Greetings, and welcome to the Astec Industries' First Quarter 2015 Earnings Call. At this time, all the participants are in a listen-only mode. A brief 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 call over to Steve Anderson. Thank you. Please go ahead.

Thank you, Brenda. Good morning, and welcome to the Astec Industries' conference call for the first quarter that ended March 31, 2015. As Brenda 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 first 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. At this point, I’ll turn the call over to David to summarize the financial results for the first quarter. David?

All right. Thanks, Steve. And good morning, everyone. Thanks for joining us this morning. Net sales for the quarter were $288.7 million compared to $238.7 million for the first quarter of 2014 that is a 21% increase or $50 million increase. Our international sales for the quarter were $77.7 million compared to $63.2 million for the first quarter of 2014, that's a 22.9% increase or $14.5 million. International sales were 26.9% of Q1 sales of this year compared to 26.5% of Q1, 2014 sales. The increase in sales internationally occurred primarily in Australia, in Middle East and South America, Canada and Europe. Those increases were offset primarily by decreases in Russia and Central America and Mexico. Domestic sales for the quarter were $211 million compared to $175.5 million in Q1, 2014, that's an increase of 20.2%, or $35.5 million. Domestic sales were 73.1% of Q1, 2015 sales compared to 73.5% of Q1, 2014 sales. Parts sales for Q1, 2015 were $73.1 million that compares to $69.3 million in Q1, 2014, a 5.5% increase or $3.8 million increase. Part sales were represented 25.3% of Q1, 2015 sales compared to 29% of Q1, 2014. Gross profit for the quarter was $66 million compared to $56.8 million in Q1, 2014, that's a $9.2 million increase or 16.2% increase. Gross profit percentage for the quarter was 22.9% compared to 23.8% for Q1, 2014. Our absorption range for Q1, 2015 was at $2.1 million under absorbed that compares to $3.3 million under absorbed in the first quarter of 2014, that's a positive impact on the gross profit of $1.2 million. We did experience a little bit of a foreign exchange transaction loss during the quarter of $734,000 and that compares to $139,000 loss experienced in Q1, 2014. Other things that impacted gross profit for the…

Thank you, David. Ben Brock is now going to provide some comments regarding first quarter this year's operations. Ben?

Thanks, Steve. Good morning, everyone. And thank you for joining us on our call today. As we mentioned in our earnings release this morning, we were pleased with our first quarter results with earnings of $0.65 per share in the quarter versus $0.41 per share in the first quarter of 2014. Our backlog at March 31 was $291.2 million, which was down about 6% versus last year. Backlog domestically was up 2% year-over-year; internationally it was down 20% versus last year. International backlog was down primarily due to the strength of the US dollar against other currencies and the global money slowdown and markets that were key to us. The encouraging news for us remain that as we mentioned on last quarter's call, we continue to hear from our infrastructure customers that they are experiencing good business level in United States and have backlog of works to do particularly on the private side. This has been good for our infrastructure group business. While it will take a long term highway build to bring sustained growth in large CapEx spending bar infrastructure group customers, we are encouraged that our customers' equipment is running at higher capacities. With regards to Federal Highway Bill, we continue to stay in close contact with our elected representative in Washington DC and we are encouraging our customers, vendors and other industry members to do the same through our Don't Let America Dead Effort. We expect after meetings last week and phone calls, our expectation is that we will see another short-term extension of the current Highway Bill by May 31 this year and that we remain optimistic that there be a long-term Highway Bill at sometime past this calendar year. As we are work and wait on a long-term Highway Bill, we continue to pursue new…

Thank you, Ben. Brenda, if you would open the queue up we will be glad to start answering questions.

[Operator Instructions] Our first question comes from the line of Jason Ursaner with CJS Securities. Please go ahead with your questions.

Good morning. Just starting with the sales outlook, backlog declined 12% sequentially, it was split pretty evenly domestic and international and across all three segments. So, yes, I understand that orders towards the end of last year were strong and you delivered on that this quarter with the revenue, but just how should we be thinking about revenue growth going forward kind of by business?

