1725 Shepherd Road
Company Perspectives
Astec Industries, Inc. builds the equipment that moves America and the world from "Rock to Road and Beyond." Our roads are America's arteries. They carry our commerce, take us to work each day, transport us back to places in our memories and forward into the future. These thoroughfares, more than 90% of which are paved with asphalt, make up a 2.3 million-mile network linking 290 million people who always seem to be on the move.
Astec Industries, Inc. is a manufacturer of road building equipment. Its 13 manufacturing subsidiaries produce machinery to handle each step of the process, from crushing stone to applying road surfaces ("rock to road"). In addition, some units make construction and industrial equipment unrelated to roads. The company is the world's largest manufacturer of asphalt plants.
Astec's principal subsidiaries are organized into the Asphalt Group (Astec, Inc., Heatec, Inc., and CEI Enterprises, Inc.); the Aggregate and Mining Group (Telsmith, Inc., Kolberg-Pioneer, Inc., Astec Mobile Screens, Inc., Johnson Crushers International, Inc., Breaker Technology Ltd./Breaker Technology Inc., and Osborn Engineered Products, SA); the Mobile Asphalt Paving Group (Roadtec, Inc. and Carolson Paving Products, Inc.); and the Underground Group (Astec Underground, Inc. and American Augers, Inc.).
Tennessee Roots
Astec Industries, Inc. was incorporated in Tennessee on August 9, 1972. Its first president was J. Don Brock. Brock had earned a Ph.D. in mechanical engineering at the Georgia Institute of Technology in 1965, whereupon he moved back to help out at the Industrial Boiler Co. owned by his father.
Brock went on to head the asphalt division of CMI Corporation (later part of Terex Corporation) for three years after CMI bought Industrial Boiler. When CMI announced plans to relocate its asphalt plant business to its Oklahoma City home, Brock formed Astec, whose name is a contraction of "asphalt technology."
According to the Chattanooga Times and Free Press, Brock was joined in the Astec venture by three former schoolmates from East Ridge, Tennessee's Central High. Norm Smith was president of Astec Inc., the largest subsidiary, where one of his executives would be company cofounder Gail Mize. Albert E. Guth, later CEO of Astec Financial Services Inc., and Mike Uchytil, a transplant from Iowa, were also cofounders.
The five borrowed $400,000 to acquire a 24,000-square-foot building. Since the founders had a reputation in the industry, there was no shortage of work, Brock told the Chattanooga Times and Free Press. Sales were $5 million in the company's first year in business, producing a slender profit of $12,000. Based in Chattanooga, the company produced asphalt mixing and paving equipment.
Business was flat for a few years, but took off in the late 1970s. Annual sales reached $30 million by the early 1980s, according to Crain's Chicago Business, and were growing at a double-digit rate. The overall industry was entering several years of difficulty, however, which would thin out weaker competitors.
Public in 1986
Astec Industries went public in June 1986 in a $12 million initial public offering. A portion of the proceeds was earmarked for reducing short term debt. Sales were more than $60 million for the year.
In January 1987 Astec took over a venerable rival, Barber-Greene Co. of Aurora, Illinois. Barber-Greene had been formed in 1917 but had lost leadership of the market for massive asphalt mixing plants (which sold for about $1 million each). While it had kept Astec from dominating the asphalt paver business (pavers were $100,000 items), Barber-Greene was financially weakened, burdened with a $32 million debt, and plants running at half capacity; employment was one-fourth its one-time peak of 2,500.
The purchase of Barber-Greene brought with it another venerable company, Telsmith, Inc., which had been formed in 1906. Telsmith was based in Mequon, Wisconsin, and produced aggregate processing equipment. Astec made an offer to buy another rival, Kansas City asphalt plant manufacturer Standard Havens Inc., in 1989, but canceled the offer, judging the price too high.
Unfortunately, Barber-Greene continued to lose money after Astec bought it. Most of Barber-Greene was sold off in April 1991, after overcoming initial reluctance from antitrust regulators. According to the Legal Times, Astec's plans to keep making asphalt pavers through its Roadtec division was key to the approval. After the deal, Astec was the fourth largest maker of large asphalt pavers, following Blaw-Knox Construction Equipment Co., Cedarapids Inc., and Caterpillar Paving Products Inc.
Barber-Greene's new owner, Caterpillar Inc., had entered the paver equipment manufacturing business three years earlier by acquiring Raygo Inc. from CMI Corporation (it had previously marketed CMI-made pavers under the Caterpillar brand). Caterpillar paid $25 million in cash for Barber-Greene, which then had revenues of about $40 million a year.
Astec Industries had posted sales of $135 million in 1990; it had a net loss of $13 million. Part of the damage was due to a $7 million judgment against Barber-Greene, which had been sued by CMI for patent infringement. However, Astec ultimately prevailed and 1994 income ($23 million on sales of $214 million) would include $15 million from this litigation.
