PARTICIPANTS

Steve Anderson, Director of Investor Relations
McKamy Hall, Chief Financial Officer
Dr. J. Don Brock, Chairman and CEO

Operator: Greetings, ladies and gentlemen, and welcome to the Astec Industries, fourth quarter and fiscal year ended December 31, 2006 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Steve Anderson, Director of Investor Relations of Astec Industries. Thank you Mr. Anderson, you may begin.

Steve Anderson, Director of Investor Relations

Thank you Jen.  Good morning and welcome to the Astec Industries conference call for the fourth quarter and fiscal year ended December 31, 2006. As Jen mentioned, my name is Steve Anderson, I’m the Corporate Secretary and Director of Investor Relations. Also on today’s call are Dr. J. Don Brock, our Chairman and Chief Executive Officer, Neal Ferry, Chief Operating Officer, and McKamy Hall, Vice President and Chief Financial Officer. In just a moment, I’ll turn the call over to McKamy to discuss and summarize our financial results, then to Don to comment on 2006 and provide some insight into 2007.

In the way of disclosures, I’ll note, that our discussion this morning may contain forward-looking statements that relate 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, assumptions and other factors, some of which are beyond the Company control. Some of those factors could influence our results, and they 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'll turn the call over to McKamy Hall, to discuss our financial results for the fourth quarter and full year of 2006. McKamy. 


McKamy Hall, Chief Financial Officer

Thanks Steve.  We appreciate your joining us this morning.  We are excited about the historical highs in sales, net income, and backlog. We also look forward to continuing improvement in 2007 beginning with a nice backlog.

In sales, we had $162.1 million in the fourth quarter for an increase of 20.5%. Our international sales were up to $48.6 million from $45.7 million in the fourth quarter. Increases came primarily from Africa, South America, Europe, and Canada in the quarter. Our domestic sales were $113.6 million, up from $108.9 million. Parts sales for the quarter were up from $34.8 million to $38.5 million. For the year, net sales were up to $710.6 million, up from $616.1 million and an increase of 15.3% or $94.5 million. Our international sales were up from $116.2 million to $192.2 million. Increase in sales came primarily from Europe, Canada, Middle East, and Africa. The domestic sales were up from $499.8 million to $518.5 million. Parts sales were up for the year from $144.2 million to $165.5 million for an increase of 14.8% and that is a total of 23.3% of our total sales. That normally runs somewhere in the 20% range. Our sales increased in all segments. If you look at the slice of the pie, the aggregate sales make up 40.7% of sales, asphalt 26.3% of total sales, mobile 18.2%, and Underground 14.8%. The sales by segment are in the segment report attached to your press release.

The consolidated gross profit for the quarter increased from $25.8 million to $34.7 million, an increase of $8.9 million or 34.5%. Also, the basis points for the quarter increased 220 basis points. In the year, the gross profit was up from $133.2 million to $168.3 million or 26.3% increase. That is a 26.3% increase in gross profit on a 15.3% increase in sales or an increase of 210 basis points for the year. All segments improved with the gross margin percentages being up from the prior year. This reflects work done by our focus groups, application of lien designs, lien manufacturing, material cost improvements, combined purchasing, and the benefits of increasing volume. This was achieved while we were occupying new facilities and relocating and repositioning of equipment in plants being expanded.

In SG&A for the quarter, we were at $27.7 million versus $24.5 million or at 17.1% of sales for this quarter versus 18.2% a year ago. In the SG&A for the year, we were flat at 15.2% in each year. The primary increases in SG&A in dollars are from 2005 - 2006 was in salaries, commissions and employee benefits. Basically, we are making investments in people, sales, marketing, etc. to continue our growth. The income from operations for the quarter, were at $7 million compared to $1.2 million or an increase of about $5.7 million for the quarter.

