Greetings, ladies and gentlemen, and welcome to the Astec Industries Fourth Quarter 2007 Results. At this time, all participants are in a listen-only mode. A brief question-and-answer will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Steve Anderson, Director of Investor Relations for Astec Industries.

Thank you, Doug. Good morning, and welcome to the Astec Industries conference call for the fourth quarter and fiscal year ended December 31, 2007. As Doug mentioned, my name is Steve Anderson and I’m the Corporate Secretary and Director of Investor Relations for the company. Also on today’s call are Dr. J. Don Brock, our Chairman and Chief Executive Officer, and McKamy Hall, our Chief Financial Officer. In just a moment, I’ll turn the call over to McKamy to summarize our financial results, and then to Don to comment on our 2007 and also to provide some insight into 2008. In the way of disclosures, I will note our discussion this morning may contain forward-looking statements that relate to the future performance of the company. 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 and are subject to certain risks, uncertainties and assumptions. Some of those factors that could influence our results are highlighted in today’s financial news release and others are contained in our annual report and our quarterly and annual filings with the SEC. As usual, we ask you to familiarize yourself with those factors. At this point, I will turn the call over to McKamy Hall to summarize our financial results for the fourth quarter and full year 2007.

Thanks, Steve. We appreciate each of you joining us this morning. We are excited about historical highs in sales, net income, and backlog. With sales growth and gross margin improvement, the company was able to generate a 40% improvement in earnings per share. We also look forward to continuing the improvement in 2008 beginning with a strong backlog. The net sales for the quarter were $221 million; that’s an increase of 36%. International sales were $85 million, for an increase of 75%. The increases primarily in international sales occurred in South America, Australia, Canada and the Middle East. Domestic sales for the fourth quarter were $136 million for a 19% increase. The part sales for Q4, 2007 were at $49 million, for a 27% increase. For the year, net sales were $869 million, for an increase of 22%. International sales were $278 million, for an increase of 45%. These increases occurred primarily in Australia, Canada, South America and Africa. Domestic sales were $591 million, an increase of 14%. Part sales were at $186 million, an increase of 12%. Sales increased in all segments. And as a reminder, we do have attached to our press release the sales and gross margins for all segments. The consolidated gross profit for the quarter was at $48 million, so the increase of 38%. The gross profit increased for the quarter 30 basis points. All segment gross margin dollars improved. For the year, consolidated gross profit was at $210 million, a 25% increase. For 2007, the gross profit percentage was at 24.1%, compared to 23.7% last year, an increase of 40 basis points. Again, I’ll remind you that this information by segment is available in the press release and all segment gross margin dollars improved for the year as well. And looking at SG&A and…

Thank you, McKamy. Dr. Don Brock will now discuss Astec’s business operations for 2007 and the general outlook for 2008.

As you see, we had a good year, our revenues, as McKamy said, was $869 million, up 22%. Our income level reached 56.8% or up 40%. Both of these were records for our company. Our return on capital employed reached a record 19.2% after tax. With the focus with Sarbanes-Oxley, the focus on cutoffs, large ticket items that we have makes our quarters a little lumpy. As you know, we had a good first quarter, a good second quarter, the third quarter was down a little bit from expectations and the fourth quarter is up. We encourage you to look at our entire year and not at quarter by quarter, because of the lumpiness of the size of our products. During the year, we acquired Peterson Pacific, which increased our presence in recycle and recycling the wood and timber industry and in the energy business. Our parts business continued to grow, increasing from $165 million to $186 million, or up 13%. Our international business was helped considerably by the weak dollar, and increases in our international sales forces. International sales were 32% of our business last year and during the fourth quarter reached 38%. We expect this to continue to grow in 2008. Our gross margins increased 40 basis points during the year. As compared to prior years this increase was a little disappointing, but the inflationary pressures are greater than I’ve seen since the late 70s. We see a continuing rise in steel prices and other components built out of steel. A lot of the savings that we reach through our efforts are offset by increasing prices, and our effort is just to try to continue to keep outrunning it. For 2008, looking forward, we have seen a softening in our domestic customers’ businesses in the aggregate and in…

(Operator Instructions) Our first question comes from the line of Arnold Ursaner - CJS Securities.

