Q4 2019 Earnings Call
Greetings and welcome to the Aztec injuries Inc. fourth quarter 2019 earnings call. At this time all participants are in listen only mode. A brief question answer session will follow the formal presentation.
If anyone should require operator assistance during a conference. Please press star zero under telephone keypad.
As a reminder, this conference is being recorded it is my pleasure to introduce your host Steve Anderson Senior Vice President Director of Investor Relations. Thank you Mr. I understand you may begin.
Thank you Doug Good morning, and welcome to the Astec Industries conference call for the fourth quarter in fiscal year end.
Your ended December 31st 2019, it's Doug stated like Steve Anderson. It also on todays call, we're very rough below our chief Executive Officer in Becky Weinberg, our Chief Financial Officer, and just a moment I'll turn the call over to Barry to provide comments and then Becky will summarize our financial results.
Before we begin I'll remind you that our discussion. This morning may contain forward looking statements that relate to the future performance of the company and these statements are intended to qualify for the safe Harbor liability established by the private Securities Litigation Reform Act.
Any such statements are not guarantees of future performance that are subject to certain risks uncertainties and assumptions.
Factors that could influence our results are highlighted in today's financial news release and others are contained in our annual report that are filings with the FCC.
As usual, we ask that you can do your eyes yourself with those factors you should also note that comments made during the call today, we'll refer to the non-GAAP results a reconciliation to the GAAP to non-GAAP results are included in our news release and our slide deck. So at this point I'll turn the call over to Barry.
Hey, Steve Good morning, everyone and thank you for joining us on the call. This morning to discuss our fourth quarter full year 2019 results I'm joined here with our new CFO Lucky Weinberg.
I'll start off by provided a high level summary ever quarterly results in an update on macro trends then turn the call over to Becky for financial details of the core.
I'll then return to provide an update on our strategic transformation progress and then open the call up procure night.
Overall fourth quarter results show continued delayed capital spending by our customers in North America, which was off which was partially offset by an increase from international whole goods in aftermarket parts sales I.
I know for end users are busy for my time spent with them in the field, but through the fourth quarter. They continue to lean on lease options that extended terms.
That along with our dealers docket initiatives had an impact on our volume.
Despite the temporary headwinds I'm very encouraged by the progress, we're making towards our strategic initiatives simplify focus and grow our organization.
So I will discuss in greater detail later in the call.
Now, let's turn our attention to the flight.
Slide four where you will see an overview about ticked industries.
For those of you knew to our story I'll highlight a few key metrics. We finished 2019 with 1.15 billion in adjusted revenue comprised of 41% infrastructure, 35% aggregate mining and 24% energy.
77% of our sales are domestic for the remainder being in the international markets.
Turning to the highlights for the quarter in the year on slide five slides five and six Nike will cover details later in our presentation, but I want to call your attention to your performance relative to free cash flow conversion, where we finished the year at a rate of 230% with improved year over year cash position.
Adjusted EPS for the fourth quarter was at 40 cents compared to 61 cents in the prior year and for the year, we finish it and adjusted 1.1 dollar 59 compared to $2.94 in 2018.
As we look forward.
We are confident that the restructuring and reorganization steps we've taken thus far in subsequent actions, we plan to take will position us well as they move into 2020.
Relative to the Corona virus and its potential impact to our business today, our employees in China are safe and our supply chain is intact and therefore, we do not foresee us worked for short or medium term impact.
We understand that this is a fluid and dynamic situation and therefore, it requires a constant monitoring themselves.
Before I turn the call over to battery to provide further details on our financial results I wanted to briefly comment on the delay 10-K filing and our material weaknesses as mentioned in our press release.
The material weaknesses that we have today are similar in nature to reposition incurred in 2018.
These related issues and.
These are controlled related issues and ultimately do not impact is validated the validity of our reported financials.
To address these issues, we have strengthened our finance Department with addition of Becky Neuberger controllers and by elevating our other finance professionals to help drive corrective action.