Jason, this is Ben. We have been encouraged over the last year really what's been going on in energy, that group with the gas heater, I mentioned that in the comments and I think we are still despite the price of oil, see growth there. On the aggregate side and the infrastructure side, I think we are okay, we just got -- we need a highway bill to have to help sustain growth, but we also -- and I mentioned high recycle asphalt plant have some newer products that will help us sell equipment even in a challenging market. So I think when you look at it going ahead I think we got new products including the Pellet Plant that gives an opportunity to grow our sales.

Okay. And the second large Pellet order, last quarter it kind of sound like it was pretty close to heading towards a firm order coming out of the London conference, is that still in the work, is it getting closer, just help us out --

It is still in the works, I had a meeting with the customer there, our guys did and it is still come like this quarter. And kind of I mentioned in the comments, it is requiring a high level of patience for us, the permitting and their supply contracts get worked out. But they indicated that they are very close to going ahead.

Okay. And just SG&A, David, appreciate all the details on what drove it, but the run rate of 41 is that still kind of how you are thinking about going forward or some of these change that at all?

Yes. I think it could be slightly higher than that. I don't think it is going to maintain this high run rate but again there are couples of wild cards in there. The health insurance kind of played havoc with us this quarter and that was certainly not something -- we are self insured company so it was not something that we -- which you can even, mitigate. It is what it is so we are responsible for, so we are -- I don't think it is going to maintain the run rate that we had in the first quarter but it could slightly higher than the 41 on a run rate basis.

Our next question comes from the line of Mig Dobre with Robert W Baird. Please go ahead with your questions.

Hi, good morning. This is Brian Brophy on for Mig. Just had a few questions on the infrastructure segment, sales were pretty strong this quarter versus last year. I was hoping you could elaborate on which product lines were driving that growth?

Yes, Brian, this is Ben. As I mentioned in my comments we had a pretty good, it was really a pretty good selling season for asphalt plant so that as taking division, but again typical back in the day here for Astec where we had what we used to call a summer doldrums, one of the concerns would be there that would you have the summer doldrums on asphalt plant. The opposite to that is the Pellet Plant so we could sell one or two those that would fill that up, so but it was at the Astec Inc division in asphalt plant.

Got it and kind of dovetailing on that, is it possible that we could see the beginning of a large replacement cycle on asphalt plant even without a long term highway bill. Can the stronger private market and state initiatives provide enough confidence for your customers to drive that replacement cycle?

Brian, I think we probably saw a little bit of that through this buying season, between that -- their product is for liquid have gone down little bit, we are seeing an average price, talking to different customers anywhere from -- depend on part of region, you had $400 and $500 or maybe use $450 a ton that's down. So that's helping on a little bit. So, yes, I think that could happen. And we were-- you know how we are, we travel a lot so seeing some customers during the quarter, they are just -- there are some initiatives being taken in state and local level to help with construction and infrastructure. And so yes we could definitely see, I think it will take a highway bill to make it consistent demand through in few years. I think you still see when they get into their season; there will be seasonality in asphalt plant purchases because they will be focused on doing the work.

Got it and then on the wood pellet plant, you mentioned you are expecting to get an order this quarter. Would revenue be recognized this quarter as well or that be pushed out to a different quarter?

No. Brian, I think the sooner is there a chance we have recognizing any revenue in the quarter -- in the year, not the quarter so the best case to be recognized part of it in the fourth quarter and the rest of it in the first part of next year.

Our next question comes from the line of Nick Coppola with Thompson Research. Please proceed with your questions.

Hi, good morning. Aggregate and mining continued to see some nice double-digit year-over-year growth. What were the key drivers in that segment and were there certain customer types or end markets that really drove that?

Nick, this is Ben. They really have been pretty balanced in the quarter where their equipment plant, there were some larger projects and then a lot of onsite crushing contract for type crushing sales so they targeted at I think-- it was kind of balanced quarter. Going ahead one of the challenges for that group if oil stays down I think they were pretty successful on the oil region in the US and that could be a concern for us, it is not there yet, and there is still decent activity but that's been a place where they have been pretty strong and supporting that business too. And that group would be a dealer network supporting that business.