First question I have is, in Q3 you highlighted you had $4.5 million of first- time manufacturing costs. Can you freshen that up for Q4, if you have that number available?

Don’t really have it available, Arnie. But it was not near as much. Very little. We just had an unusual situation in the third quarter where we introduced a number of first-time, new products. The Green Systems on the asphalt plants, we got our costs down and got the prices up somewhat on those; same way on the Roadtec equipment and the big trenchers that we had. So, there’s always some every quarter, but not an inordinate amount.

Okay. Where I was going with that is, relative to my expectations your gross margin was less than I thought it would be and noticed specifically in aggregate and mining group you had 200 basis points decline in gross profit and an actual decline in overall profit, despite a sizeable jump in revenue. Can you expand a little bit on that?

Generally, we are raising prices starting about September. Historically, the margins tend to slip in the fourth quarter, and we start to see the benefit of price increases in the first and second quarter of the year. Also, as I mentioned, we saw in the fourth quarter and are continuing to see in the first quarter, tremendous push on prices on a lot of commodity items that are affecting us. Steel is going up pretty rampant right now. Fortunately, we are locked in on steel prices at most of the companies out until June. But other prices such as bearings, things like that, we are not locked in on. And it’s a combination of when we raised our prices with the backlogs that we had and prices that caught us unexpectedly.

Given the very strong backlog you have, do you have the ability to go back within your backlog and try to get price relief?

Not really. Our customers are pretty tough in that area. I couldn’t say absolutely no; if we have some situations where orders have been delayed for a substantial period of time, due to permitting, and if it gets stretched out over like six or nine months, yes, we can go back. But most of our backlog is usually exhausted within three to four months.

And in your all other category, I assume that’s predominantly Peterson?

That is really Peterson and corporate.

And Astec insurance.

And what were the revenues from Peterson in Q4? And did it make money?

It made money. I’m not sure; do you have them, McKamy?

Roughly $30 million for six months.

Yes, for six months around $29 million.

For the quarter, it’s $18.8 million.

And it was profitable?

Yes.

Our next question comes from the line of John Kasprzak - BB&T Capital Markets.

Congratulations on the great results, first of all. Well done. I wanted to ask about state budgets. There is increasing evidence that there are problems with budgets at various states. You mentioned, maybe Don, some domestic customers are pulling back a bit. What do you see on the state budget side? Five or six years ago, it was a pretty difficult situation and looks like the budget situation today is deteriorating. I was wondering if you could just talk a little bit about what’s going on there, maybe compare it to what we saw in the last downturn?

We see, basically about, at least half the states down and half of the states flat. There is few exceptions of states being up. I think two or three things happened last year is the oil prices, light sweet crude is obviously close to $100. There is a wide disparity between heavy crude and light crude, like $30 to $35 a barrel. So, liquid asphalt prices has not necessarily tracked the light sweet crude and as a result our customers, many of them tell me that their volume was off 15% for the year, but their profitability is the most they’d ever made. They bid the work and are very cautious on bidding the work based on higher oil prices, but have not had to pay those higher asphalt prices. And as a result, their profitability is better and they seem to be operating more at being more satisfied with continuing their business and with less volume and being able to manage it and make a profit at it. From a macro scale statewide, I would say, it’s obviously down. International, as I said earlier is more than offset that. We anticipate probably domestic volume of asphalt to be pretty well flat. But I would say, internationally, it continues to grow and be up.

How would you describe the international market for you today? Is it getting better than it has been in the last year? Are there more opportunities? The same amount?

We believe there is more opportunities driven by two things. One, the weak dollar sure helps us on our pricing internationally and competing with European manufacturers helps a lot. The second thing is we have really put an emphasis to grow international sales forces in touch areas of the world that we frankly haven’t been touching. And any part of the world where there is basically minerals or mining or areas where there’s oil, is continuing to grow substantially, or they’re spending a lot of money on the infrastructure. So, we see it being good next year internationally. I looked at the prospect list for asphalt plants and it is excellent. And same way our problems on some of the crushing equipment, it is deliveries and we’re stretched out pretty good on them.

