Greetings and welcome to the Astec Industries third quarter 2009 results 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 star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Anderson, Director of Investor Relations for Astec Industries. Thank you, Mr. Anderson, you may now begin.

Thank you, Shane. Good morning and welcome to the Astec Industries conference call for the third quarter of 2009. As Shane mentioned my name is Steve Anderson. I am the Corporate Secretary and Director of Investor Relations for the company. Also on today’s call are Dr. J. Don Brock, our Chairman and Chief Executive Officer; McKamy Hall, Vice President and Chief Financial Officer; and David Silvious, our Corporate Controller. In just a minute, I will turn the call over to McKamy to summarize our financial results, and then to Don to discuss our business operations and market environment. In the way of disclosures, I’ll note this morning that our discussion may contain forward-looking statements that relate to the future performance of the company and that 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’s control. Some of those 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’ll turn things over to McKamy to summarize our financial results. McKamy.

Thanks Steve. We appreciate each of you joining us this morning. The sales for the quarter were $166.1 million compared to $237.4 million in Q3 of 2008 for a decrease of 30%. The failure of Congress to renew the Highway Bill on a timely basis always makes the visibility more difficult. International sales were $64.8 million versus $102.1 million in 2008 third quarter for a decrease of 36.5%. International sales for the quarter in 2009 were 39%. International sales in 2008 for the quarter were 43%. International sales are being assisted by approximately 25 stimulus programs in foreign countries. The decrease in dollars occurred in the Middle East, Africa, Asia, Central America, Australia, and Europe. Domestic sales for third quarter were $101.3 million versus $135.3 million for a 25.1% decrease. Part sales for the third quarter were $46.1 million versus $54.9 million or a 16% decrease. Aggregate and mining had the largest decrease followed by the underground group. The asphalt group and mobile asphalt paving had slight increases. The reduction in volume in some of these parts areas is indicative of some machinery not being repaired as it normally would be in better economic times. As far as the sales path, aggregate for the quarter provided 33.6% of the sales, asphalt 26.8% of the sales, mobile 22.2%, underground 10.2%. For the year, year-to-date sales are $560.2 million versus $778.2 million for a decrease of 28%. International sales year-to-date are $197.8 million versus $287.7 million for a decrease of 31.2%. The decreases occurred in Central America, Europe, Canada, Middle East, South America, Asia, Australia, Africa and China. International sales were 35.3% of net sales year-to-date compared to 37% for last year, so the international as held up as a percentage quite nicely. The domestic sales year-to-date is $362.4 million versus $490.5…

Thank you McKamy. At this time, Dr. Don Brock will review Astec’s business operations and market conditions during the third quarter. Don.

Thank you Steve. Our third quarter was very disappointing as we mentioned, we had weak revenues during the quarter. While in the past we have talked about usually having about $12 million in volume on the bubble. It could go either way at the end of the quarter. This quarter we had approximately $26 million in delayed shipments. Delays were caused by lack of either -- both domestic or international financing, waiting on permits, or the customers just not being ready to accept the products. Most of these delays, about $14 million were in asphalt plant type equipment. In addition to shipment delays, sales were very weak in the aggregate, underground, and other groups. Year-to-date, asphalt and mobile are basically down. McKamy mentioned mobile was up during the second quarter, but year-to-date they are down slightly but considered pretty good compared to the market. During the quarter Tom Hill resigned as the director of our company. Tom was former CEO of Oldcastle Group, and after leaving Oldcastle last year became one of our directors. Tom has launched a new start-up company Summit Materials and has made his first acquisition. Since he will now become a potential customer, he can no longer serve as a director. We want to recognize how we appreciate his service and counsel on our board and wish him well in his new company. We look forward to again having him as a customer. In September we acquired the assets of Industrial Mechanical & Integration [ph], and small company in Walkerton, Ontario. This company has a very unique pellet press used to form wood pellets and other bio-energy products. We intend to manufacture these pellet presses at our BTI operation in Thornbury, Ontario, which is about an hour away. This product along with the Peterson Chippers, KPI…

(Operator instructions) Our first question comes from Jack Kasprzak from French Bank [ph]. Please pose your question.

Good morning Jack. Jack Kasprzak – BB&T Capital Markets: BB&T of course. With regard to the next Highway Bill and your comments in the press release and on the call here, did you guys sense or get during the quarter the last few months that customers were disappointed that there wasn't any Highway Bill, that maybe there were orders ready to go and some sense of optimism that was stimulus and perhaps new Highway Bill we could kind of glide right through this, but it didn't happen and so it is a bit of a downshift in sentiment and orders in the quarter.

So as the result of all of that it makes our customers very cautious. They instead of buying new plants are doing partial upgrades on mobile equipment. They are buying it just when they need it. I will say in general the amount of work next year will probably be similar to this year, but they dislike the optimism. I think you pretty well hit on that. We seem to go through this every six-year Highway Bill. We will pass through it and it does lead to a little pent-up demand when it is all over, but there is a lot of cautiousness right now. I think also the potential tax increases in all these other bills, just everything altogether going on in Washington makes more business people nervous. Jack Kasprzak – BB&T Capital Markets: Sure. Secondly, and McKamy you mentioned the inventory and that most of the increase was from the effect of an acquisition, but are the inventory levels at a point where it might be -- it is a little more difficult to continue to build them and you might have to consider taking some further downtime idling capacity, some measures like that in the face of this uncertainty.