For the year, our income from operations was at $60.3 million versus $46.3 or 30.3% improvement. If you look at the income by segment, which is on the attached sheet, you will see the results by segment and when you look at Underground, you initially look at it and see that it reflects a decrease. Let me call your attention to the information below that and on the next page, which reconciles the sale of the property that was in the Underground segment in 2005. If you exclude that sale of property from the Underground segment, instead of it reflecting a $1.4 million decrease, it would reflect a $6.3 million increase or a 444% increase. The attached reconciliation also reflects the fact that when you take out the unusual items for 2005, our operating income increased from $40.3 million to $60.3 million for an increase of 49.8%.

In the interest expense area for the year, our interest declined $2.5 million. In terms of the effective tax rate, on the quarter, you have to ask why the change there, three things I would point out to you. One is that the increase in international sales had material impact. Two, the R&D tax credit, which was overlooked in the fourth quarter, because Congress only extended on the authorized credit in the fourth quarter, so we couldn't look at it until that occurred. Also, the domestic production activity reduction was higher than expected in the fourth quarter. For the year, the effective tax rate remained flat. In terms of net income, for the quarter, we were at $6.3 million; earnings per share were $0.29 compared to earnings per share last year of $0.05. Looking at the year, we were at $39.6 million. That is a 40.9% increase on a 15.3% increase in sales. Our earnings per share were up from $1.34 to $1.81 for a 35.1% increase in earnings per share.

As I mentioned in the introductory remarks, our backlog is at an all-time high. As of December 31, we were at $242.5 million, up from $127.7 million or up $114.8 million or 89.9% increase. We always try to update you as well on January, because that is a more current month, and you are always interested in the most current information. At January, backlog was $261.6 million versus $161 million or $100.6 million increase and an increase from December to January of $19.1 million. The backlogs are very encouraging and Don will give you more insight on the customer outlook and expectations.

The backlog information is at the bottom of the segment sheet for your attention.

The balance sheet is very strong. We are positioned financially to handle the growing volume, and at the same time, to consider other opportunities that may be available. Our days outstanding are in good shape at 37.7 days. Our turns are at 3.5 versus 3.6 last year. Nothing is owed on the credit facility. We have a borrowing availability of about $81.2 million.

Our capital expenditures for 2006 were at $30.8 million. Our projections for 2007 are $28 million. The depreciation and amortization for 2006 was $11.9 million. For 2007, it is at $15 million. We will attach the cash flow to our March filing for your observation at that time.

This concludes my prepared remarks on the financial details. I will be available to answer any questions you may have later in the call. We do appreciate your interest in Astec as we strive to improve profitability and return for the shareholders.

Steve Anderson, Director of Investor Relations

Thank you McKamy. Dr. Don Brock will now discuss Astec's business operations for 2006 and give us some insight for the outlook in 2007. Don.

Dr. J. Don Brock, Chairman and Chief Executive Officer

Thank you, Steve. As McKamy said, we are very pleased with our performance in 2006. The revenues for the fourth quarter were up 20%, as he mentioned, from $134 million to $162 million. Our net income was up 516% from $1 million to $6.3 million. Our earnings per share increased from $0.05 to $0.029.

Our fourth quarter is always our weakest quarter and it's very difficult to predict. We were pleased with the quarter. Every quarter we always have some delayed shipments and likewise, we did this year, but we still had a very strong quarter considering the seasonality of it.

2006 was a record year in both revenues and profits for the Company. Our sales reached $710 million versus $616 or an increase of 15%. Our net profit reached $39.6 million versus $28.4, a 41% increase. 2006 had no significant adjustments such as sale of assets or other things. It was what I would call a very clean year, just a good growth year. Gross margins increased 210 basis points. Our return on capital employee reached 16.2%. Our cash flow return on capital employee reached 27.05%.

In July, as you may recall, we were very concerned about the economy with oil prices reaching $76 a share and we were somewhat pessimistic about the outlook. However, as oil prices began to moderate, we saw a pick-up, particularly in the asphalt segment, in sales starting in September and it has remained very strong.

