Astec Industries Inc (ASTE) 2003 Q4 法說會逐字稿

Good morning. My name is Amanda, and I will be your conference facilitator today. At this time I would like to welcome everyone to the Astec Industries fourth-quarter and year-end results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS). Mr. Anderson, you may begin your conference.

Thank you, Amanda. My name is Stephen Anderson. I'm the Director of Investor Relations and Assistant Secretary for the Company. Also on today's call are Dr. J. Don Brock, our Chairman and Chief Executive Officer -- he's in Yankton, South Dakota today. And we have McKamy Hall, our Vice President and Chief Financial Officer, here in Chattanooga. In just a moment I will turn the call over to McKamy to comment on our financial results and then to Don to discuss operations for 2003 and the outlook outlook for the first quarter of 2004 and beyond.

Before I begin, I am sure that all of you have had a chance to read the press release that we have issued on the fiscal year-end and the quarter that ended December 31st, 2003. And, based on regulatory requirements, we should note that our discussion this morning may contain forward-looking statements that relate to the future performance of the Company. These statements are intended to qualify for the Safe Harbor liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions and other factors, some of which are beyond the Company's control. The comments that we will make during call, our commentary -- and our answers to your questions are commentary as well. Some of those factors that could influence our results are highlighted in today's financial press release, and others are contained in our annual report and our quarterly and annual filings with the SEC. Naturally, we'd urge you to familiarize yourself with those factors.

At this point I would like to turn the call over to McKamy Hall to summarize our financial results.

Thanks, Steve and good morning to all. We appreciate your being with us today. We are pleased to review with you what has been a very difficult fourth quarter and difficult year. But we're looking forward to 2004. I am not going to comment on all the numbers. But I will try to shed some light on the numbers that we have presented to you in our press release.

In the quarter, we had a decrease in sales of 16.7 percent. We had an increase in international sales of 35.7 percent or $6.5 million. Parts sales were flat.

In the year, we had a decrease of 11.2 percent. If you exclude from the change in sales the small trencher line, which is new for us this year at the Loudon operation, our sales would actually be off 22 to 23 percent. The international sales for the year have increased 20.6 percent. We are benefiting from a weak dollar and also, I think, an indication of the improvement in the economy of other countries.

The increase for the year has mainly been in Europe, Africa, China, and Australia.

Our domestic sales have decreased from 401.3 million to 331 million, or about 70 million, if you don't take into consideration the small trencher line. If you take that into consideration, again, instead of it being off like 17.5 percent looking at the raw numbers, it's really off 22 to 23 percent.

The part sales, again, are flat. Of course, that is the part of our business that we value highly -- it's a very profitable part of our business -- and are making efforts to increase that.

In terms of our total revenues by segment, the asphalt segment is at 28 percent. The aggregate segment is 41 percent of our business. Mobil, 17 percent. Underground, 12 percent.

Attached to our press release, as is our normal practice, is a separate sheet giving you the revenues, gross profits and incomes by segment.

Looking at the consolidated gross profit for the quarter, it is down 3.3. We have underutilization in the fourth quarter of 2.9 million. That is a reduced underutilization from the fourth quarter last year. Impacting our gross margin also in the fourth quarter and in the year, has been the write-down of used equipment. For the year, that number is approximately 4.2 million, with approximately 2 million of that in the fourth quarter. The underutilization of capacity for the year is approximately 10.1 million.

We did -- in spite of having the underutilization of 10.1 million -- we did decrease the manufacturing expenses 10.1 million in 2003. Don with elaborate on this more. But the volume just simply decreased faster than we reacted. Last year about this time we were talking about, with you, making heavy cuts in manufacturing expenses and in SG&A. We made those cuts, and I will address that number just a moment later.

In terms of the ranking of the segments by gross margin, our aggregate in mining is at 21.2 percent, our Mobil Asphalt Paving Group is at 20.4 percent -- the Asphalt group was at 12.5 percent and the Underground group at 3.2 percent.