Basically we did that during the third quarter Jack. We still are working inventory down or trying to and it is just difficult to get it done with this type of market. So yes, we have -- we have continued to shrink and are continuing to shrink really the workforce a little more. We're down from about a 4,300 peak to around 2,300 now -- I mean it is 3,300 now, about 1,000 employees, and maybe down another 100 or so. I don't see it going much lower than that. Jack Kasprzak – BB&T Capital Markets: Okay, and finally on the tax rate, again McKamy mentioned what happened in the quarter, but would you guys think it would bounce back up to that more normal mid-30s rate in Q4 and beyond.

Yes, we think so. Jack, although we're spending a lot on R&D and new products, we're pretty excited about some of these to backfill, and as a result since we have the cash we're spending the time to doing that. We are also -- I might say we haven't really done any shrinking of sales forces. We're trying to keep those in place. Jack Kasprzak – BB&T Capital Markets: Okay, great. Thanks very much to you guys.

Thank you.

Thank you. Our next question is coming from Arnie Ursaner from CJS Securities. Arnie Ursaner – CJS Securities: Good morning.

Good morning. Arnie Ursaner – CJS Securities: Starting with, you mentioned $26 million in delayed shipments in asphalt. If I look at your backlog growth in asphalt, it was one of the few places where you actually had a pretty good sequential change. Is this materials that didn’t ship with that had been in the asphalt backlog?

There is about 15 in the asphalt and Astec itself, Arnie, the rest of it was scattered between the other companies. And I would have to say that, you know, that was kind of in their case, 14 they expected to ship a lot of them. They shipped a week after the end of the quarter. Getting the money in right now, a lot of that we don't ship. We get the money. It is more difficult in this market as you can expect. Arnie Ursaner – CJS Securities: Don in your prepared remarks you indicated, I think you said that revenues would stay at around the same level for a period of time. Normally you see a pretty sizeable seasonal pickup in Q1 and Q2 of next year. Should we think about, when you say at the same level around the $166 million of revenue we did this quarter?

No Arnie, I guess the point I was making, I think that the fourth quarter may be similar to the third quarter, and next year will be similar to this total year. But first quarter and second quarter will always be the strongest. Arnie Ursaner – CJS Securities: So you were not trying to mention the current level staying at that level going into next year and not having the seasonal pickup?

No, no. We will have the seasonal pickup. Arnie Ursaner – CJS Securities: Okay…

And I guess I want to be cautious, but I think some of these new products were not in our budget and we don't have them kicking in much. When I make that statement I think that is our basic products, but we do expect to get some benefit from some of these newer product offerings. Arnie Ursaner – CJS Securities: My -- one other question I have is a follow up to Jack on the inventory question. You mentioned, he focused on the impact from the acquisition, but I was more focused on McKamy’s comment that it is primarily finished goods. If it is primarily finished goods and you are about to enter a 4 to 6-month seasonal slowdown period, and it is -- how do you continue to manufacture without just overwhelming your facilities, and to the extent you have to shut them down in any material way, the gross margin absorption leading to a question of can you even stay profitable in Q4.

Arnie, let me stop you a minute. What I was referring to was the change in dollar volume. The finished goods this at 9/30 this year versus 9/30 last year was up $32 million. This is the primary change or increase, and of that I think $11 million came out of acquisitions. So we're only talking about an increase in finished goods of 20 million. We don't have a monumental amount of finished goods. It is only up basically 20 million over where it was last year.

Let me add to that. Year-over-year this time last year, we were pretty well loaded up with steel and a lot of componentry that we had brought ahead due to the inflationary period we were in. We made a conscious decision before we did major, major employee cutbacks to go ahead and convert that to finished goods. And that is about what we are still living with today. We are not increasing those any, and Arnie the other thing it is more in some of the -- where we got these finished goods as more in the businesses that are not doing -- that are really off a lot. The underground Peterson, and in the aggregate companies are all down. You know some of them in excess of 50%, and whittling the finished goods down there has been very difficult. In the mobile and asphalt side we really don't have much finished inventory. Roadtec’s work goes down very well and Astec has nothing that is finished goods inventory at this point that is not sold. I will put it that way. Arnie Ursaner – CJS Securities: Staying on inventory for one more second, steel prices have dropped quite materially, what is your cost of steel currently versus market -- cost of steel in our inventory versus market?

We're pretty close to market right now. We work through most of the high-priced steel. What we would have would probably represent less than 10% of our steel usage. And it is at -- it would be at numbers like in the high 40s versus market is in the mid-30s or high 30s. Arnie Ursaner – CJS Securities: If I can ask one final question on your new products, you mentioned a wood pellet plant that might cost as much as $12 million. What will be your target market for that plant?