Our backlog is $242 million, as McKamy said, versus $127 at year-end and it continues to grow. All four groups were profitable in 2006 and all four group revenues and backlogs have increased. Our parts sales grew from $144 million to $165, international sales from $116 to $192 million.

We are looking forward to 2007 with the increase in backlog. We are comfortable that we will achieve at least the 10% organic growth that we had predicted in 2007.

Federal highway funding will increase about 9 to 10% for 2007 versus 2006. The appropriation bill was about 4 months late coming out, so we expect over the next 8 months to see some very large highway lettings due to the fact that there will be rushing to get these additional monies spent during the government's fiscal year.

We continue to see a wide swing in asphalt prices, but we also continue, on a positive note, to see states more ________ (no audio).

Our parts sales continue to grow and we continue to concentrate in this area to try to improve the growth in the rebuild and parts areas.

International sales are also continuing to be strong helped by the weak dollar in the generally strong world economy. We believe that our new and innovative products will help us to continue to gain market share in each market that we serve as we enter into 2007. As McKamy mentioned, we remain debt free with a strong balance sheet. We continue to look at a number of acquisition opportunities that fit our business and culture.

As we move forward into 2007, we are continuing to focus on better execution in our business to continue to make margin improvement through our initiatives to contain and improve our purchase component costs through better raw material purchasing and utilization, smarter product design and enhance manufacturing, and continuous flow processes in our manufacturing facilities.

We will be glad to answer any questions that you have at this time.

Operator

Thank you. Ladies and gentlemen, at this time, we will now be conducting our question-and-answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may necessary to pick up your handset before pressing the * key. One moment please while we poll for questions. 

Our first question comes from Jack Kasprzak with BB&T Capital Markets.

<Q>:  Thanks. Good morning, everyone. Congratulations on the quarter. I was going to ask first, this morning it was an announcement that Ingersoll Rand is selling their road development business, as they call it, to Volvo and I just didn't know whether you guys had any views on how that might affect you positively or negatively.

<A>:  We have, I guess, heard that it was on the market. They have been aggressive in the last three months in their pricing on paper, and particularly I guess we see it as a positive. I think it will give us some opportunities in the short-term, long-term I don't see much difference. With the short-term opportunities, there is going to be a lot of rearrangement of their distribution. Ingersoll sold a lot through their direct branches, which will have to be restructured. We think it will probably be a stabilizing effect in the market. There have been rumors for a long time that they were going to try to get out. I think this will be a positive move.

<Q>:  Similarly, CRH of course bought APAC back in the middle of last year so have you seen any change in APAC's behavior yet in terms of their desire to purchase equipment?

<A>: Yes we did. In fact, if you really look at kind of the slow start in the Asphalt group last year, it was hurt by the APAC situation and oil prices. After Old Castle bought it, they have continued to sell off a number of areas, as you know, Georgia, South Carolina, parts of North Carolina, Virginia, all except the western part of Virginia and part of East Texas. After those sales, they have started to invest in the other areas and we have a number of orders from them now that would fit in the older APAC operations and a number of other orders pending. We see a stabilizing of that, and it's really positive for the market. Old Castle is an excellent company and doing a good job.

<Q>:  Okay. Thank you very much. I appreciate it.

Operator:

Our next question comes from the line of Arnie Ursaner with CJS Securities.

<Q>:  Good morning. Can you perhaps expand a little bit? You are seeing unprecedented backlog growth. Could you comment a little bit about your views of why you are seeing it? Are people expecting significant price increases? Are you investing people? Are you penalizing them if they don’t except deliveries in a certain time? What is sort of driving this tremendous growth in backlog?