And the CapEx, $39 in 2007, you say $32 for 2008. Is this various random things; are you spending on anything in particular?

Primarily more modern machinery, cutting equipment, machine tools, some of these new machine tools are $1.5 million apiece. But what we are looking at more and more, the technology has changed where you’ve got multiple tasking machines where you can do a lot of processes without taking a part out of a machine, and we are continuing to modernize that way. The only expansion area is probably in the drill rigs, the oil drilling rigs look like it’s really going to take off and we may end up spending slightly north of the $32 to add on to the building in American Augers. We are looking at that pretty seriously right now. We just don’t have enough capacity there right now.

Our next question comes from the line of Robert McCarthy - Robert W. Baird.

Nice quarter. I wanted to ask you, basically, questions about sales comparisons. First off, the 15% number that you are using for 2008, can you give us a rough breakdown of how much of that would be organic? And how much of that would be contributed by Peterson?

Rob, if I include Peterson, it is all organic. And there will be some acquisitions to place on top of that. But Peterson in the beginning, they were having a tough year, last year. This year, that business is growing quite well. On their big, big machines, that take a complete tree and de-limb it and debark it and make pulpwood chips, that market is going very strong because as homebuilding goes down, there is not sawdust that would normally go to the pulp mill. That business has come back. The energy part of it is very strong, and we see continuing growth in that. But Peterson, basically, is about a $70 million business in revenues. They did like $60 million last year. So, we probably see them coming back to $70 to $75 million this year.

Okay. But, with only a partial year result in 2007, they ought to add, probably, something like 3% to…

That’s correct. They’ll add, basically, if you are just looking at their budget, we are talking about around $35 to $36 million additional revenues generated by them.

Okay. And just so I’m clear, of the balance, that doesn’t include any future acquisitions?

That’s correct.

Okay. And, McKamy, do you have a number for what currency translation added in the fourth quarter? F. McKamy Hall David is looking for you. We’ll have to come back to you. Overall, I think it cost us about $1.5 million pre-tax at BTI for the year. David is looking for the quarter.

I wondered if that had something to do with the year-over-year decline in aggregate margins?

Yes. BTI’s margins were down. That was a major factor on theirs, being a Canadian company.

And then, I was struck by the language, Don, the quote in the release that speaks to strong backlog, but then says that you have a strong outlook for the first six months of the year. I feel like you are trying to communicate something to us there, and I am not sure what it is.

The only thing I will say there, Rob, we are kind of blind beyond six months.

All right, okay. The comments you were making before about…

We just can’t see any further than that. There are some of our companies that have backlogs stretched beyond that, and it’s concerning to me, because you start losing business when you get out there. I don’t want to give you exact numbers, but I looked at our prospect list on out, and it is pretty damn strong. So, if I didn’t watch television, I’d feel real good.

One last one while you are digging for that number. How are you planning to report Peterson in 2008? Are you going to put it into a segment? Are you going to continue to treat it as an Other for the time being?

Other until we grow it a little bit more. We are looking at an acquisition or two to go with it, and then, we would pull it out as a separate group.

Our next question comes from the line of Richard Wesolowski - Sidoti & Company.

Don, is there a big difference between the U.S. and international pricing power on account of the dollar?

Yes. There is a huge difference. I don’t know what would be par, but I can tell you, if you just look at the way the dollar has changed, six years, five years ago, the euro was about $0.83, and now we are at $1.48, somewhere like that. So, been a huge difference in that. Probably $1.20 is where it ought to be, but it certainly makes our products cheaper.

Okay. So would you say the majority of the pricing power that you have is international? Or do you still maintain pricing power in the U.S. as well?

I think we have pricing power in the U.S. At least it’s our perception, we are the highest-priced equipment in our product ranges. We build the highest-quality and the highest-technology products. Probably more than anything is, we are very service-oriented, and as a result, there is a substantial amount of our business that we really don’t have a lot of competition on. And, so, we’ve got some pricing power there from that standpoint. But internationally, people like high-tech U.S. equipment, and if they can buy it at competitive prices, it sure helps our exports from this country.

Do you think the price increase that you pushed through in September had an affect on the 4Q new award volume?

