Greetings, and welcome to the Astec Industries' Fourth Quarter 2014 Earnings Call. At this time, all the participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Steve Anderson. Thank you Mr. Anderson, you may begin.

Thank you, Jane. Good morning, and welcome to the Astec Industries' conference call for the fourth quarter and fiscal year that ended December 31, 2014. As Jane mentioned, my name is Steve Anderson, and I'm the Vice President of Administration and Director of Investor Relations for the Company. Also on today's call are Ben Brock, our President and Chief Executive Officer; Rick Dorris, Executive Vice President and Chief Operating Officer; and David Silvious, our Chief Financial Officer. In just a moment, I’ll turn the call over to David to summarize our financial results and then to Ben to review our business activity during the fourth quarter. 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 and are subject to certain risks, uncertainties and assumptions. Factors that can influence our results are highlighted in today's financial news release and others are contained in our annual report and our filings with the SEC. As usual, we ask that you familiarize yourself with those factors. At this point, I’ll turn the call over to David to summarize our financial results for the fourth quarter and the full year of 2014.

All right. Thank you, Steve, and we thank each of you for joining us this morning. We'll go through the financial results here. Net sales for the quarter were $239.5 million in the fourth quarter 2014, compared to $223.9 million in the fourth quarter of last year, and that's an increase of 7% or $15.6 million. International sales were $87.9 million in 2014 Q4, compared to $81.5 million in Q4 of 2013, that's an increase of 7.9% or $6.4 million increase. International sales represented 36.7% of Q4 2014 sales compared to 36.4% of sales for the same quarter last year. The increase in international sales quarter-over-quarter occurred primarily in South America, in the Middle East, in Central America, and in Russia. These increases were offset by decreases in the post-Soviet states, and in Australia. Domestic sales for the fourth quarter of '14 were $151.6 million compared to $142.4 million in 4Q of '13. That's an increase of 6.5% or $9.2 million. Domestic sales represented 63.3% of Q4 '14 sales compared to 63.6% of Q4 '13 sales. Parts sales for the fourth quarter of 2014 was $63.8 million, and that compares to part sales of $56.8 million in Q4 of '13, a 12.3% increase or a $7 million increase. Part sales were 26.6% of our quarterly sales in Q4 '14, compared to 25.4% of sales in Q4 of '13. On a year-to-date basis, sales were $975.6 million compared to $933 million last year, it's a 4.6% increase or $42.6 million increase. International sales in 2014 were $321.4 million, and that compares to $333.9 million in 2013, that's a 3.7% decrease or $12.5 million decrease. The decrease in international sales year-over-year were primarily in the post-Soviet states, Africa, Australia, and in Canada. These decreases were offset by increases in South America, in…

Thank you, David. Ben Brock now will provide some comments regarding the fourth quarter this year's operations as well as offer some thoughts on. Ben?

Thank you, Steve and thanks to everyone for joining us on our call today. As we mentioned in our earnings release this morning, we were pleased with our fourth quarter results. And we were also pleased with our record setting backlog which along with our current prospect has us optimistic for the first half of this year. Our earnings per share were $0.37 of share in the quarter versus $0.36 per share in the fourth quarter of 2013. On a year-to-date earnings per share was $1.49 for 2014 versus the $1.69 in 2013. Our year-to-date EBITDA was $77.43 million versus $79.69 million as a reminder from David's comments and as our calls this year, past year, we did a pretty unusual items that effected our year-to-date EBITDA that ConExpo extends the fair market inventory right up at Telestack for acquisition accounting. And foreign exchange loss which totals about $1.5 million and the fair market value right up at Telestack was $1.418 million. The total of the three unusual items equals $7.17 million adding that back to our year-to-date EBITDA $77.43 million, would have give us the year-to-date EBITDA of $84.6 million versus the $79.69 million last year. So that would have been an increase of $4.19 million versus last year, so that would be an increase of 6.2% without the unusual items versus the sales increase of 4.6%. So, we’re please to report that operationally we have improved versus last year. Our backlog at December 31 was a new record at $332.1 million which was up 12% versus last year and as David mentioned our backlog at January 31 stayed strong at $335 million. Regarding the sales environment that were in here in the United States, it just continues to be that and certainly created by the Washington DC representatives…

Thank you, Ben. Jane, if you would open the lines for questions, we'll be ready to fill those.

