Astec Industries Inc (ASTE) 2007 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Astec Industries first quarter 2007 results. [Operator Instructions] It is now my pleasure to introduce your host, Mr. David Silvious, Corporate Controller of Astec Industries. Thank you, Mr. Silvious. You may begin.

Thank you, Joe. Good morning and welcome to the Aztec Industries conference call for the first quarter of 2007. My name is David Silvious and I am the Corporate Controller for the company. Also on today's call are Dr. J. Don Brock, our Chairman and Chief Executive Officer, and McKamy Hall, Vice President and Chief Financial Officer. Neal Ferry, our Executive Vice President and Chief Operating Officer, and Steve Anderson, our Corporate Secretary and Director of Investor Relations, normally participate in our conference calls. However, they are attending the BAUMA equipment trade show being held in Munich, Germany this week.

In just a moment I'll turn the call over to McKamy to summarize our financial results and then to Don to discuss the operational aspect of the business. In the way of disclosures, I'll 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 guaranteed as a future performance and are subject to certain risks, uncertainties, assumptions and other factors, some of which are beyond the company's control. Some of these factors that could influence our results are highlighted in today's financial news release and others are contained in our Annual Report and our quarterly and annual filings with the SEC. As usual, we urge you to familiarize yourself with those factors.

At this point, I will turn the call over to McKamy Hall to summarize our financial results. McKamy?

Thanks, David. We appreciate your joining us this morning. We are very pleased to report to you on the best quarter in the company's history. With sales growth and gross margin improvement, the company was able to generate a 40.7% improvement in net income. We also look forward to continuing the improvement in 2007, beginning with a backlog of 260.7 million.

For the first quarter, our net sales were up to 215.6 million from 185.7 million, for an increase of 16.1%. Our international sales improved from 34.7 million to 49.1 million. Our domestic sales improved from 151 million to 166.4 million.

Parts sales were at 43 million versus 40 point, 44.7 million last year, basically flat. Our sales increased in all segments. The piece of the pie that each of our segments occupied are as follows. Aggregate generated 38.2% of our sales. Asphalt, 30.2% of our sales. Mobile 20.4% of our sales. And Underground, 11.2% of our sales.

The consolidated gross profit improved from 45.2 million to 54.4 million for a $9.2 million improvement, or 20.4%. The gross profit increased 90 basis points for the quarter.

Again, let me remind you that attached to our press release for your convenience is segment information presenting much of the information that I am reviewing quickly this morning.

In terms of the SG&A and engineering, we were at 14.2% of sales versus last year, 14.9% of sales. Of course, the [ballots] continue to grow and we must continue investing in your SG&A to grow the business.

Income from operations were at 23.8 million versus 17.4 million, for a 36.9% increase. We had an improvement in income in all segments, asphalt, aggregate, mobile and underground.

The effective tax rate was 36.3%. The net income was 15.3 million, or $0.69 per share diluted, compared to 10.9 million, or $0.50 per share last year. Per share, we increased 38%.

We are ending the quarter with an outstanding 260.7 million backlog, up from 144.5 million last year. Our backlog by segment is at the bottom of the press release attached for your convenience.

The balance sheet is very strong. We are positioned very well financially to handle the growing volume, as well as other opportunities that may become available.

Our receivables are at 36 days versus 38.22 days last year.

Inventory is at 3.5 turns versus 3.6 turns last year.

We currently owe nothing on our credit facility.

Our capital expenditures for the first quarter are at 7.8 million. Total projection this year for capital expenditures is 28 million.

Depreciation and amortization for the first quarter is 3.5 million, with a projection for the year of 15 million.

We have currently available corporate cash of about 53 million, borrowing capability available of 82.4 million. If you have noticed in the 8K filing this week, you're aware that we signed a new loan agreement with Wachovia that will provide us an unsecured facility of $100 million. The term of the agreement is 3 years with possible extensions.

That concludes my prepared remarks on the financial. I'll be glad to 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. Thank you.

Dr. Don Brock will now discuss Astec's business operations for the first quarter of 2007. Don?

Thank you, David. Just a little repetitious, but we're very pleased with the quarter. Revenues were up 16% as McKamy said, from 185 to 215 million. Our income increased from 10.9 million to 15.3 million, or 41%. Our gross margins increased 90 basis points over the first quarter of last year to 25.22% and our earnings per share were up 38% from $0.50 to $0.69.