The priority for the board for me personally and I feel confident that we will make significant progress towards remediation over the course of 2020 and eliminate these internal control matters going forward.
We're working through these issues with our Collins and are confident that we will file our 10-K prior to the extended deadline.
Now I'm delighted to be able to introduce you to our new CFO Becky Weinberg crew started on December four.
Yes, great experience with an ability to implement strategic change, which creates a great fit for curve here at Astec industries as we begin the next chapter in our company's rich history.
She has held prominent leader for his leadership position liquidity. Her most recent role as VP of global finance operations that well those.
We've also had the pleasure working together well the case, new Holland and I'm very confident in her ability to lead the financial function here that there.
We are thrilled to have or join our team.
Thank you very good morning, everyone.
I'm pleased to join stay on today's earnings call. My first as CFO of Astec industries. After joining the company in early December.
Almost three months into my new role I can say, that's truly an honor to be working with such great company talented team and with an opportunity ahead of us to significantly improved financial results and drive shareholder value.
On today's call I'll provide further financial details of a corridor for your results before turning the call back to Barry for an update on our strategic transformation progress.
Before opening the call the QNX.
Turning your attention to slide eight.
Fourth quarter revenues decreased 10.7% to 283.2 million domestic sales decline a 15.5% was partially offset by growth of 6.9 precise in international sales driven primarily by increases in Australia and Brazil.
Continued softness in equipment sales, which decreased 21.4% in a quarter or offset by strong sales growth of 9.5% since her.
Our dealer inventory levels remain elevated through much of 2019 with continued impact sales into fourth quarter 19.
Dealer rental fleets that have traditionally been converted retail sales by this time in New York does not occur.
Our backlog decreased 23.6% to $263.7 million during the quarter. The backlog declined was mainly due to lower demand for paving equipment in a difficult comparison to record backlog a year ago, an aggregate mining.
This was partially offset by growth in asphalt plant related equipment.
Activity for asphalt plant related equipment exceeded our expectation is and we ended the year with the highest level one new cookies.
New bookings are paving equipment also improved during the quarter.
Within aggregate mining new equipment orders picked up modestly from the three previous quarters.
Before before I'll, just briefly discuss the impact of several charges to our GAAP results for the quarter.
In relation to the company's efforts to simplify the organization, we incurred a 9.9 million dollar pretax restructuring charge or three cents per share.
Restructuring items are related to the previously announced expected fail to just go subsidiary closure of our German operation and the transfer of the sea ice products to see second Rex constant facilities.
In the fourth quarter 29 soon.
We revised inventory control procedures considered the age quantities on tan market acceptance of the equipment and other related factors, we determined that some units required additions to their net realizable value reserves, resulting in a pre tax inventory write down 26.5 million or 81 cents per diluted share.
Sure.
Moving onto adjusted EBIT da.
Adjusted EBITDA decreased 46.6% to $15 million decrease was due to a decline in gross profit primarily driven by an increase of negative absorption variance of 4 million in the corridor.
Adjusted EPS GA any expenses declined 4% on a dollar basis, driven by lower commission consulting fees on payroll expenses.
On slide nine our infrastructure first saw revenues decreased 7.4% to 115.7 million on a quarter driven primarily by weakness in domestic equipment sales, partially offset by increasing part sale.
International sales were flat compared to the fourth quarter 2018.
Sales increased an asphalt production equipment, while decreasing in road building equipment.
Asphalt production equipment sold direct Jordi abroad building equipment sold through dealers.
Most dealers had high levels of inventory and experience longer term rentals that was supposed to convert to retail sales.
Infrastructure gross profit decreased 250 basis points to 20.2% as improvements in asphalt production equipment in parts margin was more than offset by softer markets and most building equipment.
Gross profit was impacted by an increase of 3.2 million in under absorption.
Adjusted EBITDA increased 20.6% to $9.8 million benefiting from a $4.1 million reduction in S.G.A. any expenses due to reduced commissions and consulting fees.
Adjusted EBITDA margin increased 200 basis points to 8.5%.
Moving to slide 10.