[Operator Instructions] Our first question today comes from the line of Mig Dobre with Robert Baird. Go ahead with your question please.

Good morning, gentlemen. A lot of questions here, I guess maybe the biggest one for me, pretty good backlog numbers without a doubt, and apparently trends are still decent through the quarter. So, I am wondering Ben, when you’re thinking about the full year, thinking about 2015 as a whole, how do you think about the revenue potential here?

I still think for us the summer is always going to be our challenge, and what could help us will be potential pellet plant order and/or highway bill. We need to manage through the summer better if there is not a highway bill. The money will be there, I mean, Congress has proven that they will vote an extension that keeps the base line in the 40 billion range, and with the private markets being okay, that can be manageable, but we experience a rough third quarter with how things are going especially in the Astec division. It feels a little bit better, our customers are dealing well. I have been with a lot of them during the quarter and in January. So, we see an opportunity to have, like I said in the comments, cautiously optimistic through the year. If there is not a highway bill, we would manage better because what would happen is, as you’ve heard David's comments are absorption did come down, but our margins came down with it during the third quarter. We just have to manage that better if there is not a highway bill or a large pellet plant coming through Astec Inc.

I appreciate that and I wish you had been a little more specific in your comment there, but I understand that you are, maybe a little bit limited. Sort of sticking with this line of thinking on margins, in the infrastructure group, pretty meaningful improvement in growth margin, and I am not just talking sequentially, I’m talking year-over-year also in spite of a 11% revenue decline. So, are we talking about the shift in this year? Is pricing getting better? I know you call that out last quarter as an issue. How do we think about the sustainability of gross margins into next year?

I think in the first half, it’s sustainable. There is a little bit product mix as you mentioned. Little bit of our lean efforts staring to show up, and I think we are in the Line season for Asphalt plants. So it always feels a little better around here in the winter. But it's the work that we are getting is our main product line work here at Astec division. The mobile side has stayed fairly strong. The small players have done very well for Carlson. So, it is a combination of those really, Mig. I wish it was just one, but it’s kind of everything coming together during that quarter and starting off this year.

And what about pricing?

We are still in a competitive pricing situation on Asphalt plants, and we have done a little bit better on parts, but on the plant side, it’s still pretty tough. But again, even though we are competitive, and it is tough on the parts. Back to your point on product mix, it's just been more main line equipment and just a little more volume coming through the plan and that helps us.

All right. And then before I get back in the queue, just shifting over to your energy segment. I’m trying to make some sense here of your really strong orders and backlogs. You're up 54, up 98% year-over-year, you’re calling out that oil and gas headwinds, but obviously there are some other things that are contributing to this segment. What is it and again how do you think about 2015 as a whole?

That's a great question, and Rick you may want to comment, but the biggest thing that happened to us during the quarter is we got a large $25 million order from a large oil producing company that, we can't tell you who it is, but it’s one that you know, I mean that the globe knows, and that was for gas process here, processing up in Canada and Rick, you may want to comment on the other group.

Well in addition to that, the wood chipper and grinder markets improved and we improved our market shares in those markets. So that also contributed pretty significantly to the increase in the backlog for the quarter.

Can you talk at all about, what drove that $25 million order? Is this new product introduction on your part or is this -- really any color there would be helpful.

The customer is building a new plant, and so we got eight heaters to go into that plant.

All right, I'll jump in the queue. Thank you, guys.

Our next question comes from the line of Jason Ursaner with CJS Securities. Go head with your question please.

Good morning. Just following up on - may I think the last question, when you look at the domestic orders in the backlog for the year end, is the lower oil helping your contractors in the asphalt side, may be do some more miles or just any additional commentary on what you see driving the strength there for equipment orders through the end of year.

Jason, this is Ben. We're seeing that, that's helping them on their bottom line. There is a little more backlog, particularly it is in the private side. Some of the states that have taken on more funding on their own like Pennsylvania and Virginia, we talked about several times on these calls and in the market is – that's starting to show up some big, pretty big lettings, but not needle moving letting there like the federal highway bill for the long term, so it’s fairly good in pockets, it's not everywhere. As far as the state money goes but on the private side in general, the National Asphalt Paving Association Annual Meeting ended January there were customers there from 42 states and the feelings is generally better and have little work going into the year and having pretty decent years as last year. So they're doing little bit better now.