Okay. And then second question also kind of regarding oil. In the energy segment, where are you looking for growth in 2015 and I am just trying to understand where in that segment oil prices may have a bigger impact and where they may have a kind of less significant impact?

Right. In that group, we have products in the heating side targeted at not just oil productions but also gas processing and chemical businesses and food processing businesses. And then one other thing that David mentioned was a new product introduction in energy group which -- it is a piece of energy group and it is in there because it was CR that builds heaters and tanks and that's going into energy side. They also do a lot of work with asphalt blending and some thermal water. But the one thing that they are transforming and building too is a concrete plant. And number one for them we moved the concrete plant, and we start to build Astec to CR because Astec focused on health plan. And now that's good because we have the focus on that, but on the other hand that's a new product first time per down and so you get a hit on that in the quarter, but long range next year it is going for lot better because they will be through that process and be a good supplier of new technology for concrete production. So there will be some growth that comes out of that. And in the Peterson business for the wood chipping and the grinding they are doing some good R&D on some new equipment they would come out end of this year, so there will be some growth from that. So there is some good R&D going on in that group.

Our next question comes from the line of Ted Grace with Susquehanna. Please go ahead with your question.

Hey, guys, congrats on the quarter. Congrats on the quarter. Ben or David, could you maybe just talk about how 1Q performed to plan and how you are tracking to that? I apologize if I missed it, but I know you feel possibly optimistic within the first half and prospectively the second half, but could you just help us understand mark to market where you are, relative to where you thought you would be?

Well, lot of variables in there. That's a larger question. Yes, I think we were pretty positive on where the year is going. Again there are headwinds, FOREX headwinds, we have put a lot into international growth, into putting people overseas to developing those markets in those geographic regions and we think we are ahead even though we got those headwinds, we think we are ahead of obviously where we would have been, have we not made those investments. So I think when you compare two plan internationally I think we are doing well. Domestically, again the highway bill gets a lot of discussion and lot of talk, the states are the really driving a lot right now because they are being proactive and they are being very -- they are being very creative in the way they are having the finance highways and their piece of it because it is not something that's going to be able to sustain itself. We are going have to have some expenditures and some form of fashion so we would love to see a gas tax user fee adjustment but we are happy to work with whomever and provide the equipment is going to be the most efficient to build the inroads and the least costly manner. So I think domestically we are holding our own. Overall, I would say that relatively to where we think we should have been, we are where we think we should be. And we are poised to take advantage of any uptick.

And on a related basis, just in terms of on the competitive front, can you maybe talk about what you are seeing in the core businesses, whether it is paving equipment or AMG, where it is more competitive and a more fragmented market? Can you just talk about what you are seeing on that end?

And Ted this is Ben. We are just -- we are still seeing competitors and is about every segment of our business has strong competition. And even on asphalt plant where competitive landscape maybe a little smaller, we have contractors and pretty shrewd buyers and they -- we have competition on every deal. Where we thought about as you know with the euro and the dollar and lot of European competitors coming as in the US particularly on the mobile paving side, it was already competitive. So we haven't seen that change, so the pricing still very competitive.

Okay, and the last thing, if I could just squeeze it in and Ben, you have now -- you have been at this Company your whole career and you have been CEO for the last 15, 16 months. Could you just maybe talk about what your vision is for the Company in the next 10 years? And I realize that could be a really long-winded question, but just where do you see yourself taking Astec with the team, whether it's financial metrics that you are aiming for or end market diversification that you are targeting? I guess it would be interesting to hear where you see the greatest opportunities over the longer term.

