Astec Declares Succession Plan

Astec Industries, Inc.’s (ASTE - Analyst Report) Board of Directors has formalized a leadership succession plan to bring about changes in the positions of Chief Executive Officer (CEO) and President, Chief Operating Officer (COO) and Executive Vice President of the company.

As per the plan, Benjamin G. Brock will be appointed as the CEO and President, whereas Richard J. Dorris will serve as the COO and Executive Vice President.

It is also stated that Dr. J. Don Brock, the incumbent CEO, will remain as the Executive Chairman of the Board and W. Norman Smith, the current President and COO, will assume the role of Vice-Chairman of the Board.

The succession plan reveals the future leadership policy of Astec through a formal transition process of the existing roles. The company is yet to decide the date of the final implementation of its succession plan, which involves the appointments of the officers, as the whole process depends on several factors. However, it is expected that the strategy will be executed prior to the end of 2013.

Astec, which is among the leading manufacturers of farm and construction machinery along with H&E Equipment Services Inc. (HEES - Snapshot Report), Caterpillar Inc Del (CAT - Analyst Report) and Joy Global, Inc. (JOY - Analyst Report), has also announced a dividend policy, under which, it will pay a quarterly dividend of 10 cents per share. The payment of cash dividend will begin in the second quarter of 2013.

The dividend policy, however, can be modified or canceled in any manner and at any time in the future.The amount of dividend will be determined by the company's financial position, existing credit agreement and results of operations.

Astec’s earnings per share for 2012 were $1.45, a 16% drop from $1.73 per share in 2011. The company reported revenues of $936.3 million in 2012, up 3% year over year. Domestic revenues increased 5.3% but international sales dipped 0.3% year over year.

Astec exited 2012 with cash and cash equivalent of $81 million, an increase of 42% annually. The company has no debt on its balance sheet.

Our Take

Astec’s customers depend largely on government funding for the construction and maintenance of the infrastructural projects. Although a new 27-month Federal highway funding bill was passed in Jul 2012, it was too late in the 2012 construction season to have an impact. Owing to the uncertainty prevailing in Federal infrastructure, customers have tightened their budgets. However, with the Federal highway funding bill in place, Astec will benefit from the pick up in construction.

Astec continues to invest significantly in manufacturing new products and upgrading the existing products, which will benefit the company, moving forward. Astec will benefit from a recovery in the economy and the pent up demand for equipment.

Astec currently has a Zacks Rank #3 (Hold).