International sales were up from 34 million in the first quarter last year to 49 million this year, or 40% increase.

Our rolling 12-month return on capital employed profitability return was 16% and our cash flow return on capital employed was 24%.

Looking forward to the second quarter, we entered the quarter with a very strong backlog of 261 million versus 144 million last year, or an increase of 80%. Sales have continued to look good in all segments and we have continued to see that sales continuing to come in during the month of April.

Our second quarter should be- - should be strong like the first quarter. And, right now, I guess, we see the strongest outlook that we've seen in quite a few years.

We continue to pursue our cost control and reduction initiatives. However, we do continue to see substantial inflation in a number of the components we buy, particularly steel. The price is trying- - we see steel companies increasing steel prices substantially.

We are continuing to apply more of our equipment to other industries. During these good times in the fields that we work in, we- - our equipment can be used in a number of sectors and particularly the energy sector. We are applying a number of our different products in that area. Our directional drills have been modified to drill oil and gas wells. Our large thermal heaters that Heatec builds is being used in the tar sands and for gasifying liquid natural gas. We have a new line of wheel trenchers, a more modern line, to go along with our chain trenchers for pipeline construction. The new pulverize coal burner is being accepted quite well and it reduces the cost of operating asphalt plants substantially. We're developing a new large hydraulic breaker to be used in pipeline construction. And we continue to look at applying a number of our products in the industries that are counter-cyclic to the one, to our basic core business.

Looking at our core business, federal funding is up about 9% this year. While some states are down, some are up. There's pockets of real strong growth and there's pockets that is down. California in particular is up very strong. We still see growth in most of the Sunbelt states and, overall, we see our customers spending more money to upgrade their equipment than they've done in the past.

I guess in conclusion, I'll be glad to answer any questions. We feel good about the second quarter and the remainder of the year. Be happy to answer any questions you'd have.

Thank you. Ladies and gentlemen, at this time we will be conducting a question and answer session. [Operator instructions] Our first question is from Arnie Ursaner from CJS Securities. Please state your question.

Good morning, gentlemen, and congratulations on a great quarter. It's actually Frank Wooten for Arnie. Quick question with regards to, you guys have talked about a bunch of initiatives with regards to expanding margins. Can you financially discuss how much they impacted you in the quarter and where we are in that process, where we might see that effect, results in the back half of this year?

Frankly, we, I guess the thing, I guess if we could do it net of inflation, it would be- - or, without inflation- - it would not be a difficult answer. But, we think we're probably 40% of the way through the process. I think the benefits that we saw in the 90 basis point improvement was really effort that was started last year. And I guess to say how much more there is, we think there is more. I said at the last conference call, someone asked how much more improvement we see in our margins and I said from a 100 to 150 basis points. And that got picked up as saying that's what we were going to do. Didn't exactly mean it that way, but we've got 90 of them anyway.

The difficulty is what inflation does. We're locked in on a lot of our steel purchases up into June, but they're talking about 8% increases and that's after an increase in January. So, some of that is going to be impacted by that.

We continue with the same initiatives. We continue to see opportunities to reduce costs. A lot of the new equipment we're buying should also allow us to reduce our man hours and help us to continue to improve it. But, it's very difficult to give you much more of an answer to that, due to the increases in cost.

And what was the impact quantified of steel inflation in the quarter? Do you have that?

It's, we saw probably an average increase of 3% during the quarter. And steel, to quantify that, steel is about one-fourth of our purchases, or about 12.5% of the sales price.

Got you. And as we look at your backlog, of that 260 million, what's the average age of that? In particular, I'm trying to get to, as you see these steel prices inflate over the course of the year, do you have any escalators in those contracts that are in your backlog?

We have no escalators. It's a mixed bag. On the asphalt plant business, we have some orders out into December right now. Typically, their third quarter is about full. There is room in the fourth quarter. The other companies are not quite as backed up as bad as the asphalt plant side of it.

Roadtec, for example, never has any backlog, so- - but, I'd say if I had to give you a weighted average, I would say the 260 million is probably on an average of about 3 months out.

And those are priced at current prices, however?

That's correct.

Got you. I'll go back in the queue. Thank you.

Well, we hope that we will continue to see some of our other cost initiatives at least offset the increases. That's our plan.

Thank you. The next question is from Bentley Offutt from Offutt Securities. Please state your question.

Hello?

Hey, Bentley.