Well, that is a good question, Ted. And in the short term I feel like one of our goals is to be get target back to historical higher gross margins in the 25% range. And the things we are doing to get there is a lean effort working on how we are purchasing things and you can hurt yourself little bit with purchasing because sometime the cheapest thing and the best thing because longer term you need quality too to be able to be in business down at road. I want us to be doing better job in parts and supporting customers and also get better on competitive parts. And so those things are -- they may seem short term but they take a little longer to get done. Our target over the years a 15% growth a year, 10% through organic and 5% through acquisition is still a good target in my mind and if we could do that, we would double our size every five years. It is more challenging on acquisition side of it and it was maybe 10 years ago because of the private equity money that's on the side line, so we -- as we look at companies we got to be more creative and think about things that-- the other thing I would tell you is we probably have a little bit bigger appetite today for a larger acquisition than we did in the past. So that we would take on a little bit of that to do that. But we are not willing to bet the company over it so, we-- I think there is some things that maybe hindsight how we are thinking and we are conservative by nature and that's not going to change but we could maybe little more aggressive on the size of acquisition when we look at. Energy infrastructure and mining are the industry that we are focused on. We are not looking to get outside of that, if our city is infrastructure, energy, and mining, we are not going to want get much outside our metropolitan area as an example. It is not to say we wouldn't take a look but if we have to make a lot of sense to do that. So those are just a few of the things that hopefully give you a little insight of how we think.

They do. They are really helpful. Best of luck this quarter. We will talk to you soon, guys.

Our next question is from the line of Larry De Maria with William Blair. Please go ahead with your questions.

Hi, good morning, thank you. Just a clarification, first, in the pellet plant orders, the potential anyway. Would you issue a press release for it? And remind us how many lines we would be looking at.

We would and if right now looks like it is a three line.

Okay, thank you. And then, as we're getting closer to a long-term highway bill possibility, can you just help us understand better the impact and exposure maybe to public and private highway spending, maybe help us with the size of public versus private that you guys have and how far off peak we are in both of those, just so we can -- we want to try to gauge, obviously, sensitivity to the P&L, should we get a longer-term bill later this year.

Right. Our exposure and this is Ben, I am sorry, our infrastructure group would be more closely tied to the highway bill than most in our company although the aggregate group which supply the equipment to the quarries that will crush the rock for any roads or bridges are sub grades that will be put in as a result of highway bill. So to quantify, it is a little bit kind of -- I wish I have the crystal ball because but I would tell you I know that there are still a lot of pent up demand and traveling around and talking to customers, I know that our customers equipment is running higher capacity for being out there. And I do think if we got a highway bill we would see a quick increase in larger CapEx orders and then a little bit of break while people figure where the work is going to be like. And then with the right bill we probably have couple of three years of good run, probably both infrastructure and Ag side of our business. To put a percentage on it not knowing what the bill would be, it is impossible to say. But it would be very good course. I can give you a little bit more, you didn't ask but I would tell you kind of what we are hearing on the bill, there was a fly-in of Transportation Construction Coalition last week and we had several of our division presidents attend. That's why we think it looks like an extension to May 31st, we definitely see and feeling and hear a desire by our representatives and we have divisions in multiple states, so there are multiple state entering this comment but from congressmen and senators that there is a desire…

No, thank you very much. That's really, really helpful. I appreciate it. Just the last thing, obviously the states will pick up a lot of the slack due to what's going on in the federal side. Is that a structural shift or does that come down if we get a longer-term bill and the states pull back on their spending, or is that just a structural shift now?

I think once they get into place and if the states continue like we are in the quote as earlier this quarter and South Dakota I think is one that adjusted on six and a gallon gas tax increase. If they are keeping into road people are okay with that. It is when they start getting off and take it general fund and people stop trusting on them and it doesn't get approved down the road. So I think it becomes more permanent if they keep spending it on road and people see the results. And the states will still have to match federal funds, so the things that they are putting in place now that will helping shore them a little bit will actually need to be in place to help them meet their matching fund on the other side of the federal highway bill too. So it is good that's happening before the bill.

Thank you. Our next question comes from the line of Brian Sponheimer with Gabelli. Please go ahead with your question.

Hi, good morning. Thank you very much for that color on the bill. That was where I was headed with my first question. I guess just one on the potential for another pellet plant. If you were to get this order, this would be added to your -- would all three lines be immediately added to your backlog?

Yes.

Okay. And do you anticipate funding this in the same manner that you did the first three lines?

No. Our customers have their own financing. So we really don't intend to be in the Pellet plant finance business. And fortunately the people that we take some additional leads while we were at the conference and everyone we were talking to guys their own funding.