In 1994 Astec attempted to acquire Georgia's Crown Andersen Inc., a manufacturer of pollution control products, but the two parties were unable to work out a price. Sales were $242.6 million in 1995. However, net income was hammered by losses from a German subsidiary.
Astec formed its own finance company in June 1996. Officials told the Chattanooga Times and Free Press that the company already had a long history of helping customers find equipment loans at other institutions.
Shopping Spree
Business thrived in the late 1990s, helped by federal legislation (the Transportation Equity Act) to increase highway spending. Astec achieved record revenues of $364 million in 1998. Astec closed out the 1990s with a buying spree. Johnson Crushers was acquired in 1998. It had about 200 employees at two Oregon plants.
In August 1999, Astec bought Superior Industries of Morris Inc. for $17 million. Based in Minnesota, Superior built state-of-the-art conveyors for handling aggregates and had sales of about $25 million a year. It was sold off to management within a few years, however. Teledyne Specialty Equipment's construction and mining business, dubbed Breaker Technology, was acquired for $18.5 million soon after the Superior buy. It had sales of $30 million and operations in the United States and Canada. The former Allegheny Teledyne unit had been in business since the 1950s.
Astec made one more buy in 1999, picking up American Augers Inc. for $14 million plus $6 million in assumed debt. The Salem, Ohio company made drills and boring equipment used primarily by utilities for underground construction. It had annual sales of $36 million. Astec had considered up to 40 potential acquisition candidates, Dr. Brock told the Chattanooga Times and Free Press. Astec typically retained existing management at acquired companies.
The company was riding high as it approached the turn of the millennium. Less than 10 percent of U.S. roads were paved with concrete; most were covered with blacktop, Astec's specialty. Astec had grown to 13 subsidiaries which were each typically leaders in their respective fields. Revenues continued to reach new heights, hitting $449.6 million in 1999. Net income rose 30 percent to $31.7 million, also a record.
Peaks and Trenches in 2000 and Beyond
Employment hit a new high of 3,400 workers in 2000. However, the company was entering a period of global recession exacerbated by high oil prices and the effects of the terrorist attacks on September 11, 2001. In the cost-cutting that followed, the workforce was cut back by a fifth and Astec Financial Services was closed. In the midst of the downturn, Astec was supplying one of the country's biggest public works projects, the addition of a fifth runway at Hartsfield International Airport in Atlanta.
Some mergers and acquisitions activity, intent on extending Astec's "rock to road" reach, proved challenging to execute in the short term. It acquired Case New Holland's tracked trencher business for $12 million, and bought a Loudon, Tennessee plant from John Deere to consolidate its trencher lines. However, Astec was unable to sell its own Grapevine, Texas trencher plant immediately as planned. Astec Industries posted a $29 million loss for 2003.
A new $287 billion federal highway act signed into law in 2005 funded highway construction for six years and promised work for the company. Brock told the Wall Street Transcript that state and local governments accounted for most road construction and were likely to respond to the improving general economy, increasing their spending as well.
By this time, Astec was the leader in the world asphalt plant industry with an estimated 55 percent or better market share. It was also the largest manufacturer of crushing equipment in the United States (number two in the world), according to Brock. It also boasted the strongest balance sheet in the business, becoming debt free after 20 years by the end of 2005. Sales for the year were up 20 percent to $616 million for the year.
While federal spending emboldened customers to replace their roadmaking equipment, Astec was upgrading a few of its own facilities as well. Astec had to contend with rising prices for both oil and steel; however, renewed interest in energy exploration was increasing demand for its trenchers and drilling equipment. Since asphalt was a petroleum byproduct, increased oil costs made road building more expensive, leading some customers to defer purchases of new equipment, noted the Investor's Business Daily.
Astec had a reputation for producing the "luxury sedans" of roadmaking equipment. Its gear was innovative and efficient. The company was also responsive to environmental concerns and had developed economical processes for recycling asphalt onsite, a practice common in Europe but slow to catch on in the United States.
Principal Subsidiaries
American Augers, Inc.; Astec, Inc.; Astec Insurance Company; Astec Underground, Inc. (f/k/a Trencor, Inc.); Astec Mobile Screens, Inc. (f/k/a Production Engineered Products, Inc.); Breaker Technology, Inc.; Breaker Technology Ltd. (Canada); Buckeye Underground, Inc.; Carlson Paving Products, Inc.; CEI Enterprises, Inc.; Heatec, Inc.; Johnson Crushers International, Inc.; Osborn Engineered Products SA (Pty) Ltd. (South Africa); Kolberg-Pioneer, Inc.; Roadtec, Inc.; Telsmith, Inc.
Principal Operating Units
Asphalt Group; Aggregate and Mining Group; Mobile Asphalt Paving Group; Underground Group.
Principal Competitors
Blaw-Knox Diamond Construction Equipment Corporation; Caterpillar, Inc.; Terex Corporation.
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