SG&A in engineering contained in the fourth quarter about $.5 million of write-off of loan fees, and we incurred about .8 million, which is a heavy amount for us, in terms of health insurance claims in just the fourth quarter. We did have a very good overall year, in terms of health insurance claims. But we got hit heavy in the fourth quarter.

The goodwill impairment charges that we have elaborated for you in the press release are shown on a separate line. On the second page of the financials, at the lower portion of the page, we have spelled out for you the goodwill impairment by segment so that you can look at the segments without goodwill.

In the SG&A area, if you just look at the expenses on face value, they are off about 2.3 million. But this has been offset by increases in SG&A because of the added product line at Loudon, Tennessee, from the small trenchers. Also included in the expenses offsetting that increase is about $3 million of debt restructuring. So if you add back to the 2.3 million the offsetting factors that are included in there, we have actually cut the SG&A, trying to make it apples-to-apples to the prior year, about $8 million. So if you take the $10 million of manufacturing expenses that have been reduced and $8 million of SG&A that have been reduced, we achieved our goal that we talked with you about around this time last year or maybe a little bit earlier.

In terms of operating income, we certainly are not pleased, with the quarter or with the year. But, as we have tried to note here and will continue to try to spell out some things for you, there are certainly a lot of unusual expenses in terms of the debt restructuring, the write-offs, the goodwill and so forth. Now, our interest expense is down for the fourth quarter by 1.3 million -- that has basically cut it in half from the prior year. It's down about 3.2 million for the year. We did put a new loan agreement in place in May of 2003, and certainly the rates have also played a contributing part in the reduction of the interest expense.

In the other income, there is a reduction in other income. But this is primarily for the quarter, the result of the fact that we exited the leasing and financing business of Aztec Financial and sold off the portfolios earlier in the year and did not continue in that business in the fourth quarter.

Some of you may wonder what happened to the effective tax rate when you look at the tax expenses -- or the tax effect. Of the goodwill, 15,851,000 of the goodwill impairment was nondeductible, and that is the reason for the effective tax rate being what it is.

We had a loss for the fourth quarter of $1.24 a share -- a loss for the year of $1.47 a share.

On the positive side, our backlogs, as we have pointed out in the press release, have increased 30.8 percent at the end of December, and at the end of January, have increased 38.1 percent. That is one of the reasons that I am very enthused about 2004.

If we go to the balance sheet, we will see a reduction in receivables and a reduction in inventories. And if we look at the debt closely, you will see that we have reduced debt $58.5 million, in spite of the financial performance that we have had -- or the income from operations or loss from operations in 2003. This was accomplished through the sale of the Astec Financial portfolios, the focus receivables, the focus on inventories, and some income tax refunds, primarily. We also paid off $8 million of industrial revenue bonds in Grapevine, Texas, on the property that is held for sale there.

In terms of the revolver, on the new agreement at the end of the year, it was at 27,997,000, which has now been spelled out on a separate line on the balance sheet. We provided you a paragraph in the press release relating to the fact that we are now classifying that revolver in accordance with EITF's 9522 as short-term and have provided you an explanation there relating to that.

The term loan with GE at 12-31 was $34,821,000. Our capital expenditures for 2003 were 3.6 million. Our projections for 2004 are at 7.2 million. We do have a capital expenditure limit in our loan agreement for 2004 of 9.5 million.

We will continue to monitor these and Don will approve these, in relation to the progress that we are making throughout the year.

Our depreciate for 2003 was 12.7 million and our projections for depreciation for 2004 is 11.5 million, compared to the projected expenditures of 7.2 million.

That is the prepared remarks that I have for you, and we will certainly be glad to answer any questions later in the call. Thank you, Steve.

Thank you, McKamy. Dr. Don Brock will now discuss business operations for 2003 and the outlook for 2004. Don?

Good morning. As McKamy mentioned, the sales of our core products was down over 20 percent during the year. We really felt like at the beginning of last year we would probably have a flat year. But we did not anticipate the continuing downturn. This downturn, along with what we have experienced over the last three years, has been frankly very difficult to adjust. Our volume in our core businesses are approximately 60 percent of what they were three years ago. We made a lot of cuts. But we did not respond as quickly as we needed to. And there are certain things -- when it gets to brick and mortar, it is difficult to cut.