<A>: Arnie, I like would like to appear more brilliant than I am, but I am not sure that I know all of the answers to it. There was a certain pent-up demand out there that we see. We also see in the asphalt side of it, a push to be able to do more recycle. It has a tremendous economic benefit to the customer and to the state. That means a re-equipping of a lot of plants. We are selling a lot of our double barrel plants, what I would call partial plants, not complete plants, but where they are just buying them in order to increase the amount of recycle. That is the one driver in the asphalt side of it. It also helps doing more recycle. You do more milling so it helps the milling machine business at Roadtec, for our coal planning; it depends on how you want to refer to it. The other area we see is continuing with energy process. Where they are, the pipeline industry looks like it will continue to be strong through 2010. It will continue to grow anything related to energy. It is a combination of a number of those things. I would say the asphalt is driven more by the economics to do more recycle.

<Q>:  My final question, if you would, is you have been completing a very significant capacity expansion. Can you give us the status of that and your view of how you think that could impact margins in 2007?

<A>: The four expansions we had were one here at Astec which is a facility to build our own burners for the drums and the new pulverized coal burner. In that, I would say the functionality is probably 75 to 80% of where I would like to see it. Roadtec is in their facility and it is running at what I would say 80 to 90% of where we would like to see it. Every time people move, it takes them a while to get their nest built so they are improving significantly. Astec Mobile Screens is operating well in their facility. Kolberg-Pioneer is really just getting cranked up with theirs. I would say that they are probably 60% there, but by the end of the quarter, they will be running good. I would say that all of them will be running where we would like to see them by the end of the first quarter. It will increase capacity. Probably right now where we have our toughest problem on production is in the Astec operation with the asphalt plants. We have really been barraged with orders there, and that is probably the one that is struggling the most right now and is not one we added on to.

<Q>:  Again, you normally have pretty significant leverage. What do you think the margin degradation in Q4 was or the benefits you hoped to get in 2007?

<A>: Well again, I think that there is a potential for 100 to 150 basis points, probably more in margin. The leverage we would probably get more as an SG&A though as we increase SG&A, and I don't think we will see as much increase in this year as we have last year. We have added sales people and are continuing to try to get them up to speed. If we can increase 10 to 15%, we see pretty good leverage from them.

<Q>:  Okay. Thank you very much.

<A>:  Thank you, Arnie.

Operator:

Our next question comes from the line of Scott Mackey with Robert W. Baird.

<Q>:  Good morning, gentlemen.

<A>:  Good morning, Scott.

<Q>:  Congratulations on a great year.

<A>:  Thank you.

<Q>:   I first wanted to ask.  Just in terms of gross margin expansion, and again congratulations on the 200+ basis points in 2006. I was wondering if you had a preliminary target for what you might be able to achieve in 2007?

<A>: Scott, we are trying to get another 100 to 150 basis points. My reluctance of being too optimistic there is we still see a lot of inflation and we are obviously pushing back all we can on that. We are trying with all of our initiatives to control purchase component costs, but there is still an underlying inflation there that continues to creep up on us. Steel prices, we are seeing them trying to push up again. We also see some opportunities in buying with steel. They just announced a recent increase of about 5% and they seem to be in sync with each other because everybody seems to go along with it when one raises the price. My reluctance to get too optimistic on improvement is due to the inflationary part of it in our purchasing area.

<Q>:  As I look at that by segment, it seems that there is an interesting dynamic. The gross margin expansion in ’06 was kind of where one might have thought it would have been. There is more runway in the Asphalt group and particularly the Underground group, whereas maybe tenacity constraints a little more so in the other two segments. As you look out to 2007, is there a re-shuffling in terms of where the expansion opportunity is? Or would you still expect to see just proportionately more expansion in Underground and Asphalt?