Okay for pets, and mining group revenues decreased 20.7% to 22 $92 million.
Capital equipment sales decreased 34.1% in the quarter.
Perfect and international sales declined 28.6, and 6.7% in a quarter respectively.
As a reminder, most aggregate mining sales go through dealer distribution and has a previously mentioned I dealer inventories and lower rental to retail conversions relative to last year resulted in softer demand.
Adjusted gross profit declined 760 basis points to 18.8% and Unabsorbed overhead increased $5.9 million.
Adjusted EBITDA decreased 65.9% to $4.6 million, primarily due to the decline in gross profit.
Decreasing as GE any expenses of $4.3 million due to reduced commission payroll in consulting fees I didn't offsetting positive impact on adjusted EBITDA during the quarter.
Adjusted EBITDA margin decreased 650 basis points to 5%.
Slide 11.
Our energy group revenues of $75.2 million decreased 1.1% a decline of 11.4 precise and domestic sales for nearly fully offset by 77% increase the international sales.
Gross profit of 24.8% increase 260 basis points.
Strong increase in parts sales relative to total energy group sales contributed to the gross profit improvement.
Adjusted EBITDA increased 35.1% to $9.4 million benefiting from increased gross profit and half a million dollar drop in S.G.A. any expenses.
Adjusted EBITDA margin increased 330 basis points to 12.5%.
We're pleased with the results realized from the restructuring actions taken in the energy correct.
We continue to maintain a strong balance sheet with minimal debt. This provides us a platform launch our longer term strategic initiatives, a cash position improved by 89.2% versus prior year, providing ample liquidity to execute our plans.
Slide 13.
As we go forward, we will continue to have a disciplined approach to deploying our capital.
We consider the various avenues that capital deployment, we do so in the context of our long term strategic objectives and related revenues earnings and cash flows in order to maximize shareholder value.
I'll now turn it back over to Barry for additional comments.
Exactly.
Turning to slide 14 of the earnings presentation, I'll provide an overview of our strategic pillars simplify focus in growth.
First simplified it.
Since becoming CEO effort I have heard feedback from customers analysts and shareholders that our business is too complex.
I want to appropriately leverage our scale reduce organizational complexity consolidating rationalize our footprint and product portfolio.
Second focus we want to strengthen our customer centric approach rod commercial excellence to streamline processes, and then still a performance based culture.
Finally grow wanted reinvigorate innovation leverage technology to enhance the customer experience explore global growth opportunities allocate capital to maximize shareholder value.
Within these pillars that made great progress in a very short time.
Slide 15 outlined some of the major milestones we are executing against.
On on our transformation journey and the progress we made today.
Under simplify where the majority of work has been done so far we have to strengthen the executive leadership team.
Latin the reporting structure restructured the organization from subsidiary structure to product is going to functional groups and executed our six could you just procurement initiative.
The first quarter of 2020 earnings we plan to condenser reporting structure from three to two segments my role into energy group into the existing infrastructure group to streamline our reporting structure and more accurately reflect our business since we're in the process of selling the jet fuel business, but effectively eliminates our exposure to the energy industry.
The new segment structure will align more appropriately wood products in our portfolio portfolio and the end markets we serve.
We didn't focus we have line, we have aligned our management incentive programs and higher in the senior Vice President of operational excellence to instill operational excellence across the organization.
Information officer, who oversees implementing in enterprise data analytic strategy to further develop data connectivity across our businesses and streamlined financial reporting.
And we look to further optimize our product portfolio in 2020.
These actions and expected cost savings will set the organization to up to reinvest those savings into driving profitable growth and maximize shareholder value in future.
Moving to our long term targets a slide 16.
As we referred to during the last earnings call. These metrics are meant to San through the cycles over industry and are also tied to our management incentive plans.
We will measure ourselves against these targets reported progress to you our shareholders on a regular basis.
These targets, we'll continue to be evaluating an updated over time based on our ability consistency of between them.
Broadly, we've seen ability to 5% to 10% revenue growth EBITDA margins greater than 12% EPS growth of greater than 10%.