So, could you just very quickly explain the differences from an accounting perspective as far as how this would flow through your P&L versus your first plant?

Yes. I can explain that. This is David, Brian. Yes, during the first plant we are financing that and so you have to devote revenue because it is essentially our plant until we finish it. And may get their financing and once that financing in place we can recognize the revenue. On these other plants, once we deliver the facility which we've already done for the initial plant that we were financing for these additional plants once we deliver those we would recognize the revenue because the financing would already been in place with the third party. So that's a fundamental difference right there.

Okay, so this isn't a pay-as-you-go, either. This is -- you set up a line and send them an invoice and they pay you for the whole thing and that's that?

Right.

Your next question is coming from the line of Stanley Elliott with Stifel. Please proceed with your question.

Good morning, guys. Thank you for taking my call. Quick question, I hate to go back to the wood pellet piece, but on the permitting or the customer that you are thinking will have the order by the end of this year, they have both their permitting secured already and their financing secured? I just want to make sure that I heard that correctly.

Well, I would tell you that and the answer that would be 95% on above. And about the same line their supply contracts, so they are very comfortable where they are.

Perfect. Then you talked about getting the gross profit back up to 25% as a near-term goal. There is lots of momentum on this pellet business. Is it a matter of flipping the switch once you get the one that's in testing right now, maybe another one or two lines or plants, actual plants going, that you can get up to that 25% threshold or is it that some other parts of the energy business need to help pick up some of that slack?

That with the Pellet plant when we were successful and get one sold and it comes through we will show up in the infrastructure group through the Astec Inc because they are the lead seller of the equipment. So it will show up in infrastructure even a product is group energy. So the opportunity for us the first one out of the gate was in the range of normal margin on the side, that's a first one. We've taken our punches and get made all lined out and getting running, so we have an opportunity it would be back in line with the historical margins in the course of the second plant, one that we are selling now. But we have to do a lot of things right and we will be focused on it. But we have the opportunity to do that on this one and we are getting ready to sell. It won't be home run type margins but we can get back in line with our traditional margins.

Perfect and I apologize if you guys said something about this earlier, but what sort of benefit could we possibly see from lower input costs, steel, et cetera, in the back half of the year?

Right now, this is Ben, we are seeing steel prices down a little bit as we travel around the divisions, one of the challenges we have is back to the question enough competition in pricing and we are still seeing quite a bit of competition. So we are going to try to get the advantage where we can but to a certain extent -- I hate to say we get away we are trying to keep it but we are facing pretty stiff competition in a lot of places too.

Our next question is from the line of Brian Rafn with Morgan Dempsey. Please go ahead with your question.

Good morning, guys. Give me a sense, you talked a little bit about -- I was going to ask you about the price elasticity on the infrastructure with the construction and engineering side, road builders or pavers and that type of thing. You talked about them being very shrewd buyers and certainly having stiff competition. I am wondering you guys develop a lot of new products. What is the receptivity of some of the road builders adopting new product given how competitive they are and how price elastic they are? Are they deferring any when you guys bring out a new product line? Is the deference today different than maybe their adoption might have been when markets were a little stronger?

Rafn, this is Ben. What we are seeing is if we've got a new product like our hot recycle asphalt plant system that what we call the V-flight system, that cause s inside of drum, flight have a new design and then we tie that design in with VFD on our drum which is more detail than you probably ever wanted but we can run higher recycle from zero up to 65% to an existing spiral drum. There is a great reception to that. And so we do okay on that. The problem with that particular one is the prices are high enough. We need to sell lot more of it to make a difference on the top line but we are seeing good reception to things that help them lower their cost and be more competitive to get win more work, win more business.

Okay. Is there -- are there any -- on a regional basis, there are some states where the DOTs have been pretty aggressive -- Texas, Florida, and Wisconsin. Are there pockets of strength where you are seeing better business versus maybe other areas where states, maybe the DOTs aren't as aggressive in the infrastructure build?