<A>: I think Underground's got a lot of room. I think the Mobile group's got a lot, because they went through a total reorganization of the manufacturing facility last year, which was disruptive, you can’t help it. So it affected their margin last year. As we added about 60,000 square-feet there, once it continues flow-through manufacturing, and they are still adjusting somewhat to that. Improvements have been made, and I think you will see quite a bit more room there in the mobile side of it just as they get up to speed. In the aggregate side, I think we will make a significant difference at Kolberg-Pioneer as they get their continuous flow going. We moved a lot of stuff around out there from one fabricated here, you plained it there, then you move back and assembled somewhere else and now it's all in straight line and as it gets up to speed, it will make a significant difference there. Asphalt is going to be up, I think, just by volume. As much as anything, we are making some changes, but it's not changing where you run a hundred-yard dash there, because they are wide open on manufacturing right now. 

<Q>:  I guess just a follow-up on that quickly, especially with your comments earlier on bumping up against potential capacity constraints is that, in that business. As we look by segment, and you commented earlier that you expected to potentially achieve 10% organic growth or more in 2007, how should we think about that by segment?

<A>: Good question. It's down all across. I think I would have to, what's your comments, Neal? I would say it's pretty well...

<A>:  Yeah, we see it somewhat even it could possibly be a bit more in the expansion with the company. It's pretty much even right across the board as we look at it. 

<A>: The only thing, Scott, I’d add to that, Astec Group, the asphalt plant is probably going to be a little more than that because they were down the first part of last year. If you look at the backlog down there and they were $37 million last year and $110 this year, and they continue to add volume. We really think that we have the equipment of choice with a high amount of recycle, so they got very strong backlogs right now. They have the opportunity of being up a little more than normal. 

<Q>:   Sounds great. Thank you.

Operator:

Once again, if you would like to ask a question, please press *1 on your telephone keypad.

Our next question comes from the line of Rich Wesolowski with Sidoti and Company. 

<Q>:  Thanks a lot. Good morning. 

<A>:  Hi, Rich.

<A>:  Good morning. 

<Q>:  Hey, Don, just to confirm where you are with liquid asphalt prices. If oil stayed at $50 for the remainder of the year, would that be a meaningful help or hindrance for the business? 

<A>:  If it stays in the 50 - 60 range, I think the industry is fairly comfortable with that, Rich. The rule of thumb on it, is take the price of a barrel of West Texas Crude and subtract $10 from it and that's what heavy crude is going to sell for and multiply that by 6 and that's what a ton of asphalt is going to cost. Going through that math, that puts it around $300 a ton and that's what we are seeing. We have seen some winter fields where people are buying on the spot market in the winter down in the low $200s. One thing that really helped the attitude of our customer was that huge spike in July where they were up to $400 a ton. They bid a lot of work at that and then when it came back down in the fourth quarter, it sure helped their profitability and our optimism. I personally think you are going to see oil stay around where it is. You can get a reading anywhere you want to on that. I was up in the Tar Sands, week before last in Canada, and they are predicting within a year it will be at $100/barrel. You can hear whatever you want to hear on prices, but to answer your question, the $60 is okay. 

<Q>:  Okay. What stage are you in terms of investing in the sales and administrative personnel? We saw that grow just about the rate of sales in 2006. Considering the higher backlog in sales growth do you expect that this year? 

<A>:  I don't expect it to grow as fast as it did last year. We have had a number of other increases that McKamy didn’t mention. We have added people for Sarbanes-Oxley. We have added an internal audit staff over the last couple of years. We have added a number of overhead things that will not continue to grow and as we make acquisitions, should not continue to grow. So, I hope we are plateaued but to tell you, my goals are to get back down to 14% but I don't think we will quite get to there, maybe 14.5. 

<Q>:  Okay. Finally, can you just detail the major projects within the $28 million ’07 cap ex budget?

<A>:  There is about 70% of that in the machine tools. Basically we are adding at Telsmith. We are adding just about all over the company, primarily, new automated machine tools. The rest of it will be pretty well maintenance, capital expenditure, automobiles, trucks, things like that. About 60 to 70% of it is in machine tools. 

<Q>:  Okay, great. Thanks. 

<A>:  Yes.