Not really. And we may end up having to increase again this year. We are watching this inflation very, very carefully. And that’s probably my only negative concern is holding margins, is making sure that we can keep up with inflation, keep our prices out front from it. But no, we didn’t get a lot of front-end business.

Okay. Can you discuss how far out the asphalt plant backlog stretches and how you priced those out-period contracts in light of fluctuating steel cost?

We are stretched out into July. But we were on the steel cost in the Tennessee area here, where four of our plants are, we are locked in on steel until end of June.

Okay. And then finally, if you do a 14% or so on SG&A, your guidance implies 24.5% to 25% gross margin, so a little bump from there. Are there other avenues beside the pricing through which you expect to boost the margin? Is there any fruit left from the focus group, etcetera?

Rich, I have just been to 12 of the companies in the last 3 weeks and it’s amazing what we’ve done with rationalizing the products and our focus groups, what they’ve done. But the disappointing thing is most of everything we’ve done is being offset by the inflationary price increases, in steel and components. As I said earlier, bearings has gone up from 13% to 60%. Anything related to copper is tremendously up. So, a lot of our savings in these initiatives, don’t get me wrong, we are continuing on, but a lot have been eaten by the component price increases. So, that’s why I’m a little reluctant to say there’s much room for a margin improvement as long as we are in the inflationary period.

Robert [McCarthy], to answer your question. We had a $120,000 of expense in Q4, only about $1.5 million for the whole year.

Our next question comes from the line of Thomas Hayes - Piper Jaffray.

Don, you had mentioned some of the initiatives here domestically, where I think everyone is talking about a flat market. But I think one of the drivers really could be, and you had mentioned was the warm asphalt. And I know a lot of associations are doing some work on that. Let me get your view on when you thought that it would move towards a mainstream acceptance?

My personal opinion is within two to three years, it’ll be the mainstay. Our competitors are coming out now with competitive units to try to do this mechanically. The way we are doing it decreases the cost of the mix. And there has been a lot of effort with warm mix of adding additives to it, but it increased the price $3 a ton. The way we are doing it, we are decreasing the price, probably, $0.40 to $0.50 a ton and increasing the production of the plant. Our competitors, I am sure, will come up with ways of doing it. We are way out in the front of any of them. We have like 30 units and about 50 more on order at this point. So, we see it taking off. Our engineers call it the “green tsunami.” The other area, though, I think that that we probably are not emphasizing as much is probably 20% of our volume right now is in the energy business and that’s growing. Heatec’s volume, 40% of it is in energy business. The American Augers, probably, could reach 40% to 50% within a year in drill rigs and in the energy business. A lot of our products can be applied to industries that are hot now and not down. So, we are continuing to try to grow in that area. And, at the same time, grow in a way that is green. The recycle products, growing in that area, Tom, offers real sustainability,. and the more recycle that we use, and the more we process and reuse it, it really rings well for sustainability.

Fine. And is that becoming more of a selling point to the state DOTs, as they become more budget conscious, they recycle?

Yes. Really, where it helps there is, there is a huge amount of environmental movement in these state highway departments and state governments. And the recycle ability has been around, but there’s been a reluctance to do it. If you work for a highway department and you are an engineer, there is no reward for taking a risk. If you make a mistake, you might get fired. However, the green movement has given them a lot of cover and anything that’s green that reduces emissions, that offers sustainability, it gives them cover in. They are less reluctant on taking risk.

Okay. You continue to grow the international business well. I was just wondering how much further scalability there is within the international without having to increase the sales force?

We are increasing the sales force. We’ve had large domestic sales forces. But, basically, international, in the past, has been just a bonus to us, and it has been primarily major companies that have come to us because of our technology. We are adding dealers and adding reps in many areas of the world that we haven’t covered in the past. So, yes, we are increasing the number of international people.

Our next question comes from the line of Buzz Heidtke - Heidtke and Co.

Do you use FIFO?

FIFO, yes.

Okay. And then, I know, in the past, you’ve always spent a lot of money tinkering with your products, making them better, and a lot of your competitors didn’t, but it gave you a little edge later. Are you still doing that?