Free cash flow conversion or more than 100% net income and return on invested capital about 14%.
With a clearly defined pillars of our strategy to simplify focusing grow in the roadmap constructed execute against our transformation plan.
Hi, I'm, even more excited about the future of assets and look forward to sharing our continued progress of our strategic transformation on upcoming conference calls, we now welcome the opportunity to take your questions.
Thank you we will now be conducting a question and answer session. If you'd like to ask your question you May Press star one on your telephone keypad a confirmation total indicate your line is in the question Q you May press star too if we would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before press.
In the Starkey. Our first question comes from the line of make debris with Robert W. Baird. Please proceed with your question.
Yes. Thank you good morning, everyone and welcome to Becky.
For the working with you.
Thank you Mick.
I am actually have quite a few questions. So I'm just going to ask two and maybe.
Come back on a follow ups.
My first one.
Maybe is.
Really related to the material weaknesses, and the remedies and I'm trying to understand exactly what the what.
What the nature of this material weaknesses and.
Really.
What I'm trying to get out here is as you're sort of looking at the organization and the changes that you need to make.
Is there some needed investment there has to happen here from a system standpoint, I T standpoint.
And do you get a sense that you have the right people in place at this point to be able to address everything that you need to address or is this something that kinda needs to progress they need to staff up into like as 2020 unfolds.
Hey, good morning make this is Barry I'll take a shot effects are answered your question.
Great Great question first and foremost, we really haven't filed our 10-K, yet so I think once we do that the clarity in regards to what types of material weaknesses are there will become more present to you.
I would tell you that from an investment perspective, we absolutely have under invested in IP and I think that with the onboarding of amount Litchfield now there's CIO.
We're putting together a vision and strategy around how do we improved the data conducting this of our ever companies and I think you have a appreciation for the fact that historically, we've operated more of the holding company with a bunch of subsidiary companies that really had disparate systems and just the spared processes and so.
As we now change the direction of the company to be more focus on product groups and functional expertise relative to a matrix organization will start to pull in some of those.
Consistency and drive more standard operating procedures, which I think will help in general, but we have many independent ERP systems, I think that part of our investments and move forward will be to a defined a strategy to be able to get us unless.
We are we're in the process of implementing the middleware that allow us to be able to pull data in from these different sites and be able to do data analysis more effectively.
To answer your question about the right team I think that.
From my my first days in August It was my focus first and foremost to make sure. We had a strong leadership team and I believe that now we have the right team in place in order to be able to tackle these things and drive them to resolution very quickly.
That's a both on the finance side with Becky on the IP side with Matt.
He's added many group controllers to the to the organization now to bring many experience as a tool sets and allow us to drive this with good rigor and good pace and so I feel very good about where we're at I don't feel good about where we're at today, but I feel good about where we're heading in the future where the right people processes and investments.
Sure.
There's a lot of wood to chop here and you know again my experience looking at other companies that have gone through similar transformations. It takes time and it's not an easy road necessarily so.
Just as a follow up here.
Can you size, the incremental investment that youre going to have to make here and.
Sort of the level of operational risk. That's involved are you looking in migrating to a common ERP platform what sort of outside help are you using any color here would be helpful. And then I'll jump back in acute thank you.
Yeah, I would tell you that right now were formulating the strategy in the actions that we're going to take in order to do that so just I'd ask for your patience to bear with US as we just that defined we'll we'll share more effectively with you.
I could tell you that Matt Litchfield, our CIO has been through his personally been through 32 ERP implementations is certainly.
Has the scars and the the wins in the victories, obviously to help us keep us in perspective I've been through European fermentation. Becky has globally. So I think we've got good array of people, who understand the risks and other types of investments both in time and money thats going to take to do this.
So we'll have more to share on that as we go through a 2020.
Okay. Thanks.
Thanks, Nick.
As a reminder, ladies and gentlemen, it is star one to ask your question.
Your next question comes from the line of Joe Mondillo, What Sidoti and company. Please proceed with your question.
Hi, everyone. Good morning, Hey, good morning, Joe.