Operator:

Our next question is from Jon Evans with Wells Capital.

<Q>:  Can you talk about two issues, I guess. First of all, relative to acquisitions, can you give us any kind of insight into kind of where you are potentially on the acquisition front and then I guess if you are finding prices are too high, is there a point that you return some of that cash to the shareholders on the balance sheet?

<A>:  We have looked in the middle of last year at probably six to seven acquisitions. We personally think the prices are pretty lofty, particularly if the financial buyer gets in it we don't have a chance. We are working on a couple of potential acquisitions right now. One of those has been, we think, is pretty far along in due diligence. Again, it's too early for us to make any comments on that. Your second part of that question was...

<Q>:   Well, I guess if you get to some kind of point where you just return some of this cash to the shareholders in like a special dividend or something or..?

<A>:  We have looked at that considerably last year. We have been asked that question quite a bit and our Board had a dedicated meeting just to discuss the subject and at that time, we had a number of acquisitions working. Some are still working. Secondly, we are just in the process of redoing our loan agreement and that was up in the air last year. If we do not come up with an acquisition, we will look at either doing a stock buy-back or giving out dividends on the cash. We are not going to just sit on it.

<Q>:   Okay. One last question. I think last quarter you talked about , that you had raised prices and I guess because you are seeing maybe some steel prices or raw materials starting to go up for April, are you thinking about putting anymore price increases, and maybe the other thing is can you help us with the backlog? Do you have the ability to go back to them and push price if raw materials go up?

<A>: Last year, the last part is, no we are a fixed price contract and again, our backlogs, while we've got substantial backlog, everything we got will be out of here by August at the latest. So, we don't have long, long deliveries stretched out there. We did have one large plan in California that was a long delivery and it had an escalator in it, but in general, we do not have an escalator. We increased our prices a little earlier last year, particularly in the asphalt side of it. We have been able to push up but there is more push back now than there was just like we are pushing back on our suppliers. When steel was leaping up at 200% per year, they were more amendable to us raising our prices substantially than they are now. We have increased prices but it's been more in the 4 to 5% range and not at great numbers.

<Q>:  Does that mean you had another price increase or was the 4 to 5% what you already had?

<A>: That is the one we already had.

<Q>:  Okay. Thank you so much.

<A>:  Yes.

Operator:

Once again, if you would like to ask a question, please press *1 on your telephone keypad.

Our next question is a follow-up from Jack Kaprzak from BB&T.

<Q>:  Don, I just wanted to see if I heard you correctly or interpreted you correctly. We know the backlog was up from the end of December to the end of January. Did you indicate that it has continued to grow here through the end of February or were you just referring to that number that you guys gave from December to January? Just trying to get the more up-to-date view of the backlog.

<A>:  Jack, one reason that helps it grow is January is usually a weak month and that is one reason it grew. We are continuing to get sales and this is a busy time of the year. It is when people are buying. The mobile side of it, they really don't start buying until right now. They want it all in the next two or three months. We are seeing a very strong market, I guess, but to answer your question, I think that's what you were looking for, but we think the market is very good right now.

<Q>:  That certainly was what I was hoping you were going to say, yes. Thanks Don.

Operator:

Our next question is a follow-up from Jon Evans with Wells Capital.

<Q>:  One last question. Because your backlogs are so strong, is there any kind of issue that you believe you are missing any kind of sales or are customers concerned about that?

<A>:  Jon, on asphalt plants, we missed a couple a couple of weeks ago and then one of them came back to us. We, for the first time, are beginning to see where some people can't wait.

<Q>:  Because they try to get it ordered, right? Or they are not going to get it.

<A>:  Yes, they've got work and they've got to get it ordered so we are right at that point right now. The frustrating part on a lot of these big orders both on crushing and asphalt plants. The large orders, they order in and they get delayed because of permitting or something else and it's a constant shifting around. International sales are also strong, too, and again those, you’ve got to meet a boat so generally those don't gets pushed back but domestic sales where permitting often gets pushed back. Specifically, we have lost one or two. I know the week before last, we lost two and then we got one of them back.