Buzz, that’s the only fun I have.

You had over a 100 patents about 10 or 15 years ago. How many do you have now?

I don’t try to keep up with them. I try to push the other guys where they can take credit for it. But, now we continue to develop new products. And that’s where we’ve grown them over the years.

Okay. Now, what percentage of your business goes to the mining industry?

Probably 10%. That’s the two areas that we are really pushing in setting up independent sales forces or separate sales forces is in the mining and the recycle, and separating those and putting more focus on mining and recycle for our crushing equipment as well as staying in the construction aggregate side of the business. Our aggregate mining group, if you look at BTI, 50% of their business is mining. If you look at Osborne, probably 30% to 40% of theirs is in the mining. But some of our domestic companies are just now really growing in that area.

Okay. Now, what are your, say, two or three top countries that you ship to? Canada is probably one of them.

It varies. We ship a lot to Australia. Their infrastructure is very similar to ours and it’s very common. But last year, Australia, Canada and South America and Africa are the four top ones. But Africa is a big country.

Okay. Do you have any plants overseas? And are you thinking about opening any in China or anywhere like that?

We have one in Canada and one in South Africa. We have not gone to China yet. We sell a lot of products in China, but we have not opened up there yet. It has been a tough country for us, for our products, not being high-volume products. Really hadn’t quite fit that market over there yet. Maybe another way of saying it, we sold a lot of equipment over there, but they immediately copy it and to go over there and to try to get into that competing; big part of what they want is a lower-tech product at this point, and we are on the high-tech end.

Okay. The last question is, you got a pretty good balance sheet right now. Have you thought about getting into the leasing and financing business?

We got into finance business about 10 years ago, and we found we are better manufacturers than we are financiers. The problem is, we have access to the customers that want to buy it, but it is hard to separate your balance sheet with a finance company from a balance sheet of a manufacturing company. And we decided we better just stay in the manufacturing side of it. Our dealers do leases, particularly in the recycle equipment to track-mount equipment. We encourage them to do that and we support them on doing more leasing or rent-to-own type equipment.

Our next question is a follow-up question from the line of Arnold Ursaner - CJS Securities.

Don, can you give us an update on the COO status?

What our Board has decided, we’ll be dividing our aggregate group up into two Group Vice Presidents and we’ll have at that point four Group Vice Presidents and two of those guys will be stepping up over a period of next couple of years, and we are going to promote from within. We are not going outside.

Okay. Question for McKamy. Can you just remind us of the accounting, when you have CONEXPO, I know it’s every three years and it’s a pretty hefty SG&A expense. Just remind us of the accounting treatment of that, please?

In the past, we have expensed 50% in the year of the show and 50% in the year after the show. We are going to be expensing all of it this year in the year of the show.

And that’s a new requirement.

Yes. That’s the latest interpretation by our audit firm. That will be about an extra $700,000 for this year.

Okay. And that will hit in Q2? –

Most of it will be. We’ll attempt to get it in Q1.

Okay. And, on the $1 billion of revenue that you are highlighting for the year, you speak a lot about new products, but some of the math doesn’t really seem that material. So, perhaps, if you could spend an extra minute on the $1 billion of revenue and quantify the revenue impact on what you believe will be the key new products in the upcoming year?

From the standpoint of new products, while they are not real big, there’s a lot of these green systems at Astec. There is the pulverized coal burners that we came out with two years ago. We are selling them very quickly in the Astec side of it. In the drill rig side of it, probably the biggest growth is going to be in the oil drilling rigs. At Roadtec, there are 400-horsepower mill. There is stabilizer, which both are new products, we will be adding to it. And the crushing side of it, new multiple frequency screens, our track mounted machines that we’ve been developing over the last few years. We’ve really organized our manufacturing; up until this year’s the first year we are really beginning to have availability like we want it. So, we see a continuing growth in recycle machines. At Peterson, before and since we’ve acquired, they’ve developed a number of new products, a whole new line of chippers. Their recycle machines have all been reengineered. The flail machine which delimbs and debarks the full tree, we are now going to be able to make boiler fuel out of the bark and the stuff was previously been wasted. So Arnie, that’s a quick round of them.