Good morning to you. A couple of questions here for you. McKamy mentioned earlier that 8K has been filed and that you have an unsecured new loan for $100 million. And I was just wondering, I know that in the past you have mentioned your interest, the Board's interest, in expanding your business partly through new acquisitions.

Right.

And I was wondering if this is sort of a preamble to that event within the next several months. Or, is there something, maybe you just want to discuss what's going on in the acquisition field.

Bentley, we have some core chips going probably with three different companies at this time and they're in various degrees of, I wouldn't say completion, but we're pretty far along on one of them and at various degrees on the others. There's about five different companies that either have approached us or we've approached them. Some of them are add-ons, some of them are a little different industry. But all of it's basically equipment-type business. But, we're at various stages and we will be putting some of that money to work before too long.

Okay, thank you. And one other question, I was particularly impressed in the recent visit to your headquarters relating to your best practices program and particularly in the area of standardization of your equipment. And you indicated earlier that you thought you were at 40% through that process. Where do you see in the next couple of years going as far as the standardization of your equipment? I mean, that's such a wide range of equipment, but there is a certain areas of commonality.

I guess, we see it as a continuing culture, more than anything else, of trying to take cost out of the products and to use as many common components from one company to another. We see that as, we've still got a lot of room to improve there and a lot of opportunity. I don't know how to answer it much different than that. But, I think that the more of that that we do, the more volume that we do, the better it helps us, the more power it gives us in our purchasing.

Okay, fine. Thank you, Don.

The next question is from Jack Kasprzak with BB&T Capital Markets. Please state your question.

Thanks. Good morning, everyone.

Hi, Jack.

Hi. McKamy, what do you think- - the tax rate was 36.3% in the first quarter. Is that about where you think it will be for the full year? Is that a pretty good estimate?

Yes.

And CapEx for this year still around 28 million. Is that?

That's correct.

Good number? Okay. I just wanted to get an update there.

If we do acquisitions, obviously we would have some change in that number.

Sure. Okay. And I wanted to ask, too, about the Underground Group. It's your smallest group of course, but that was the only segment where backlog was down year-over-year. I guess I'm nitpicking here a little, because everything else is just very positive, of course, very strong performance. But, I was wondering if you could just talk about what's going on there, if anything. If you expect it to be down, what sort of prospects are you seeing there?

Jack, I think it's kind of an anomaly there in that we had a pretty good sized order for some large trenchers last year in that backlog. And I would class it more as flat than up or down, when you look at April and what we have sold right now. They're doing okay. We really got opportunities for margin improvement there and growth and we've got a lot of things in place there. But, we're not there yet. You know, the companies are making money and we're improving, but they've got- - they've obviously, if you look at the numbers, got more opportunity than any of the rest of them. But, the backlog we don't see, we see a good growth this year, probably 10% or more in that business, but not- - you know, it's not down like it looks like, I guess what I'm saying.

Got you.

Jack, there were two- - let me just add a little to that. There were two large directional drill orders that they did not have the down payments for that did not get counted in the backlog that immediately did become eligible for the backlog right after the first of April. That would have made it look better.

Two large directional drill orders hit in April.

Yes, we had them in March, but we didn't have the down payments, so they were not counted. And that's the way it should have been. But those came in right at the first of April. So, that would have changed the looks of it a little bit.

Great. And- - that's very helpful- - and, you mentioned, Don, California as a strong state for highway funding. Could you mention, are there any other states of note out there that's- - I think Texas is a state that's been strong- - anything else stand out?

Texas remains strong, Jack. If you look in Canada, various parts of Canada- - Alberta, Ontario- - spending a lot of money. The Canadians have got a lot of oil money now, and so they're spending a lot. Florida continues to grow. Georgia continues to be very strong. Their- - Indiana is going to be spending a lot of money by selling off that toll road up there. It's interesting, I mean, right next to it, your state of Virginia, there's a lot going on there. While there's not much highway money, there's sure a lot of commercial work going on there. So, it varies. South Carolina is down, while Georgia is strong. Tennessee and North Carolina are down. So, you can have a number of them down. But, California is up enormously. We've got more plant orders in California than we've had in ten years.

Wow. Okay.

You asked for states, but I think Australia is exceptionally strong, too.

Yes, Australia, we've got five plants going to Australia right now. It's, which is unbelievable for a relatively small market. The international market, I guess, the one thing it sure helps is a weak dollar. But the international market is very strong.

Okay, great. Thanks very much.