So I just wanted to regarding some of the changes you made one thing that you have are well into that you've been sort of looking out for even before.
Youre arrival Barry.
It was procurement so I was wondering just given.
Sorted that more of a decline that we've seen in your markets in in your your business over the last six to nine months could you update us what you're anticipating of savings regarding the changes that you've made with procurement already for 2020 or beyond.
On or however, you want to frame that.
Yes. Good question. So we've committed in previous calls and other meetings that we were intending to hit a target of $25 million or annual cost savings from this initiative, we still stand by that.
Certainly that will be headwinds of volume is the as the demand has softened.
But we're still sticking with the 25 million I think what gives me confidence in that number.
Is that with the changes we made around the reorganization to get focus you know that good synergies from the.
For the way we operate in a way we procure but also one of the other changes we made at the leadership level as you brought in Greg goes walls as the senior Vice President of operational Excellence, Greg Briggs, then great rigor great discipline in the processes and tools that were using now that on top of what we instituted back in the beginning of 2019 or even greater.
And so I suspect that.
With his leadership and with the greater communication across the company to $45 million is still an achievable number for us.
And just to clarify that 25 million was based probably on a higher volume you know year ago or so so that you wouldn't realize that fully in 2020 incorrect.
Our intentions are to realize it all in 2020.
We are we do have a headwind of volume, but we believe that we're going to continue to add to that funnel and we'll be able to realize those savings as we move forward.
Okay, and then the C. I see I consolidation one to one was that completed.
Actually this is really at the end of February we were basically done with that as far as moving materials and closing down the facility, we still in that facility.
So were essentially done with that restructuring activity now.
Okay is there any way to.
Give us an idea of the savings regarding that consolidation.
I would tell you that for full year 2019, we had about $11.4 million in restructuring 9.9 million of that came into Q4, and we expect all of that they had a greater than three year or less than three year payback.
Great.
[noise].
Regarding just I guess, just moving to the sort of the demand that you're seeing the trends.
You mentioned dealer inventories remain elevated through 2019 does that mean, they still remain elevated at this point or could you talk about the channel inventories and then regarding your bookings they seem to improve throughout the year is that an indication.
Or at least stabilize do you think things have stabilized in the business.
Yeah, I think you know up from previous conversations Joe that we really know that our customers are in users are busy and you know almost to a almost to accompany.
As I've spent a lot of time in the field whether that was in a national dealer conference is the national asphalt paving association, making trips out to visit with customers might so.
To build those relationships understand the business almost two up almost to a company they've all set in 2019 was one of the best years I've ever had and expect to they move into 2020 that.
They are expected to be consistent with 19.
You know I'm happy to see that on our implied orders.
We continue to build strengthen those numbers as we went through 2019.
I can I can quote you that.
As of February our backlog is up 12% from where we finished 2019, so I think that.
We're we're.
I hesitate to say, we're at the bottom, but it feels like we're at the bottom and I think we could potentially be turned the corner I could also tell you ought to dealer inventories as something that we're paying a lot of attention too. We know what are mobile road truck equipment.
Our dealer inventories dropped by 33% through 2019, so the dealers are working hard to the right sized where they're at of course are managing lease fleets and inventory and everything.
So we feel.
We feel good about where we are now.
That cycle, and what 2020 will bring to us as we move forward.
Okay and then last question just regarding the Jeff Garro sale do you anticipate that's not to finalize correct you have not found a buyer for that.
We're in the process of talking too interested parties and we expect to have that closed loop in final by mid year.
Okay. My question was going to actually be because I think that was stayed in the press release several months ago that you do you still anticipate them in here, but I guess answers yes.
That's correct yes.
Okay, alright, great. Thanks.
Our next question a follow up question from the line of mid October with Robert W. Baird. Please proceed with your question.
Great. Thanks for the follow up.
So.
Let's see what do you start I I guess I guess my first question.
Is on aggregate and and mining.
Can you maybe provide some kind of context.
The demand normalization I think that's the that's that's the term that you have used in your release.