Yes. And you named some of the states, I mean Texas where we have done very well. We have been well up in the Dakota in the mid west in general. On the West Coast, California on the infrastructure side not so much. Although we did deliver a larger asphalt plant to California during the quarter. But it was -- that's been few and far between delivery. But we definitely that and holds true even when there is a big highway bill because it is a different states are in a different position, so there will be that -- there is hot areas and not so hot areas even when there is a highway bill but the middle part of the US has been get force.

Yes. Let me ask you, going back to the highway bill, as you look at your discussions have really been about timing. I think you made a very good comment if we don't get something by August; this may be it for this administration. From the standpoint of what kind of dollar volume or what kind of dollar -- if you look at Army Corps of Engineers, if you look at Osama's shovel ready, you have numbers on a six-year highway bill that are all over the map. What is your sense of if we get a bill, what might be -- what might we see in total dollars for the bill?

Brian, it depends on the years that they win because we part everything from a four to five to a six year bill. And not this is just educated guess but my guess would be about $50 billion year. I don't have anything in writing anything to take that to other than just hearing what I am hearing and that's just a pure opinion.

Well, that's fine. Your opinion weighs very high, so I think we will take that. Let me ask if we get -- if we don't make August and we're back to as you said the milling and inlay business, is there any point where equipment becomes critical from a standpoint of if you say that you are seeing higher capacity utilization, the private business is coming up. At what point if we don't have a six-year bill is there some incremental secular buildup or might that be it for the entire administration? Might we be that sluggish for the next two or three years?

Well, I think there are two pieces to that because you got the product side and the public side and it seems like for a customer and a product company stand pretty consistent and that's been a pretty good base form now for a little while. And then you got the states with their funding mechanism so they are starting fitting in place and then the federal government, I think if there is a extensions, the basis in place for everything to be okay and then our job in our places to have the new product that working on come out to help create additional demand to the normal demand that comes in a stable market. And as things working on a different division right now.

Okay. Let me ask you a dumb question. I see -- every time I see Tennessee's Bob Corker on the TV talking about Iran, was he the bright card, the lead guy in this highway bill, or is that just your representative from Tennessee? And if he is mitigating deals with Iran, does that at all take away his leadership from the highway bill?

That proposal never became bill, if they kind of put out written proposal saying, hey, we like to see $0.12 a gallon gas tax increase over two years and that was senator Corker and senator Murphy, Murphy is out of Connecticut and Murphy is a democrat and Corker is a Republican, so it is not partisan, so I think it is fair to say that as with this Foreign Relation Committee assignments that he is little more focused on the international and what's going on there. But I wouldn't say that staff is not less focused in talking with them they are still a very vocal supporter of the highway funding and we talked to them within the last week really and they are still very much supporter behind the scenes.

Okay. If you look on the infrastructure side, is there anything in this market of extensions, product lines that are doing better than maybe -- small pavers versus larger pavers or types of hot asphalt mix plants? Or is it each quarter is very different in the product mix?

Brian, we are seeing pretty consistent market share gains in small pavers and in pavers -- larger pavers too. So that would get across in pavers on the small side and road too on the larger side. And we are seeing good market share on milling machines. And we've been very pleased with how those companies are doing.

Okay and just one final. Your sense again from a 50,000-foot view, your capacity utilization, how many shifts are you running, infrastructure versus energy and mining, your three basic segment business?

Sure. Our overall on average and every group we are running around 70% to 75% utilization. Of course we have some division they do not run at that much but that would be a pretty fair average.

Okay. Any hiring at all, headcount this year, or pretty stasis?

We will do it as demand requires. We are in careful market where it is a challenge to hire, South Dakota is a challenge to hire, and Oklahoma has been probably less of the challenge with all where it is. Other than that I think we will able to find right level of labor.

Thank you, ladies and gentlemen. It concludes today's question and answer session. I would like to turn the floor back to Steve Anderson.

Thank you, Brenda. We appreciate everyone's participation on first quarter call. And thank you for your interest in Astec. As our news release indicates today's call has been recorded. A replay of the conference call will be able through May 5, 2015. And an archived webcast will be available for 90 days. The 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 sent out earlier today. So this concludes our call. Thank you all. Have a good week.

Thank you. This concludes today's teleconference. You may disconnect your line at this time. And thank you for your participation.