Okay. And the year-over-year comparison, these orders are coming through for a bit of lead time any, is any concern the contractors last year and may be hold off and anticipation of ConExpo and that's place at all into the year-over-year numbers.

Well, I don't know about the ConExpo side, I think there is definitely pent-up demand and just a little bit of work probably got us a couple of deals that may be 1.5 in last year. But again historic versus historical sales levels as asphalt plants buying season, its sill lagging. On the mobile side, it's still pretty strong as it has been.

Okay. And in terms of cash flow, looks like pretty much breakeven for the quarter and for the full year excluding Telestack again pretty much flat, just working capital investments seem like, they have taken up a lot of cash, most of that in inventory, how are you thinking about current working capital levels and cash flow going forward?

A lot of that you are seeing there is pellet plant and so that's a lot of money part of, the sale was $60 million and when you get that back we'll look a lot better, David if another comment on that.

It's something that we talk about and monitor on a fairly regular basis and we have in the past when we get appropriate discipline and need to apply appropriate discipline. Our guys are pretty good about generating cash and pulling it out of the balance sheet. So right now, we really allow because of our internal metrics, allow folks to buy a little more inventory so that they can deliver more quickly to customers and also they’re investing in R&D and then product development, so that's a little bit. But you’re right, we do watch that AR and the inventory numbers pretty closely.

And at this point you wouldn’t expect the customer on the wood pellet to get financing until Line 3 is in or there going to do it Line by 1.

It will be 2016, we mentioned that in the past that, all three line should be running mid year so we’re still very - hate to call it working the kicks out but when you start up that much iron you go through that process and probably running strong by the end of the third, the latest, we have learned a lot in Line 1, that's been fixed for Lines 2 and 3 a good investing but if we - they need to run to get the financing in place, all three lines, because they want to finance it all in one shot. We need that going in, I’m sorry - we didn't know that going in, Jason, I’m sorry.

No, no problem. I will jump back in the queue, let's some others get a chance.

Thank you.

Our next question comes from the line of Nick Coppola with Thompson Research Group. Go ahead with your question please.

Good morning. On SG&A you called out in your few opening comments Telestack and payroll and related expenses and so was there anything unusual and either of those items or were you running about where you expect to be training in Q4 and a follow-up to that, what kind of SG&A leverage do you expect in 2015?

No, there was nothing unusual in those. They were added together and they were the vast majority of the increasing SGA&E. And we do expect - I would expect, trending that we would be in that probably 41 range on average going forward, I think that's probably of fairly safe number right there.

Okay, that’s helpful. And then what are your infrastructure customers particularly those within energy intensive states reporting back to you? You really see negative impact on either private, on the private or public side for infrastructure and places like, place like Texas from lower oil prices?

Nick, this is Ben, I talked to a few contractors from Texas meeting our reference to Florida and they have a long term concern in the media, they didn’t see anything this year, the ones that I talked in. Didn't really talk to any from North Dakota or South Dakota but near that region we are installing at very large asphalt plant right now in Minnesota which is probably the worst price to be selling in asphalt plant right now. I think it was minus 35 the other day, they couldn't even starting the welding machine on site. We haven't heard much of that in concern for 16 out of that into a basis.

Okay. That's helpful.

The other thing, I would add to that, it's not a part of the question and talking with people on energy side and kind of trying to get a feel for how long the oil industry, the issue could be there, our general feeling and talking with people is that, its about an 18 months issue as far as oil prices coming back. And that just didn't - talking to lot of people there is not science behind that, there is just a lot of conversations.

Okay, that’s helpful. And then my last question for, just looking for anymore color about Brazil, it sounds like you finally got that up and running with early performance look like there, and kind of just color about what's going on down there and may be any ability to or just I’m to add product lines down the line.