And I guess I'm wondering here, that's when I look at your order intake for 2019, it was about 350 million.
The prior two years, there were calling for 30 to 47.
So obviously lower order intake in 29 team what happened in 17 and 18 them maybe was.
A little bit unique what's going on in 19, and while were why weren't water is lower.
And how do you think about this this concept of what normalized demand looks like.
Yes, good question make thanks.
Of course I wasn't here during a 17 and 18 years I know that there was were good years as every as we went through.
Finishing up 2018, there was a lot of market activity and our dealers are building up or their inventories. Obviously, we were busy supplying them with inventory as we roll from 18 and 19 I think as we discussed in the path.
The the season for 2019 and again this is.
So this is feedback that I personally received from all the customers that I've met with weak there was a slow start to the season in 2019 for many parts of the United States and then as they got into the season.
Hi, everyone that I've spoken to a my customer visits of really referred to the leases and are in rental opportunities and leveraging that maybe more than they have in the past I know as I talked to some of our dealers. They are saying that the rental fleets are becoming a bigger part of the revenue stream and so that has a I think.
Somewhat delayed the doctor versions for rental the retail, which then obviously has an impact on us.
Great News is as you look at the other public aggregate companies and as I make visits they're all having great to have had a great 2019. They had a great volume years. They had good pricing years. So they have capital available I think it's more of a delayed spend than it is something that.
No that is really a.
I think thats really the change to the market as we've seen it today.
Well I mean, that's the question Barry because a lot.
Customer is doing well.
Helps but.
The equipment investment cycle is not necessarily want to one perfectly correlated with that so.
Again, you know I'm I'm trying to understand the nature of what normalized demand looks like because if what you're saying is that your order intake in 2019 is more in line with what normalized demand looks like then a lease in theory Youre segment revenue in Htwo.
20, probably should be down something like 15%, which I think if that would be the case, then that would make a consistent with what some of your peers My parents in cat and so on our saying about the aggregates business. So.
Am I missing something here or should we all be thinking something like down 15 for 2020 here.
Yeah, you know were worse, we're still I guess I'll reiterate the fact that we're not giving guidance as we move forward into the new year.
So I'm not going to comment on what we see as far as the a the market being down on some percentage basis.
I can tell you I think that as we went through 2019, you know we saw somewhat of a.
Kind of a big.
Big swing in regards to we had a lot of inventory out in though in the dealers the customers.
Had a units that they were comfortable with and so I don't want say is let's right word it's more a probably up a reflects you know as we finished with that high of inventory that 2019 saw big drawback on our business.
I think that I understand that logically on why that happened.
I think as we move into 2020, I think as we release Q1 results it'll be interesting to see where our implied orders are for that period.
And I can tell you that.
Typically.
We had a dealer ordering program that we announced today remind side around in November timeframe. We didn't have a lot of customers take us up on that program does for our stocking for their equipment, but as we bet as we've exited 2019 and entered 2020, we've seen more quoting activity.
We've seen or dealers with less inventory, so I think that.
We're starting to see I think 2020 will.
Tell us what that normalized volumes really is a good through the course of the year.
Well I appreciate that and look I'm going to push back a little bit here and say that main if you're if you're telling us on this call that youre seeing your backlog being up for the business, 12% since December you're providing long term target to being up 5% to 10%.
But not really being willing to do speak as to what 2020 at least normalized demand would look like you can appreciate that makes it pretty difficult for folks like us from the outside to look in and say, Okay. You know what's reasonable to assume on a fundamentals here I would really bottoming where are there other challenges that we need to sort of.
Modeled and or Bacon. So I think that's what we're all struggling with just to kind of be clear.
Yes.
If I can move.
Now let me just comment that I I. Appreciate I appreciate your respective Megan I know that but thats not giving guidance that makes them more difficult for you to have the right information in order to to do to make sure you take care of your shareholders in customers.
