec Industries, Inc., et
al., Case No. 1:19-cv-00024-PLR-CHS. The complaint generally alleges that the defendants violated the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder by making
allegedly false and misleading statements and that the individual defendants are control person under Section 20(a)
98 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
of the Exchange Act. The complaint was filed on behalf of shareholders who purchased shares of the Company’s
stock between July 26, 2016 and October 22, 2018 and seeks monetary damages on behalf of the purported class.
We dispute these allegations and intend to defend this lawsuit vigorously. The Company is unable to estimate the
possible loss or range of loss at this time.
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.
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 2018, 2017 and 2016 was $1,869, $1,991 and
$3,289, respectively. The grant date tax benefit was increased by $67, $290 and $220, respectively, upon the vesting
of RSUs in 2018, 2017 and 2016.
Compensation expense of $2,032, $2,978 and $2,426 was recorded in the years ended December 31, 2018, 2017
and 2016, respectively, to reflect the fair value of RSUs granted (or anticipated to be granted for 2018 performance)
amortized over the portion of the vesting period occurring during the period. Related income tax benefits of $528,
$1,132 and $934 were recorded in 2018, 2017 and 2016, respectively. Based upon the grant date fair value of RSUs,
it is anticipated that $3,022 of additional compensation costs will be recognized in future periods through 2022 for
RSUs earned through December 31, 2018. The weighted average period over which this additional compensation
cost will be expensed is 1.8 years. RSUs do not participate in Company-paid dividends.
Changes in restricted stock units during the year ended December 31, 2018 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
2018
$
161
61
(25)
(32)
165
53.09
58.45
50.84
45.79
56.82
The grant date fair value of the restricted stock units granted during 2018, 2017 and 2016 was $3,553, $5,399 and
$1,946, respectively.
17. Revenue Recognition
As discussed in Note 1, Summary of Significant Accounting Policies, the Company adopted the provisions of ASU
No. 2014-09, “Revenue from Contracts with Customers” and its related amendments effective January 1, 2018. The
adoption of this standard did not have a material impact on the timing or amounts of revenues recognized by the
Company, and, as such, no cumulative effect adjustment was recorded as of the adoption of the standard.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
The following table disaggregates the Company’s revenue by major source for the period ended December 31, 2018
(excluding intercompany sales):
Net Sales - Domestic:
Equipment sales
Pellet plant agreement sale reduction
Parts and component sales
Service and equipment installation revenue
Used equipment sales
Freight revenue
Other
Total domestic revenue
Net Sales - International:
Equipment sales
Parts and component sales
Service and equipment installation revenue
Used equipment sales
Freight revenue
Other
Total international revenue
Infrastructure
Group
Aggregate and
Mining Group Energy Group
Total
$
$
$ 296,974
(75,315)
119,823
10,822
8,098
12,502
1,022
373,926
220,015
--
71,862
1,844
3,127
6,265
(741)
302,372
$ 178,584
--
42,666
6,355
4,358
5,896
1,657
239,516
43,516
19,215
3,152
1,693
1,043
(256)
68,363
98,604
44,609
1,069
2,948
3,266
296
150,792
24,308
10,528
390
908
417
79
36,630
695,573
(75,315)
234,351
19,021
15,583
24,663
1,938
915,814
166,428
74,352
4,611
5,549
4,726
119
255,785
Total net sales
$ 442,289
$
453,164
$ 276,146
$ 1,171,599
Revenue is recognized when obligations under the terms of a contract are satisfied and generally occurs with the
transfer of control of the product or services at a point in time. Revenue is measured as the amount of consideration
the Company expects to receive in exchange for transferring goods or providing services. See Note 1, Summary of
Significant Accounting Policies, for further information regarding the types and timing of the Company’s revenue
transactions. Contract assets and liabilities, excluding customer deposits, are immaterial at December 31, 2018.
The Company had a pellet plant sale which was accounted for over time using the ratio of costs incurred to estimated
total costs. Pellet plant sales recognized under the over-time method in 2018 for production activities were not
significant. Penalties are accounted for as a reduction in net sales. During July 2018, the Company entered into an
agreement with its pellet plant customer due to unresolved issues which inhibited the plant’s ability to meet
contractual provisions by the date required in the Company’s sales contract with its customer. Under the terms of the
pellet plant agreement, the Company paid its customer $68,000. Considering this payment and other provisions of
the pellet plant agreement, including the forgiveness of $7,315 of accounts receivable due from the customer, a
$75,315 reduction in sales was recorded in 2018.