Thank you, Jack.

The next question is from Rich Wesolowski with Fidelity and Company. Please state your question.

Thanks, good morning.

Hey, Rich.

First question, it looks like an anomaly in the mobile asphalt paving margins in that every segment was up sizably, those were down a little bit. Is there anything odd that happened in the quarter?

I think one thing that I'm aware of is that there was a competitor that was trying to move quite a bit of inventory and was hard on the particular margins in that segment of the market. I think in the paver side it was, what McKamy was touching on, one of them just got sold recently and they've been very aggressive on their margins.

I think the other thing, Rich, is we added on 60,000 square feet onto Roadtec. They moved into it during the fall and they were kind of tangled up in their britches in the first month of the year, so their margins were down, particularly in January, probably up through mid-February. They've recovered that now, but in general, that was probably the shuttle buggies and the pavers both went through that move and we've gone to a continuous flow-type manufacturing and it just took a little bit of time to get everything up to speed. I think you'll see that improve in the second quarter.

Well, the awards seem to be working in your favor there. I mean, do you expect to maintain the margins that you did last year in the mobile group?

Yes.

Caterpillar last week cited tighter lending conditions, which is a little bit of a surprise to me. The fact that they've prevented some of their customers from replacing equipment, even when the activity was high in their market. Are you seeing any of that?

We're seeing that on certain components of our equipment where people want to do more rental and less purchase or at least a rent-to-purchase thing. And we're seeing, particularly as the market is as strong as it is, some of our products that go through dealers, the dealers are getting, they're using up their credit lines I guess because of the fact that they're having to do a lot more renting. So, we are seeing a little bit of that.

However, a substantial amount of our business goes direct. And the direct customers seem to be, I guess, if I'd see anything at least on asphalt plants, bigger purchases, I see our customers healthier than they've been for the last few years. And I think that's one of the reasons you're seeing the increases in volume.

Okay. Have you seen any recent change in the number of states allowing or preparing to allow a greater proportion of recycled material in the road mix?

We are. In fact, I guess, as I've mentioned in prior calls, I think I've given 30 speeches in the last year on how to increase recycle and the amount of it. And I have a draft specification from Texas in yesterday and they're going to 25% on surface mixes and 35% on other mixes. And I spoke on that 2 years ago. So, it seems like you've got to plant the seeds and wait for them to occur.

Bit of a lag.

So, it seems to be occurring. And there's some new processes we've come out that we think will really allow us to go on up to the 40 and 50%, you know, in the next, during this year, which we're pretty excited about.

Okay. Finally, oil over the past year has been a big subject with you, with it in the mid-60s now or the low 60s, is it beginning to scare you? Are you beginning to see any effects from that?

You know, if it gets up in the 70s, it will make you a little nervous. I think the one thing that our industry is now aware of is the higher recycle we go, the more we temper that. And I think we're better prepared for it than we were just even at 12 months ago. And I think that's a lot that's driving our sales, too. I mean, the equipment we're selling is equipment to do high recycle and to prepare the recycle. So, I think everybody's getting prepared for higher liquid, although, whoever you want to talk to you can get a different opinion on that.

The other thing I do see in the market, as we put our drill rigs more in the oil market and we've been in the tar sands and a number of projects up there for all of our companies. There is one heck of a lot domestic drilling going on. There is more development in the tar sands. And we are beginning to wake up and do more in the U.S. A lot of ethanol plants going in, things like that, which is real good in my opinion for our economy.

Sounds good. Thank you very much.

The next question is from Rob McCarthy with Robert W. Baird. Please state your question.

Chris [Weltzer] in for Rob. How are you guys this morning?

They said Rob was in Germany yesterday. I thought you were, he was back in a hurry.

No, he's still there. Couple of quick questions. You mentioned before a couple of big pipeline projects, one in Alaska and one in Canada, I think.

Right.

Could you sort of update us on your thoughts on those projects?

The two of them up there is the Alaskan line, which is a natural gas line coming down through Alaska and then through the Yukon and into British Columbia. The other one is the Mackenzie line, which parallels it. And I don't, it seems like the Mackenzie line's ahead of the other one. The politicians in Alaska seem to, can't see how they're going to divide up the revenues very well. And that thing keeps getting dragged out. But, there's a lot of talk on the Mackenzie line. And it looks like it may occur before the other one.