But I am trying to go, let’s say for example, on the green machine, which was the first one you mentioned?

Right.

They sell for roughly $50,000 for an upgrade?

Yes. We are doing three a week right now. So that adds to that. But the overall business, not just all new products; they are the icing on the cake. But overall, the business is continuing to grow. So that’s what we are seeing.

Okay. And I know you spoke to your revenue growth of 15% before, roughly 3% from Peterson. If I look at the remaining, perhaps, 12%, how much of that is price? How much of that is volume?

About 4% of it is price.

Our next question is a follow-up from the line of Robert McCarthy - Robert W. Baird.

One is a follow-up to something you just said. I just wasn’t clear, McKamy, the extra $700,000, is that the 100% of the cost? Or is that the extra half?

That’s the extra half.

Okay. And, then, my question, Don, was for you. I wondered, you’re obviously aware that Terex has been promoting their ability to retrofit old Cedar Rapids plants and produce their version of foamed asphalt. Can you speak to the difference between their solution and yours, if there is one?

Basically, we are both foaming the asphalt. They have put one system in and, really hadn’t hardly run it, and we have got 30 of them running. I am sure that they’ll make it work. What they do is what we did on our prototype.

Okay.

We modified it. But I’m sure they’ll do the same, Rob, it’s not rocket science. And, frankly, the industry will be better if all of our competitors do it. It’s a good thing for the industry. And we’ll all participate in it.

Is that something that could accelerate adoption?

Yes. It will help, certainly, if the competitors do it. Because right now, when we end up being the only supplier, one of the problems we’ve had over the years, with the Shuttle Buggy is, the problem that it was patented and nobody else could use it and the states were very, very reluctant to spec it in. I think when the patent will run out in about a year on the Shuttle Buggy, I would say the market for that will grow when it runs out. We’re not afraid of competition.

No, you got a track record to support that sentiment. Thanks, Don.

We do have a follow-up question from the line of Richard Wesolowski - Sidoti & Company.

Can you give us a sense of how far ahead or behind you are in the sales and overhead staff relative to the internal plans for 2008 and 2009?

How far ahead we are? I’m not sure I understand the question, Rich.

If we hired the salesmen and so forth to generate the sales.

We have hired enough. It’s an ongoing process. We have a new International Sales Manager at the Astec operation. He has hired a couple of guys in that area. Our guy that is over the international sales, in the aggregate, has done an excellent job and that side of the business has certainly grown a lot. We are adding at Roadtec or in the Mobile side of it, underground, we really combine American Augers and Astec underground international sales force and it’s pretty well-established. The area we still probably got some real growth opportunity is at Peterson, which, internationally, they do quite a bit of export to Japan. But there are probably a lot of other markets that we hadn’t done as well and we are looking at other markets for them.

Okay. Lastly, can you update the outlook for the vertical drills, whether or not you sold any more outside of that first customer? How many prospects you have? Whether you are going to expand Augers’ facility, etcetera?

The first customer has now ordered seven of them and we have got other prospects that we should close very quickly. He was reluctant to let us show them to anybody else. And he continues to give us orders about as fast as we get them built. The Marcel Shale that goes from St. Louis to New York state; there is a lot of shale gas in that area. And they estimate there’s like 50 trillion cubic feet and our rigs are ideal for that to be able to go down shale and turn. They are predicting that there is going to be a huge number of rigs go all the way from St. Louis through Indiana, Ohio, Pennsylvania, West Virginia, all of those areas up through there. A tremendous amount of drilling will be going on because of that. That deposit is like three times what the Barrett Shale is. And that seems to be a real hot area of the country.

Do you expect to expand the facility anytime soon?

Yes. I’ll be talking to the Board about that tomorrow.

There are no further questions in the queue. I would like to hand the call back over to management.

Thank you, Doug. We appreciate your participation on our fourth quarter and year-end conference call for 2007 and thank you for your interest in Astec. As our news release indicates, today’s conference call has been recorded. A replay of the conference call will be available through March 4, 2008, and an archived 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 earlier today. Since there are no further questions, this will conclude our call. Thanks you.

Ladies and gentlemen, that does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time.