As McKamy mentioned, our losses, if you really point out the big ones -- we had 16 million in goodwill, about 7 million in debt restructuring. The Loudon startup of the Loudon plant, moving the trend core, moving the case line, training the people. And, I might add, the volume was lower than we anticipated in that division. But we had an $8 million loss there. And, along with the used equipment write-downs, when we traded for a lot of equipment two to three years ago, the market was pretty high. And in some cases, we gave too much for it. Things were going good, and the prices of this equipment gradually decreased, so we had a pretty significant write-off of $4 million there.

Also, while we made adjustments, we still were underabsorbed about $10 million, as McKamy had previously said.

During the year we brought our debt down 58 million. And today, at year-end, our net debt to total capitalization was approximately 20 percent. We plan to continue to reduce our debt -- hopefully, by the end of the year, it will be down more like in the 10-percent range.

As we look forward to 2004, I guess, first I would hit on the two negatives that concern us. And number one, steel prices has increased dramatically in the last two months. And from what we see, we're probably going to see continuing volatility in steel prices up through May or June of this year. We have made adjustments in our prices, really in our equipment prices, to try to compensate for some of this.

Secondly, oil prices continue to remain high, and that is kind of a double-edged sword in, one, that it reduces the volume of business for our customers. But it also pushes them more to doing more recycling and conserving of fuel, which fits our products.

As we plan for 2004, I might point out, we were very cautious again. We looked at 2004 in October and November of last year as being a flat year. And for the first time in three years, we see a significant pickup in our revenues. Our backlog was up at year-end -- our backlog was up in January, and our backlog was again up in February. So we are continuing to grow the backlog, and our businesses are coming back quite strong.

We have a number of new products, offerings that are hitting the market at what we consider the right time. In the Astec division -- we have a new, energy-efficient burner. We have a new control system. Our ability in our plants to run high percentages of recycle without using any more fuel, gives us quite a differentiated advantage, as the amount of recycle usage goes up. Our special screening plants that we built at our PEP division allows the processing of the wrap so that the customers can go to higher percentage than they have in the past.

We have a new line of milling machines, a new line of pavers. The new highly-portable fast-pack crushing plant continues to grow in sales and is an excellent machine that we think will be an industry-changing concept for the aggregate side of the industry.

The modular plans are also doing well. In our BTI division, we have a new hydraulic scaler for underground mining equipment that is selling well. Our surface miner that we are building at the Astec underground location -- we built two last year, he have two more on order and two more coming. So, these are $2 million machines, capable of cutting rock at 26 inches deep, 10 feet wide, in one pass. We believe that will certainly help the dollar volume and the growth in the Loudon operation.

As McKamy mentioned, international sales is much stronger. The weak dollar is helping that. I guess, in the -- one of our problem divisions, the Astec underground -- has been, with the startup and everything has eaten money. And we believe that we have gotten a big part of that behind us. We have hired a new VP of Sales who has about 25 years of experience in the industry. Our workforce is much better trained. And the sales of our trend core line, which has been off 40 to 50 percent, seems to be picking back up, particularly with this new surface miner. The new highway bill is still in question. As many of you know, the Senate passed a version that was $318 billion over six years, with 255 billion being for highways. The amount of money that they claimed they could fund was around 238, but that's a nice increase for the industry.

The House bill was larger than this. But we believe it will drop down to the Senate bill or somewhere in that range. The administration bill, instead of 318, is 256, and would be a flat bill. So there is a lot of bickering going on in Washington. I guess our best analysis is we are hoping and believe probably the Senate bill would be the version that may end up passing. It passed strong enough in the Senate to override a veto. Keeping everything in perspective, if you look at the last numbers that I have seen for total road spending on roads in 2002 -- the total spending was $130 billion a year and 31 of that was federal money. That other 99 billion comes from or is driven by the general economy.