We have quoted some of the bigger companies on the very large trenchers and more specifically for the Mackenzie line than we have for the Alaskan line. We had one of our machines up in Alaska for two winters cutting in the permafrost up there to prove that it could do it, but- - so, we know that when that goes, we think it will be our machine that end up there. But, you know how long politics takes. So, that's about where it is right now.

You were talking earlier about your machines being used in sort of non-core alternative uses. Do you have any sort of, I guess, estimate of how much, what percent of your business now is non-core?

I would say that probably 25% of our business is non-core. The equipment we build for asphalt plants, we build, we have a large soil plant for cleaning up contaminated soil going in in England. We have one going in in Korea. We have one going to Australia this year, it's on backlog. So, it's very similar to an asphalt plant, runs at higher temperatures, has oxidizers on it, same type of pollution equipment. So, in the environmental cleanup, we do a lot in that area.

In recycling for handling products our crushers are used in a number of areas. The tar sands, I met with people last week who have processes for separating the oil from the tar sands and they want us to build the equipment to do it for them. Our directional drills are actually for the SAG-D or steam-assisted process, where they run lines down under can and is being used on some of that. And then our horizontal drills, we build a unit that pushes and pulls. Most of the regular drill rigs don't push, so the horizontal drilling's been done at great depths, but not in shallow areas. And our rigs will work in shallow oil. So, we feel like there's a great potential for that.

I could go on all day. The Heatec equipment, close to 40, 50% of their business does go to other industries. So, it's been my goal for years to try to diversify our companies where we are not totally dependent on highway-type construction. And it seems like there are more and more opportunities coming available in that.

Got you. And then you talked about Roadtec a little before. But, if you could give us an update on sort of how the production ramp is going at Roadtec and the other facilities that have had significant capacity expansions. Are they at a hundred percent yet, for instance, or are they still working their way up?

I'd say Roadtec the two bays that they added on is a hundred percent. But, the part of the plant that they moved out of that we're reconfiguring is probably up to 70%, where we build the milling machines and new stabilizer, some of those products. At Kolberg Pioneer all of the plant's complete, but their processing and their equipment and all of that probably is at 70 to 80%. They're in there, they're working on it. But, it takes a while for everybody to get their nest built and really get the products flowing. We see continuing improvements every month in it, but it's not there yet. Mobile Screen is up to speed. The facility that we added, the Astec operation to build burners, is running. It's probably at 80%. I mean, they're building burners and doing a good job. But, at Roadtec we saw the man hours go down probably from when they first moved in to where they are now, 30% drop. So, and we hadn't quite gotten there in all the others, other than Mobile Screen I'd say.

Got you. Thank you very much.

[Operator Instructions] The next question is from Tom Brinkmann of Davenport. Please state your question.

Good morning, guys.

Hi, Tom.

Just wanted to follow up a question with what you guys talked about with Alberta, Canada, and the oil sands. Sounds like you have a couple of different things going on there. You first mentioned that, in response to a question on the highway work, but also you mentioned obviously with drilling equipment for the SAG-D operations for separating oil from the tar sands. So, you actually have sold highway-related equipment up there as well?

Yes, there is a lot of infrastructure going on up there, a tremendous amount, to get into that area. What we, we're selling an asphalt plant or more a year up there, probably a couple a year into Alberta, which was a pretty quiet area for years. And, plus a lot of mobile equipment going up there. A lot of the crushing and conveying and stacking equipment's going up there.

Okay. Now, are these being sold to highway contractors or are you talking about- -

Everything I mentioned then, Tom, was going to highway contractors. And basically, when you get into the actual process of drilling, we've met with the oil companies up there and the people who, some of the people who actually do the drilling up there, and there's probably four American Augers directional drills operating up there at this time and a possibility of a heck of a lot more. They've done a lot of striping up until now, but they're wanting to do down from 200 feet down to 800 to a 1000 feet and get that through this steam assisted process. And they want to go down 300 feet, then turn horizontally for 2 miles. And that's doable with a directional drill. And they put another hole about 16 feet below it. You put steam in the top hole and then you pull oil out of the bottom hole.

I was just curious if you've actually sold any equipment to the oil sands operators for screening or if you guys actually offer this type of thing for aggregates, crushing aggregates. And I know they're scraping off some of the top soil to get at the tar sands, but they may also reuse some of that material that they have pulled up.

Yes, to answer your question, yes, we have sold to those guys.