18. 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 - The Infrastructure Group segment is made up of five business units. These business units
include Astec, Inc. (“Astec”), Roadtec, Inc. (“Roadtec”), Carlson Paving Products, Inc. (“Carlson”), Astec Mobile
Machinery GmbH (“AMM”) and Astec Australia Pty Ltd (“Astec Australia”). Three of the business units (Astec,
Roadtec and Carlson) design, engineer, manufacture and market a complete line of asphalt plants and their related
components, asphalt pavers, screeds, milling machines, material transfer vehicles, stabilizers and related ancillary
equipment. The other two business units (AMM and Astec Australia) primarily 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. During late 2018, the Company decided to close AMM, located in Germany, in 2019, and its
assets are being liquidated. The principal purchasers of the products produced by this group are asphalt producers,
highway and heavy equipment contractors, 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. Pellet plant sales in 2018, excluding the pellet plant agreement sales
100 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
reduction of $75,315, as discussed in Note 17, Revenue Recognition, were not material. The pellet plant equipment
sold to this customer was manufactured by each of the Company’s segments.
Aggregate and Mining Group - The Company's Aggregate and Mining Group is comprised of eight business units
which are focused on designing and manufacturing heavy processing equipment, as well as servicing and supplying
parts for the aggregate, metallic mining, recycling, ports and bulk handling markets. These business units are
Telsmith, Inc. (“Telsmith”), Kolberg-Pioneer, Inc. (“KPI”), Astec Mobile Screens, Inc. (“AMS”), Johnson Crushers
International, Inc. (“JCI”), Breaker Technology Ltd/Breaker Technology, Inc. (“BTI”), Osborn Engineered Products, SA
(Pty) Ltd (“Osborn”), Astec do Brasil Fabricacao de Equipamentos Ltda. (“Astec Brazil”) and Telestack Limited
(“Telestack”). 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 - The Company’s Energy Group is currently comprised of six business units focused on supplying
heavy equipment such as heaters, drilling rigs, concrete plants, wood chippers and grinders, pump trailers, storage
equipment and related parts to the oil and gas, construction, and water well industries, as well as commercial and
industrial burners used primarily in commercial, industrial and process heating applications. The business units
currently included in the Energy Group are Heatec, Inc. (“Heatec”), CEI Enterprises, Inc. (“CEI”), GEFCO, Inc.
(“GEFCO”), Peterson Pacific Corp. (“Peterson”), Power Flame Incorporated (“Power Flame”) and RexCon, Inc.
(“RexCon”). Power Flame, located in Parsons, Kansas, was acquired in August 2016. RexCon, located in Burlington,
WI, was formed to acquire substantially all of the assets and liabilities of RexCon, LLC on October 1, 2017. 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.
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., a captive insurance company and a Company-owned distributor in the start-up phase of
operations in Chile. The Company evaluates performance and allocates resources to its operating segments based
on profit or loss from operations before U.S. federal income taxes, state deferred taxes and corporate overhead and
thus these costs are included in the Corporate category.
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
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 2018
Revenues from external customers
Intersegment revenues
Restructuring and asset impairment charges
Interest expense
Depreciation and amortization
Income taxes
Profit (loss)
Infrastructure
Group
$ 442,289
21,568
1,870
10
8,424
880
(112,954)
Aggregate
and Mining
Group
$ 453,164
16,603
--
384
9,383
2,349
45,464
Energy
Group
$ 276,146
17,578
11,190
17
9,149
306
3,070
Corporate
$ --
--
--
634
957
(28,769)
1,586
Total
$ 1,171,599
55,749
13,060
1,045
27,913
(25,234)
(62,834)
Assets
Capital expenditures
536,744
14,823
590,512
8,731
309,397
4,580
367,211
769
1,803,864
28,903
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
102 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
The totals of segment information for all reportable segments reconciles to consolidated totals as follows:
Net income attributable to controlling interest
Total profit (loss) for reportable segments
Corporate expenses, net
Net loss attributable to non-controlling interest
Recapture (elimination) of intersegment profit
Total consolidated net income (loss) 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
Total consolidated assets
Sales into major geographic regions were as follows:
2018
2017
2016
$
(64,420) $
1,586
295
2,090
$
78,608
(40,963)
205
(55)
110,504
(55,992)
171
476
$
(60,449)
$
37,795
$
55,159
$ 1,436,653
367,211
(4,986)
(664,914)
(300,709)
22,202
$ 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)
$
855,457
$
889,579
$
843,601
United States
Canada
Africa
Australia and Oceania
South America (excluding Brazil)
Other European Countries
Mexico
Russia
Middle East
Brazil
Other Asian Countries
Japan and Korea
China
Post-Soviet States (excluding Russia)
Central America (excluding Mexico)
West Indies
India
Other
Total foreign
Total consolidated sales
$
$
$
Year Ended December 31
2017
932,294
65,509
36,847
40,201
18,562
18,679
8,508
13,609
2018
915,814
61,582
45,613
38,645
30,081
25,985
9,632
9,571
7,877
6,292
5,472
4,881
10,478
10,286
2016
941,273
37,539
31,557
29,948
28,204
19,198
13,489
3,185
3,403
4,300
6,926
3,649
2,765
2,730
2,706
1,494
957
734
255,785
$ 1,171,599
4,760
6,113
5,951
2,929
3,421
1,026
685
252,445
$ 1,184,739
10,825
4,595
3,293
5,904
2,994
318
480
206,158
$ 1,147,431
ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT I 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
Long-lived assets by major geographic region are as follows:
United States
Brazil
Northern Ireland
South Africa
Australia
Canada
Germany
Chile
Total foreign
Total
December 31
2018
162,775
8,866
7,641
4,682
4,624
3,480
345
35
29,673
192,448
$
$
2017
158,683
11,114
6,342
5,684
4,532
2,893
1,148
--
31,713
190,396
$
$
19. 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
$2,230 and $2,192, respectively
Accumulated other comprehensive loss
December 31
2018
2017
$
(30,656) $
(21,140)
(3,227)
$
(33,883) $
(3,103)
(24,243)
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.