So, as the general economy improves, the money that is collected by states, by cities, by municipalities, by counties -- rural roads, private roads, all of that goes with the general economy. While we focus on the federal money, it is a kind of leading indicator. But the real bulk of the revenues come from other sources..

In summary, I would say that we believe that we have just come to the end of the longest and the deepest downcycle that we have seen since the early '80s. We resized the Company. We exited a number of money-losing products and businesses. We have focused on improving our products. We have lowered our breakeven. But even with that, we have capacity to do probably 700 million a year without very significant capital expenditures.

We have reduced our debt and plan to continue to bring the debt down. We believe that we're well positioned to do well as the economy upturns. With that, we would be glad to take any questions you have.

(OPERATOR INSTRUCTIONS). Arnold Ursaner, TTS securities.

This is John Reilly for Arnold Ursaner. The first question I have is about backlog. Can you give us a little bit more color on which segments are seeing the most increases?

McKamy, you have probably have got those numbers at your fingertips there?

I've got them right here. Just one second.

And then a follow-up to that would be, what portion of internationals are making up for that increase in backlog?

John, in general -- I will answer while he is looking up the specific numbers. But we are seeing the asphalt side of it pickup significantly. That has been good. But it has been -- really, aggregate is stronger, asphalt is stronger. The Mobil is very strong. Underground has not picked up as much as we would like. But it is up and much better. But I would say the strongest of the bunch is the asphalt. McKamy, have you got those --?

At 12-31, the Asphalt group was 24.9 million, versus last year of 26.6. So that is off 1.7. Mobil is 3.1, versus last year's 2.5. That is increase of .6. But let me just remind you that we seldom have a lot of backlog in Mobil asphalt paving.

Aggregate and mining is 43.0, versus 24.4, or up 18.6. Underground is 8.3 versus 17.2 -- I'm sorry, 7.2. I was trying to look forward to the rest of your question. And the international is 18.7 this year, versus 10.7 last year.

So, half of the increase in backlog is made from international orders, just about half?

That's right, John.

And then the majority of the increase is coming from the aggregate segment?

Yes, at that point.

That was at year end, John. At this point, we had very strong sales in the asphalt side in January and February.

Was there any particular orders that attributed to that aggregate? Where there any large turnkey systems orders that happened in the quarter?

I think the ones that contributed to it -- we had a couple of large orders in Russia. They are not turnkey -- they basically are products. We have one in Turkey. So there is some pretty good international orders we have. And I hesitate on -- I think we have got about an $8.5 million order in New Jersey. And I can remember whether that was in December or January. But there is only one large project there, domestically, and that is the product project in New Jersey.

And then the last question I have, before I get back in the queue is, could you just update us on where you are with the sale of the Grapevine facility -- what your expected proceeds and timing of that are?

Steve, do you want to comment on that?

Yes. Where we are, John, on that -- we are negotiating with a potential buyer. We have exchanged some numbers back and forth, but we are still apart. There is no contract in-place right now. So we continue to actively market that facility.

John Kasprzak, BB&T Capital Markets.

McKamy, my first question is -- you mentioned sales were down 22, 23 percent, excluding the small trencher line at Loudoun. Is that for the year -- that number?

It's both for the year and the quarter.

It's for both? Okay. And then my next question is, the margins, the gross margins in asphalt -- in the asphalt group were -- they typically seem to decline -- at least, they have in the last couple of years -- into the fourth quarter. Is that phenomenon driven by the soft sort of environment you have been in? And do we think -- I guess it's a two-part question. What do you think are the more normalized margins for the asphalt group? And in a stronger economy, business environment, would you think you would see such a tail-off in that margin in the second half of the year?

John, what we see really is historically 60 percent of your volumes in the asphalt side's in the first half. Everybody wants to order, get it running, before May. And then they are trying to finish work at the end of the year. And getting anything shipped at the end of the year is very difficult. So, generally, in the fourth quarter, we have absorption problems. During the first quarter and in the second quarter we are overabsorbing a lot. So margins in that -- historically in that business -- on an average have been like 20 percent gross margins. They have been down due to the economy and the competitiveness of it. We see those coming back somewhat.