Okay. Great. And the also as far as the outlook for the highway construction market in general, the American Road and Transportation Builders Association has sort of forecast a plateau in highway construction in 2007. Do you guys agree with that or are you seeing a stronger market than that?

Well, we're seeing is from a federal standpoint, yes. I mean, it will be a plateau. Next year will be about the same. But we're seeing some states, like California, some of those, that a number of the states are raising a lot of the money themselves. And we're seeing an increase in state funding. We've had a good enough economy that state revenues are pretty darned good. The problem is that gas taxes in a lot of states, Tom, haven't increased, but the general fund has. And we're seeing some of them, like Arkansas is, diverting some of their general funds back to highway funding. There are a lot of, it's kind of a mixed bag. But I guess I see or get the gut feeling in traveling around and talking to the different state highway departments that there is getting to be a more of an awareness that the roads have got to be upgraded and got to be fixed. We're just getting in gridlock. And I feel pretty optimistic you're going to see more funding coming into the market in the next 3 to 5 years.

Okay, good. And the recycling equipment you mentioned that's increasing in sales. Is that for- - I assume you're talking about recycled asphalt pavement wrap. Do you guys offer equipment to crush recycled concrete?

Yes, to answer your question, there is really for all products. The aggregate companies where their overall volume is flat to down, they continue to raise their prices, which as they raise their prices, they make the recycle more valuable. So, what I was referring to is our track mounted jaws, impactors, combs, all of those, are being used to crush concrete, building rubble. The recycle asphalt, we're basically processing it a little further down, taking it totally back apart and resizing it to its original sizes, which allows us to control the quality of the material we're making out of it. But, we had a customer down in Mississippi who sold a concrete crusher to about four years ago and he was worried about getting enough concrete. With Katrina down there, they're bringing in tons after tons of materials to him at no cost and he's crushing it and selling it for $20 a ton. If you get enough of that, you can do all right.

Yes, it's a good business if you can get it, I guess.

That's right. So, there is a lot of opportunity. As the, the thing I guess, the changing economics of the higher aggregate prices, the higher oil prices, makes these recycle products more valuable. I tell people, if you look at it, there's 18 billion tons of asphalt on the roads. Multiply that number by four and you've got 72 billion tons of crushed rock that has been crushed over the past 40 years. And it hasn't disappeared. It's still out there. And we can reprocess that. And that, when it becomes, when the virgin material goes up in cost, it makes people look for those type of materials where they can process them and replace the virgin materials with them.

Not only, you mentioned Texas with the mix. Is it true also that they can use the recycled asphalt pavement for base material underneath the roadway as well?

They can, Tom, but that's a poor use of it. I mean, it's worth what it replaces. And if the rock's $10 a ton and you've got $300 liquid asphalt and it's got 5% asphalt, you've got $15 worth of glue and $10 worth of rock. That's $25 a ton. And why put that down? It's value is $25 a ton and if I can crush the concrete and put it in there that doesn't have the asphalt in it and let it go in, it's replacing the $10 a ton material, if you see what I'm saying. And so, you really want to put the highest value use of it.

Another great product, roofing shingles. We're shredding up roofing shingles and putting that back in and it's got 19% asphalt in it. Well, 19% of $300 a ton, figure it. You know, pretty big numbers.

Last question, what is the current price of liquid asphalt per ton and how does that compare to a year ago?

You're looking at 3 to 3.25. We were seeing around 400 last year. Simple formula is take the price of a barrel of crude, which was 65 this morning. Subtract $10 from it. Gives you $55 for heavy crude, which most of your liquid asphalt comes out of. Multiply that by 6. And that's about where you're going to be. And that's about 3.30 a ton. So, it's not where it was last year.

We can stand a $300 level, but you get up on around 400, we better be doing a lot more recycling.

Okay. Well, great quarter, guys. Thanks for your questions.

Thank you, Tom.

I have the phone showing no further questions. Thank you. I'd like to turn the call back over to management for closing comments.

Thanks, Joe. Again, we do appreciate your participation on our first quarter conference call and thank you for your interest in Astec. As our news release indicates, today's conference call has been recorded. A replay of the conference call will be available through May 1, 2007. An archived webcast will be available for 90 days. A transcript will be available under the Investor Relations section of the Astec Industries website within the next 7 days. All of that information is contained in the news release that was sent out earlier today.

Since there are no further questions, this concludes our call. Thank you.

Thank you for your participation, ladies and gentlemen. This concludes today's teleconference. 11