Well everybody knows how the economy is going down there so perfect timing to open a plan in Brazil for the economy it's not great. So its going to be a struggle this year and the way we are trying to offset that struggle is that due to few more products that we would build through the plant there. We had the one small asphalt plant that is we call a voyager that's really built in our [hydraulic] [ph] operation transferring the drillings down and then we’re now talking about one other size plant for that operation that was hit well in Brazil and then we've also discussed potentially may be one or two Roadtec pieces, when we design the facility we did not meant to flexible to build multiple decision forth of equipment. So it's going to be a struggle though in year one, there is no doubt.

All right. Thanks for taking my question.

Our next question comes from line of Ted Grace with Susquehanna. Go ahead with your question please.

Good morning guys. Ben and David, I was holding to get some perspective on thinking about margins in ’15. I know you made some comments in SG&A in $41 million run rate being can a reasonable run rate, if I heard that correctly. But I was just wondering, when we look at 2014 on 5% sales growth we kind of flat gross margins in low 22% range, operating margin is comprised about 50 basis points, could you just give some kind of handholding or framework kind of think about, for how you are thinking about the opportunity from margin expansion both at the growth and the operating lines in '15?

Ted, this is Ben. We think we will be improved in the first quarter particularly against the first quarter of '14 on margin. We’re trending in that direction to predict effect historical highs in the 25, 26 range I think, we feel early but we're certainly going to feel like we’re going to be above fourth quarter margin of last year and first quarter margin of last year.

On the first quarter is that, are you talking operating, or is what due to kind of the ConExpo easy comps so to speak or are you talking about the gross margin and underlying profitability is actually better.

That's gross margin and underlying profitability is being little better.

Okay. And when you think about the big puts and takes behind mix, could you just maybe walk us through or bridge us through how you’re thinking about materials or under absorption on revenue growth in those dynamics, I think, that kind of handholding would helpful for people, if they think about fairly '15 estimates.

Sure, we have been feel kind of come down during the fourth quarter, we think that will be stable in the first half and so we are its that’s a good and bad story that’s nobody else is using much other, it good helps us and but we see advance stable for what we know at the moment. Your other question the materials and absorption that will be okay in the first half, I think they will be probably we were this year, will keep in mind.

Any other big puts or takes for them kind of the cost of good lines we should be mindful off?

I think just, as I mentioned we have been working on our lean effort, I think we starting to see that in a margin little bit. Volumes helps us could you can, when you walk through our plan which we done a quite bit in January to, you can see differences starting to take shape.

Okay. The second thing I was hoping, kind of zeroing on and I apologize the price so much of that but within the aggregate creating -- the products within the aggregate mining group, can you talk about just the domestic environment for that product line and then may be that the outside U.S. opportunities kind of the environment fields for the kind of the core aggregate products.

Sure, timing is perfect, because I just spend a week traveling and visiting some customer sites where we put in big quarry at Oklahoma, near Oklahoma a large crushing system and traveled with the more the stationary aggregate group and the portable aggregate group during that week. So that really kind of been [indiscernible] hero for us over the last few years. They have been very steady as a group and their backlog is of a little bit, but it is a little bit more manageable perform as a whole. We are still challenged with pretty good backlog levels on the portable side, particularly in the washing equipment. Talking with the customers and talking with few of our sales reps traveling around with some windshield time generally the feeling is pretty good for domestic. And of course we’re seeing some nice releases from some of the larger aggregate suppliers that have come out in the last month or so. So our guys are generally update about domestic outside the USA there is still a concern about Russia even though we have down generally okay in Russia and what happens for us is there is not a lot of great local manufactures as the equipment we build in Russia. So that's why we have been may be then able hold on a little bit there, with the politics we’re keeping it a eye on it. Outside the USA for aggregate mining site was Brazil is in that group, so as we are start – help again think that will be a challenge for year on but there is still all working Columbia coming up and so we’re stand active there and particularly stand good for us, so not so much middle east and not so much Africa but Europe we are starting to build little more activity. And I think that’s the lot because of Telestacking in the region and people paying a little more attention to us is the having manufacturing in that region and Telestack is in that group and there is start looking it ways incorporate some of there crushing equipment in the systems have been incorporate, Telestack equipment. So, I wouldn’t say that we’re over the top saying, internationals about them for any others but that were pleased, that we’re making a little more headways of course is may be last year at this time.