The only caution I give is dollar and steel still prices are sure getting -- while they are about 10 percent of our costs -- or about 10 percent of the sales price, I should say -- we are seeing pretty significant increases there. We have increased our prices to try to compensate for some of it, but the price increases to get -- the steel prices are going up ahead of our price increases.

And with regard to the credit facility -- the waiver you got -- is your interest expense going to go up as a result?

No.

So, your sort of previous projections on interest expense related to the new credit facility would, I guess, be unchanged on an ongoing basis?

Correct, John.

And your tax rate for 2004 -- let me ask this first. You mentioned, as far as 2004 goes, that -- you gave us a lot of detail on the backlog and you see a significant pickup in revenue, I think is what Don said. Do you think that could lead to profitability, during 2004?

Yes, we are going to be profitable in 2004. I will answer that one.

And so, should we then -- a small question about the tax rate -- do you think that would change from the previous periods, sort of in the high 30s, McKamy?

Yes. And I guess the benefit there will not be from a reduced tax rate. But it will be from the cash that we do not have to pay out by utilizing the losses. In other words, we will still book the 38 percent or so. But the difference is that the cash will not flow out. We will have about 6.5 million of tax assets or loss carryforwards that we will benefit from, from a cash standpoint.

John Franzreb, Sidoti & Co.

When I was looking at the underground group and year-over-year increase, I was wondering how much of the small trencher product might be in that number?

Are you talking about on the sales?

On the sales side, yes.

Approximately 21 million.

For the full year?

Yes.

How much for the fourth quarter?

John, I don't have that right at hand. I will have to get back to you.

That's fair enough, McKamy.

The big trencher market just kind of died last year. It is coming back. And probably if it had not been for the two surface miners, Trend Core just would not have had a whole lot of business. But it has come back reasonably strong. And so I guess that is the reason we feel pretty good the underground side is coming back.

Now, you touched on the steel prices. How much is steel of your cost of goods sold?

Of our cost of goods sold, it will represent between 10 and 15 percent of the cost of goods sold. The thing we have not quite seen yet is the steel prices flow into the components we buy. But that is what concerns me, is how much it will flow into that. This increase has been pretty rapid and pretty dramatic. But I guess there is a lot of speculation that it will quiet back down here by May. That remains to be seen.

Now, you mentioned something I thought was interesting before, that there was a total of $130 billion spent in highway projects last year. And only 31 million of it was Fed. Now, it's kind of easy for us to kind of look at that number, because it something that we can generally fine. But when you look at that $99 billion number from the general economy, what does that make up? Can you kind of talk a little bit more about that segment of it and how that has been trending, and where do you expect it to trend -- what's the drivers behind that piece of spending there?

John, if you look at -- and you can relate it again to taxes. If you look at the federal gas tax, when you get a gallon of gasoline you pay 18.3 cents a gallon. Each penny will raise between 1.6 and $1.8 billion -- and that kind of depends on, obviously, the amount of gallons that we are burning in the country. But somewhere we consume between 160 and 180 billion gallons of motor fuel in this country each year.

So that brings in about 31 to $33 billion in revenues. The average state tax on top of 18.3 federal -- the average state tax is 22 cents a gallon. So on an average in the country, that brings in another 40 billion. So, from just state revenues and federal revenues, you are looking at probably 73 billion of the 130. The rest of it then comes from cities, counties, municipal roads, some private roads, subdivisions, things like that. And I would say that both the state tax -- not as much the state tax again, as per gallon, generally. But most of what happens with the state tax money -- it tends to get diverted a little bit in a bad economy. So the general economy affects that 99 more than anything else -- the general health of the economy, I should say.

So, the states have an option kind of to shift some of that funding to something that may be needed more so than the federal money does?

Typically, it is supposed to be dedicated to roads. But the politicians are quite clever with the way they move things. In some states, they pay for the highway patrol out of that money. Some states -- well, it's pretty amazing where it goes sometimes. -- material that is still related to highways.

But in essence, normally, in good years the bulk of it is going back to highways.