All I'm doing it to me is this onetime assisting the facts and you know I think that you were depress me to say are we at the bottom of the cycle I think that I'm comfortable insane here on this call that 2019 really showed us the bottom award cycle and you know how fast is a change and how fast as we go up I think thats just to be determined and that's.
Where I'm reluctant to give guidance in regards to what that looks like as we go through 2020.
Fair enough so related to that how do you think about the highway bill.
Especially within the context of of an election year here.
And that level of visibility, maybe getting a new highway bill approved.
As a requirement to do sort of really put a floor on.
On the business and maybe inflected higher is that is that needed in 2020 or.
Can you can you sort of see a rebound even absent that.
Yeah, I think that they know about as I've had that conversation with the customers.
Certainly anytime you go through an election period, there's some sort of.
Concern or trepidation and uncertainty and around what that means I think the great thing about.
Where we stand today both.
Both parties agree that infrastructure Bill is something thats needed in the United States and.
You know they talk to the customers as I alluded to earlier, they see generally 2020 looking a lot like 2019 for them.
So that the interesting part will be as we go through 2020 is what does that mean for us.
So as they convert more read rentals, the retail as they make more capital purchases and orders to support their their year, how does that roll down into the it to the as tech.
Our group so I.
I think that I've said before as well that we're not going to hide behind a highway bill we need to be a really good company without a highway bill over half the states today have been other independents funding through gas tax and so there's been a lot of activity. So I.
I don't necessarily see a big swing or big or slow down because election based on the feedback I'm getting from customers.
But we all know that you know as we get closer the political environment could could move that so I think it's a little bit of wait and see.
Okay.
No more questions in that I'm done I don't know if I missed this in your releases, but on the inventory charge was there a breakdown by segment.
But that that was in there today, you can share with us.
Got it back in.
Yes, we certainly haven't broken down internally, but no we did not share that breakdown and.
It was really some specific units in specific areas of our business kind of cross the board, but largely the biggest portion of that we'll try to use the equipment and so we think of that is kind of a one time event as we were setting up dealers moving away from a direct sale business model.
So with dealer model, there about 50% through that process and so as our dealers will now be picking up do you see equipment, we shouldn't see that repeat itself that we get to take some action on the used in particular, along with some other select units. Yes. Let me just got to maybe add to that I think you know make that.
We're in the process in parts of our business going from direct sales to distribution.
And primarily in the mobile equipment side of the business and as weak as we move down that path and with new management and new leadership news of device. We've looked at it and we have to update our policies as we update our policies on how we manage used equipment.
We took the position that we needed to be more disciplined and moving forward. You know I think we're all have clear accountability the visibility to how we'll manage that moving forward and.
So we don't suspect that we're going to have a an impairment like this again moving forward with better disciplined better processes are new reinvigorated disciplined processes. So put out some more color situation.
I mean, it does I'm I'm, just looking to make sure that I have sort of clean financials. The segment level. So that we understand what happened here. That's why I'm asking the question because it's the same thing with restructuring right you know I'm I'm kind of unless I'm missing something.
I'm trying to understand how that played out a second level as well you got a couple of things this quarter that we're.
Pretty material, Yeah, I would I would tell you that the a the inventory impairment is primarily in the infrastructure business.
Yeah. Okay. So you know animal mobile side problem Yep, Okay talking about here okay.
And then and then on the restructuring I would tell you that the lion share is on the in India energy business.
And I wouldn't I would also I would also tell you that you know is documented too and then in her script that we're very pleased with the restructuring activities and you could start to see some of the benefit of that showing up for the energy business as we close out 2019.
Okay.
Understood then.
Maybe my last question as you're looking at whatever you're going to have left of of energy is there.
More portfolio actions potential asset sales to be done out of out of there or are you considering what's what's left over in that segment to be to be core and.
Part of the company longer term.
Yeah, So as I alluded to in my opening we're going to move as we go as you're going to Q1 of 2020 to reporting in two segments infrastructure underground mining as we know them today and infrastructure side will include what's left of the of the energy, it's really a better fit for the segments that we serve the customers we worked with in the.