<Q>:  Relative to Arnie's question, risks and uncertainties making people take delivery out, since the backlogs are so strong or are they being able to push out because of permitting, etc.?

<A>: The customer is the boss. We can't shove it down their throat.

<Q>:  Gotcha. Thank you very much.

<A>: Okay.

Operator:

Our next question comes in from Arnie Ursaner with CJS Securities.

<Q>:  Hi. I wanted to follow-up on a couple of things. One is you mentioned share repurchase as a possibility. Just remind us, do you have an authorization in place already?

<A>: Our Board basically said, when we get to that point they would be ready to talk. We don't have one in place right now.

<Q>:  Okay. I know we have been trying to avoid focusing on delayed shipments because they tend to happen pretty regularly. Can you quantify the impact of the delayed shipments in Q4?

<A>: Yes, we can. It probably would have been 10 million in volume. Some of those are paid for, you know, totally paid for. It's a mixed bag. With Sarbanes-Oxley and with the focus on revenue recognition, we just can't recognize it until we ship it. I hate to even talk about it as McKamy and Neal have talked about it before here, it seems like every quarter, we are looking at $10 to $12 million in delays. It carries from one to the next.

<Q>:  My final question is, obviously strategically you focus on international growth as an area for you. At what point do you think you would like or are planning to build some capacity directly in international markets, and if so, is it underway at the moment?

<A>:  We don't have any thoughts in that area right now. It's.., again, we build niche products and to get the volume in any market, various markets are pretty good for us, but it's added capacity to our plants here and the more volume we can run through our existing facilities, we can ship an asphalt plant, Arnie, to Australia for about 15% of the price of the plant and to try to build over there would run us more than that. So, right now from an economic standpoint, it still makes more sense for us to build it here. China is different but the demands in China, they really want lower. We sell a few plants in China now, but they have so much protectionism and to go over there and compete for the local Chinese market, the technology they want is so much lower. They are not after manpower reduction or labor reduction. There are plenty of competitors already in place over there for the lower tech equipment. Right now, our strategy is to try to fill the next boat from here.

<Q>:  Okay. I think you mentioned you are going to have about $28 million of capital spending in 2007, yet 2006 was a major build year for you. There are years for capacity expansion yet there is less than a 10% decline. Can you comment a little bit more about where that capital spending will be going and is some of that lingering carry-over stuff from the 2006 build?

<A>: As we added in 2006, a lot of the money we spent was on bricks and mortar at those four facilities and this year, as I said, we are adding capacity and metal working equipment and machine tools, a lot of the machine tools we are buying are $1 million and $1.5 million purchases. We are trying to upgrade and get the modern machinery and as we up our continuous flow through the plant, we are just trying to up the through-put-through by more modern machine tools and more metal working equipment. Its tools this year instead of bricks and mortar.

<Q>:  But as we think toward 2008, should that number be drifting down to a more normal maintenance capital expenditure-type number?

<A>:  Yes.

<Q>:  What would that number be?

<A>: Well, our maintenance capital expenditure is around $12 million a year, somewhere like that.

<Q>:  Okay. Thank you.

Operator:

Our next question is from Alex Mitchell with Scopus Asset Manager.

<Q>:  Actually, all of my questions have been answered.

Operator:

Gentlemen, I am showing no further questions in queue at this time.

Steve Anderson, Director of Investor Relations

Okay. Thank you, Jen. We appreciate your participation for the fourth quarter and year-end conference call for 2006. 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 6, 2007 and an archived webcast will be available for 90 days. A transcript will be available under the Investor Relations section of our website within the next seven days. All of that information was contained in your news release that was sent out earlier today. Since there are no further questions, this will conclude our call. Thank you very much.

Operator:

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