One last question. You doubled your CapEx this year. Anything significant in that number?

The only thing we have in the CapEx that we have some machine tools that some of our divisions are really very strong, particularly the plant we have out in Oregon is running seven days a week. And we are going to have to add a major machine-tool out there. And other is pretty well maintenance stuff. We held back awful tight last year, just due to the economy. And some of it is just maintenance equipment. But in general, the only real big pieces is out there.

I believe, Don, at KBI we have one lease that we need to buyout?

Yes. We will be buying out a lease that we've got. That's the other one.

(OPERATOR INSTRUCTIONS). Bentley Offutt, Offutt Securities.

I enjoyed my trip last August up to your Loudoun, Tennessee plant. And I have to say I was disappointed with the continued losses that you had in the fourth quarter. I thought perhaps you could bring us up-to-date on how that is going. When I was up there, the production of your smaller trend core units seemed to be, had plateaued out at the going rate of May and June of last year. And I am wondering, are they moving ahead better now? Or if not, where do you see that direction?

I would say, in November and December, extremely slow. January was slow. It has picked up a lot in February. We are kind of backfilling with some of the trend core orders. That is helping a lot. And the absorption up there -- it looks like we have increased the schedule on the small trenchers. And we also are picking up to revenues from the Case parts sales this year. We extended the agreement with Case through September and we are receiving some of the gross profits from those for the first nine months -- is our deal with Case. So that helps to offset overheads.

As of September, we will completely take over the parts business, which is about a $12 million a year business. So we are gradually working our way through it. Our productivity is better -- our man hours are going down on both big and small machines. To say we are completely comfortable -- we are going through a process of starting to replace the Case dealers that were not, basically, mainline trencher dealers and seeking out new dealers. And we are probably going to an 18-month transition there. About 10 of them that we will keep that have been the mainline trencher dealers. So we are working through it. We don't anticipate -- we think the worst is behind us. It will probably -- my best estimation -- it is going to be a breakeven to a slight loss for the year -- for this year. With a little more trend core volume, that could switch pretty easily. But if I had to make the call right now at the first of March, I would say we are going to be operating at close to breakeven.

Is that facility now -- what, 50 percent or about 40 percent utilized, would you say

Probably 40 -- more like 50, I guess, is probably the right word.

Could you -- it's a beautiful plant. Would it make sense to bring in another operation within that facility, since it is such a large plant?

We are certainly looking at that. I think we have got to give it an opportunity to build up this dealer network. In the peak Case builds, 4 or 5000 of the small machines. And we are down below 1000. If we could get up to 1800, in that range, that plant will be in good shape.

The addition of the parts business, Bentley, will make a big difference in how that capacity looks.

Yes, it will make a big difference. Also there's a number of pretty sizable orders on the big trenchers that is kind of on the horizon and that could make a huge change in that plant. So we are watching the energy bill -- the two big pipelines in Alaska. There's some large pipeline work in Russia right now. So there is some pretty sizable projects out there that could certainly change on the big end of the business.

I think, to answer your question, though, is that we obviously are considering that has an option. But we need another 12 months to see what shakes out.

I am interested also, Don, on the significant improvement in your backlog in the last several months. And I am wondering, considering the higher prices as you say of oil and the continued weakness in the economy, impact on the states, et cetera -- what are the drivers behind this big pickup in the backlog in your business, do you believe?

I guess I believe that there is probably three things that is affecting it. And I guess, Bentley, to be real honest, I am not sure I totally understand. Because, normally this time of year, with a highway bill not being passed, our customers are a lot more cautious than they are right now. We don't see them that cautious in their purchases.

I think to things is driving it. The private companies are certainly benefiting from the accelerated depreciation, to where they can take 50 percent the first year. And that expires at the end of this year. The second thing is just pent up demand. For the last two to three years they have been extremely cautious. When I look at our product mix, it kind of points to that, because we are selling -- particularly in asphalt -- we are selling a lot of components as well as complete plants. But I would say the mix of people just buying a new double barrel to where they can run more recycle or people buying a baghouse or adding a silo -- there is a lot of that type of product mix, which says I am still cautious -- I am not ready to totally replace it. But I've got to do something.