Okay. And then last one if I can squeeze it in, for '15 when we think about the impact of FX, given lot of the manufacturing’s in the U.S., how would you encourage people to think about kind of A, how it's impacting your sales ability on transactional basis, just disadvantage. And then B, just as we think about the impact of the FX on your revenue from a translational and the effect you have in profits for '15, could you just little handle there?

Sure, it’s painful. The Australia with Astec, Australia at Aussie dollar this morning was $0.77 when I took a peak this morning that is painful for gaining equipment sold although with those guys or holding on and had compared to what’s happen to them on the volume side, they held on okay through the last year and the Canadian dollar is 79 is not held. And then the euro even in 113 we seen to be getting some deals, so it’s a concern for us and we’d like to see if it will better in Australia talking with those guys, I’m going to go down there Sunday and spent some time with them but it’s a challenging time there that there is some opportunities for as there too, so it anybody somebody is buying, we are trying to get in front of them and on the business but it's a challenged to us but we are still as you can see at our backlog were still solid.

Yeah, alright that's very helpful. Best of luck this quarter and safe travels down [indiscernible].

Our next question is from the line of Brian Rafn with Morgan Dempsey Capital. Go ahead with your question please.

Good morning guys. Give us sense, that you mentioned Ben talking about your expectations for this time I guessing at six year highway bill, any thoughts on the size, the numbers you are hearing at, is it more of that 245, 275 billion, I heard the army core of engineers talk about $500 billion and then if that actually close through on a six year bill, what’s kind of pence up demand might you see from some of your old builders actually kind of releasing some orders.

That, if you take what we are hearing, we are hearing everything from a four year to six year bill and then average of $50 billion a year, its kind of what we have been hearing and I kind of think sometimes is its too hard to the last guy last. But that’s kind of generally what we are hearing, we are hearing gas taxes doesn’t have a lot of legs but we’re hearing there is tax quote changes on to it, try to make it happen, its kind of what we are hearing. And so if lets say that happens an it’s a 4 to 6 year bill and what with that mean for us, particularly on the infrastructure side, I think it means that we would see a pretty good click order run for about three months, there is a plenty of people who love to do something right now but need that bill to feel comfortable. And then I think we still break as everybody figured out, where is that money hitting and where is that money going and where the jobs going to be lagged and then I think we see few years of pretty good activity in infrastructure grew. Our customers are doing fairly well and I think they’ll move quickly and then 80% of our business is probably held companies, where you are dealing with one decision maker at the top they can make a quick decision, so I think we would see a quick increase and then kind of little break and then have a pretty consistent run through for years.

Okay thanks I appreciate that if you look at road tech and you look at let’s say we take a worst case scenario you don’t get highway though watching and continue to stumble along. There have been extension right it’s there they’ve been pretty far on with that if you don’t see your releases how over the next few years how strong is that are you from repair parts sooner or later the equipment is going to break down and if you want jobs there’s a lot of discounting I mean how much demand to repair parts. And have you seen that you have to change off as we haven’t had fixed your bill and repair parts have been pretty strong?

I think we seen a built in that December and January parts on the year we had I think there will be a good opportunity for that in either case in the second half and through the winter next year, because that it’s going to come and we’re in pretty good position and have the structure built for that I think we’ve got them to improve that in energy and in the as a plant come along on that but we still got room for we recall based on ground they’re direct in front of customers working for the parts business.

Yeah I would I just did go ahead I want to finish.

Well I just say Astec had a really good parts here last year and starting off really start this year.

Okay and then just again from the standpoint of 50,000 foot view what kind of capacity utilization are you seeing across some of your subsidiary companies or how many ships that you are running. What’s running fairly strong and what’s running with low capacity?

Yeah sure I would say we’re probably today run and we’ve been probably last year we ran at 60% to 65% range along with 5% and 70% range and not to 75 but somewhere between 70, 75 right now obviously was what we were doing in that and that’s pretty good indicator [indiscernible] relation here is not good. And truthfully it’s not great and in it there is no who help us in network increase man hours to the shop. Now I’ll say that with an Astec, because oil and gas industry is pretty robust it is both right now. But we did have a water drill rig that we have we’re starting to build that that was 30-K they were moving to help their volume too so we think it will help us not only unless what we’re doing what happens they will help us I think with more man hours.