Systems that we sell on interest there is really good alignment there and from a core noncore I believe we've done all the heavy lifting relative to the divestitures of our of our companies and product wise at this point in time.
We will always continue to have a opened eyes and continue to evaluate as we move forward through time as you can imagine.
But at this point in time, we feel that though weve the product lines that we have left at astec or product lines that were going to continue to grow as we look forward in time.
Great. Thank you good luck.
Our next question is a follow up question from the line of Joe Mondillo with Sidoti and company. Please proceed with your question.
Hi, everyone. Just two quick follow up questions regarding some of the savings that you're going to see there.
Here related to the the few things that I sort of were mentioning in my prior Q and I.
As well is there's probably going to be some other things.
How much.
I guess reinvestment are you gonna see or maybe I can rephrase. It another way of the you know that 25 million related to procurement 5 million maybe related to see I consolidation you know that's looking like 30 million.
Will that be a net number or or are you going to be using some of that to reinvest in the business.
[noise], Yeah, I think that.
You know as we look at our capital plan move into 2020, certainly we've broken out the detail around what part of that is cost savings investments versus a innovation versus just general maintenance. It I think we have a good proportional breakout of cost the cost savings.
Yeah, I don't have a total right now in regards to as we look forward on the I.T. side, you know what that investments going to be an ERP strategy I suspect that the majority of that vessel will be post 2020 will send the probably the a lot of this year doing their work to make sure that.
We understand what we're going to do and how we're going to doing the timing of that plan. So I think what we can do for you guys as we move through the use of subsequent calls and.
In other meetings, we can give you an update on where that stands and and so you could have a better feel for what that invest it looks like.
Okay and then this leads me to my second question, which is.
I appreciate your still going through.
The the turnaround strategy and what you want to do over the next few years.
And that May take a little more time, and so I understand that you haven't sort of maybe laid out the plan as clear as you probably want would love to tell us.
But I'm just wondering what sorta, you're envisioning the timing.
Of maybe putting forth I'm, a little more detail a more comprehensive plan you know step by step of what you're doing and what the savings would be and you know multiyear targets. I know you have some multiyear targets out there already but I'm, just curious and what you're sort of thoughts on this.
Yeah first let me tell you that I really am excited im pleased by the energy and momentum in the organization from changes, we've already announced to you relative to your really moving away for subsidiary companies and going more to groups around product lines and in functional maitre.
So type organization, everyone sees the value a we've had people from one site already visiting other sites that quite honestly, so they've never been through before.
We've got a expertise in and all kinds of our all parts of our business that are now going to other sites and ensuring that expertise and so we're starting to see some real benefit on the operational aspects and operational excellence type initiatives around.
How do we leveraged the skills and abilities to make us better everywhere. We are so thats exciting to me.
I see no big opportunities relative to cross selling.
You know we have a very dominant position in the asphalt plant market in the United States, how do we leverage that sell more of the other parts of our business in other parts of our product portfolio with for those relationships and trust.
So I think that there's lots of opportunity as you can imagine.
Some of the synergies in the value that can comfortably said to synergies now that we reorganized the company. So we're very excited about that.
I think as we as we move forward, we'll just we'll share more of that plan and some of the benefits from that plan through the course of this year at this point in time, Stephen I've had a mbeki have had a chance to talk about Investor day. Later this year, probably in the December timeframe and that would be a great opportunity for us to be with all of you at.
One place into roll things out a little bit more.
Constructively and Holistically.
Alright, perfect I look forward to thanks, a lot and have a good thing.
Yes, Thanks, Joe.
There are no further questions in the queue I'd like to hand, the call back to Steve Anderson for closing remarks.
Thank you Doug.
Again, we appreciate your participation on this fourth quarter conference call and thank you for your interest in Astec as today's news release indicates today's conference call has been recorded a replay of the conference call will be available through March 18 to 2020 in an archive webcast will be available for 90 days, a transcript will be available under the Investor Relations section of the.
Astec industries website within the next seven days all of that information is contained in the news release that was sent out yesterday afternoon. This concludes recall so thank you all have a good week.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.