So we see that as a second thing, is just the pent-up demand. And the third thing, the weak dollar certainly helps international sales significantly. And I think a lot of our international customers have been waiting for a downturn in the dollar. It's amazing how the currency exchange can affect prices. We have seen it -- I remember a few years ago in Sweden we had sold a customer a plant, and it was seven kronas per dollar. And then the next year it was 11 kronas per dollar. So, these exchange rates can certainly drive it.

John Kasprzak, BB&T Capital Markets.

Don, on your comment of 700 million or so in capacity, revenue capacity -- just with regard to what peak earnings might be if you were to reach that 700 million -- when you guys earned $1.59 in 1999 you had an operating margin of almost 12 percent. Is there any reason to think we could not get back to, if we were to reach that 700 million level, to a similar operating margin? Or do you think -- obviously, still prices are tough to predict. But would that hurt your ability to get back up to that level? Whether -- what sort of pricing environment would have to improve markedly to get to that level? Or is it -- would it be fairly attainable, in your opinion?

Jack, I think it's fairly attainable. Rising water covers a lot of stumps, and we have got a lot of fixed capacity. We are the most vertically integrated Company in the business. And as a result there is obviously a lot of fixed overheads that you can't do a lot about. Over the good cycle that we came out of there -- the good part of it -- we spent over $100 million on CapEx. And we were preparing to go to that level before the bottom started falling out on us.

So I think we are well positioned for that kind of growth. And I would have to say the good side of it -- our efficiencies are a lot better. Our organization is the whole lot humbler than they were going into this. And I think we are more focused on our business. And the competition basically is not as strong as it was -- this fallout has been hard on everybody.

That was leading to my next question. So, can we infer that you guys probably picked up some marketshare during this downturn?

We believe we have. The road tech operation has continued to grow marketshare in the pavers side of it. Milling machine end of it -- we've picked up marketshare. Plant business -- we believe we are in the 55 percent or better range. So yes -- we think we have grown marketshare. Our major competitor in the crushing business is basically shutting down his major U.S. operations -- they will bringing them in out of Europe. So we believe we have grown marketshare.

Tom Brown, Oppenheimer capital.

I was hoping you would be able to talk a little bit about where the incoming orders are coming from, specifically -- are the orders coming from kind of old, tried and true customers who had just put off the spending? You sort of alluded to picking up marketshare. That would imply you picked up new customers. And also, is the strength really coming from smaller customers or larger customers, or are there any trends within that whole --?

One of the trends that I see is the larger companies, who, over the years, when the cycle was good, made a lot of acquisitions have had some digestion problems. And we are seeing the orders more coming from the privately owned companies. These businesses that have to be run like a patient in intensive care, and entrepreneurs get up early and go to bed late. And they are the ones that, frankly, we see doing the best. And they spend more money per dollar volume than the larger companies. They are quicker to respond to changes in the environment -- as oil prices go up, they will buy equipment to do more recycle quickly. They basically just move a little -- they are more agile. That does not say that some of the big companies are not doing well -- there's some of them doing quite well. They are well positioned. Some of the larger companies have made acquisitions in areas that it's difficult to get zoning.

But to specifically answer your question, we are getting more of our volume from the privately owned. And I think the other thing is the larger public companies are not as aggressive on taking the accelerated depreciation as the privately owned companies are.

That this time, gentlemen, there are no further questions. Are there any closing remarks?

Thank you, Amanda. We appreciate your participation on the conference call and thank you for your interest in Astec. As our press release indicates, today's conference call has been recorded. A replay of the conference call will be available through March 12, 2004. And an archived Web cast will be available for 90 days. A transcript will be available under the investor relations section of the Astec Industries website within the next seven days. All of this information is contained in your press release today. Again, thanks for your participation in Astec Industries' conference call for the fourth quarter and fiscal year ended December 31, 2003. This concludes our call.

Thank you.

Thank you.

Thank you for participating in today's conference call. You may now disconnect.