20. Other Income
Other income consists of the following:
Investment loss
Licensing fees
Other
Total
21. Business Combinations
Year Ended December 31
2017
2018
2016
$
$
(228) $
--
764
536
$
(96) $
651
663
1,218
$
(276)
546
259
529
In October, 2017, the Company acquired substantially all of the assets and liabilities of RexCon LLC (“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 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. The
Company determined that the full $3,488 of goodwill that was acquired in the acquisition was impaired in the fourth
quarter of 2018.
104 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in thousands, except per share amounts unless otherwise specified)
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 (“Power Flame”) 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 Power Flame 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. Power
Flame’s operating results are included in the Energy Group beginning in the third quarter of 2016. The Company
determined that an amount equal to $7,702 of the goodwill that was acquired in the acquisition was impaired in the
fourth quarter of 2018.
Power Flame, 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 2018 ANNUAL REPORT I 105
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
Performance Graph for Astec Industries, Inc.
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
2013
100.00
2014
102.78
2015
107.49
2016
179.57
2017
156.86
2018
81.67
100.00
112.04
111.49
126.41
143.21
135.97
100.00
91.61
67.02
88.36
113.38
84.98
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 1980-2019.
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, 2013 and assumes that all dividends were invested on the date paid.
106 I ASTEC INDUSTRIES, INC. I 2018 ANNUAL REPORT
FINANCIAL OVERVIEW
(in thousands, except as noted*)
OPERATING RESULTS
Net sales
Net income (loss) attributable to controlling interest
2018
2017
2016
2015
2014
$1,171,599
$1,184,739
$1,147,431
$983,157
$975,595
(60,449)
37,795
$55,159
$32,797
$34,458
FINANCIAL POSITION
Total assets
Working capital
Equity
PER COMMON SHARE*
Basic
Diluted
OTHER DATA
shares outstanding
Basic
Diluted
Associates*
Net income (loss) attributable to controlling interest
Book value per common share at year end
Weighted average number of common
$855,457
$889,579
$843,601
$777,353
$802,265
371,760
585,290
423,823
686,765
407,972
648,841
399,785
609,858
388,862
596,152
$(2.64)
(2.64)
25.53
$1.64
1.63
29.58
$2.40
2.38
27.99
$ 1.43
1.42
26.30
$1.51
1.49
25.62
22,902
22,902
4,401
23,025
23,184
4,437
22,992
23,142
4,218
22,934
23,120
3,740
22,819
23,105
3,952
CONTENTS
Our Industry-Leading Footprint . . . . . . . . . 1
Letter to Shareholders . . . . . . . . . . . . . . . 2 New Technologies . . . . . . . . . . . . . . . . . 4
INFRASTRUCTURE GROUP
AGGREGATE & MINING GROUP
ENERGY GROUP
Astec . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Astec do Brasil . . . . . . . . . . . . . . . . . . . 16
CEI Enterprises . . . . . . . . . . . . . . . . . . . 32
Astec Australia . . . . . . . . . . . . . . . . . . . 10
Astec Mobile Screens . . . . . . . . . . . . . . 18
GEFCO . . . . . . . . . . . . . . . . . . . . . . . . 34
Carlson Paving Products . . . . . . . . . . . . 12
Breaker Technology . . . . . . . . . . . . . . . 20
Heatec . . . . . . . . . . . . . . . . . . . . . . . . 36
Roadtec . . . . . . . . . . . . . . . . . . . . . . . . 14
Johnson Crushers International . . . . . . . . 22
Peterson Pacific Corp. . . . . . . . . . . . . . . 38
Kolberg-Pioneer . . . . . . . . . . . . . . . . . . 24
Power Flame . . . . . . . . . . . . . . . . . . . . 40
Osborn Engineered Products . . . . . . . . . 26
RexCon . . . . . . . . . . . . . . . . . . . . . . . . 42
Telestack . . . . . . . . . . . . . . . . . . . . . . . 28
Telsmith . . . . . . . . . . . . . . . . . . . . . . . . 30
CORPORATE INFORMATION
Corporate Executive Officers . . . . . . . . . 44
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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 25, 2019, at 10:00 A.M. EST in
the Training Center of Astec, Inc.
located at 4101 Jerome Avenue,
Chattanooga, TN 37407.
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2018 ANNUAL REPORT
Corporate Headquarters:
1725 Shepherd Road
Chattanooga, Tennessee 37421 USA
Tel: 423.899.5898 • Fax: 423.899.4456
www.astecindustries.com
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