Thanks guys.

Our next question is a follow-up question from the line of Mig Dobre with Robert Baird. Go ahead with your question.

Yeah, thanks for taking my follow-up just a little more color maybe on the aggregate mining segment. I’m wondering can you part out some of the moving pieces on your margin in he fourth quarter been a little bit shy what I personally expected. Also looking at this segment margin here’s been between call it 9.5% to 9.8% over the past three years. Is there any reason to think that we should be seeing that number change in 2015?

Hey this is Dave I don’t think we’ll see a change very much in 2015. I think when you look at aggregate and what they delivered and I guess I’m just looking into the answer just, because I was traveling with them. The project was a large project in Oklahoma was a bit piece of that and that there was a new equipment on that new designs new, conveyer design through our bolt and screw and that such showing up in the margin and that we have first we always take a look at our margin as the same that’s happening is an aggregate on a noble sign to make say beyond the JCI side they’ll be on more development on their global track units and they’re doing some work to be able to get those to breakdown and going to containers and so they’ll be able to ship a little easier and more economically to get outside the US and be competitive and a little bit of that showing up too.

Okay.

They’re going to be okay this year on margin.

All right I appreciate that and I remember Ben you said in the mining, we bought a third of this segments revenue. Has there been a mix shift in 2014 and notable mix shift does that any kind of we should be aware?

I would say it did. If there is a shift its more to the aggregate side in this year and we got a large 900 crusher that is – and it's ready to go and we're, we think ready to go over the top, so we got a home for it. But we think we got a home for it. And we would like to get down installed before the middle of this year at a place and get it tested out, and start proving ourselves in those 900 to 1200 horsepower crusher segments of the market. That will help us grow the mining side and then been I the Brazil and being next to the mine, build right there will help us long term, I don’t think it move the huge amount this year down there given what’s going on.

But is it fair to say that mining is - I don’t know may be closer to quarter of the segment at this point.

I think so, I don't have the exact number here may be got, I got it will be the right.

All right. And then, I’m looking to clarify something is that I’m little confused with regards to your EPS comments for the first quarter, are you to be clear, are you saying you are going to be up sequentially in year-over-year in terms of earnings?

In the first quarter versus the first quarter of last quarter we should be up.

Okay, all right.

That's your question?

Yes, that is my question. And the last one is on the potential wood pallet plant order that you said, you could get either may be late 1Q or early 2Q. Can you remind us may be size the order of the potential there, the way the revenues going to be recognized and maybe the way you force you see the revenue flowing through the various segments?

We are renegotiating that is probably the green lines or so similar to what we have at Hazelhurst with extra auxiliary equipment. So it's going to be a little more money. And it's going to be partially in the fourth quarter in the balance and the first and second of next year. There is a lot of moving parts to those and working on back pages and that kind of stuff. That would be where it would be if we were successful.

And in terms of that flows is segment level for revenues?

Well it would be mainly all in infrastructure group through Astec because all of those companies that would be affected were selling to Astec. So, and most of it probably 90% of that would be growing through Astec Inc. and then you would see it small pieces to show up and aggregate mining group and energy because [indiscernible] for us. The good news about that is we're not financing that. So, we are setting up the time so we can recognize that as we ship it. So that would be lot better.

Sure, if you're able to financing on or the customer can get financing on the plan that you already have in Hazelhurst and we are talking about this one as well, that could potentially be a pretty meaningful swing to the outer number right?

Yes.

So, as these things develop it would be helpful to get some press releases or some kind of update maybe in the quarter?

If we got the order that was farmed up, we would release on it.

Thank you, guys. Good luck.

I would now like to turn the floor back over to Mr. Anderson for closing comments.

Thank you, Jane. We appreciate everyone's participation on our fourth quarter conference call. And thank you for your interest in Astec. As our news release indicates, today’s conference has been recorded. A replay of the conference call will be available through March 10, 2015 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 7 days. All of that information is contained in the news release that was sent out earlier today. So, this will conclude our call. Thank you all. Have a good week.

Thank you, Mr. Anderson. This will conclude the teleconference. Thank you for participating. You may disconnect your lines at this time. Have a great day.