Arnie, with the renewable energy requirements in Europe and in Australia and most of these countries, it probably will be in the United States. It is anticipated they are going to require utilities to burn 20% renewable fuels. Their choice is either wind power, solar or wood. Wood is the big quantity of that, and basically a wood pellet plant consists of a taking either sawdust from sawmills or wood chips where you will prune a forest or trim a forest out. They generally will trim it three times before they will ever get to the lumber you know that they use for homebuilding. Most of the wood is the younger type wood, but the Peterson unit will de-bark, de-limb and make a microchip that is about a quarter of an inch. That material has 50% moisture coming in and we have to run it through a drier and dry it down to 10% moisture. There is over a 100 species of wood. So you end up having to blend that together. So we have got feeder bins somewhat like an asphalt plant. We have got a drier somewhat like an asphalt plant. Then we grind the wood down to about 2 microns, about a 16 of an inch, and then form it into a pellet where it is mechanically handleable, and where you really just densify the energy. It has a BTU of close to Montana coal, but it has very little ash. No sulphur. Real clean burning. Lot of wood pellet stoves for residential use is out there, but the big usage is for these utilities. Right now most of the pellets being built or being made in the States are being shipped to Europe, and many of the suppliers have 10-year contracts with the European utilities. There is a shortage in Europe of wood pellets. Arnie Ursaner – CJS Securities: Thank you very much.

Okay.

Thank you. Our next question is coming from Rich Wesolowski from Sidoti & Company.

Good morning Rich. Rich Wesolowski – Sidoti & Company: Thanks. Good morning. How are you?

Good. Rich Wesolowski – Sidoti & Company: So summing up the earlier discussions on inventory, the profitability, does 3Q represent the gross margin you would expect Astec to report during a period where you are cutting production to draw down the inventory, however long that lasts?

Yes, we think we're going to range still in the same range. We have done a lot of adjustments to try to maintain that, and yes. Rich Wesolowski – Sidoti & Company: Okay, would you expect the sales in the asphalt business, the partial plants, the odds and ends can sustain this business at this revenue level, until the demand for the big ticket stuff comes back?

Yes, I think so. I think there is going to be a shift Rich, international sales basically for the asphalt plants pretty well stopped last October with the dollar strengthening during the third quarter, late third quarter and now we're seeing a real good pick up in international sales, and we don't see any -- frankly between Canada and the other international sales, it has really been helpful to asphalt and mobile this year. Domestic sales have been weak this year, and I expect them to stay weak next year. But I do see with the dollar weakening a continuing improvement in international sales. My point out to -- a big part of the wood pellet plants will come out of the Astec operation. Rich Wesolowski – Sidoti & Company: Okay, on the international business, and this is a tough one to answer I recognize, but with the dollar being down do you think the company and US manufacturers are getting a bigger share of a same sized pie, or do you actually think the industry is selling more equipment now than they were 3, 6 months ago?

I just got back from New Zealand and Australia. I had to speak at a convention over there, and the Australian market is very good. I mean there is a lot of mining and I don't see the negatives that I see in the States. In both of those countries generally, what we see Europe is still weak, Eastern Europe is really not as weak or we see that as a pretty good market. I think that the stimulus in these other countries, I think they have got two things going on for them. Number one, they are spending a lot more of their stimulus money on infrastructure and particularly on road and bridges and there is not as much. I guess the simplest way to say there has not been as much radical change in the government that they have versus what we have got. With the change going on in Washington, this got a lot of business people cautious and nervous, and I don’t see that in these other countries. Rich Wesolowski – Sidoti & Company: Okay, and finally has there been any tangible progress you can point to on the regulatory side in the US as far as raising the amount of (inaudible) that’s allowed in the roadmix?

Yes, I think as I have mentioned over the years, we personally put in a lot of time on that and I would say the average amount of recycling has gone up about 10%, and continues to increase as they do more of it. They become more comfortable with it, and we see that as a real insurance against higher oil prices, and I think higher oil prices tend to drive that. So, yes, I am very pleased to see that that is going to… Rich Wesolowski – Sidoti & Company: (inaudible) average?

The average, I would say, countrywide now, it is in the -- somewhere between 20% and 25%, where it is, was probably 10% less than that. But the other thing that is driving it is just warm mix technology or the lower temperature forming the asphalt really it is environmentally friendly, no smoke, no smell, and you increase the recycle. In Australia, I was the keynote speaker over there at their convention, and it is really -- they are very green and ability of asphalt to be sustainable and recycled and run it with no smoke and no smell certainly sells. Rich Wesolowski – Sidoti & Company: Great. Thanks Don.

Thank you.

Thank you. Our next question is coming from Tom Hayes from Piper Jaffray.

Great. Good morning gentleman. In the release, you mentioned rightsizing the various units, and you provided a little bit of color. I just wonder if you could provide a little bit more insight into some of the work you are doing at the various units to adjust the SG&A for this new -- (inaudible) it seems like a multiyear level of business activity being down.

Well, in some of the businesses we have had to cut pretty deep. Obviously, you try to maintain the sales force, but particularly in the underground businesses, we have certainly suffered a lot there and in some of the aggregate businesses, we have had to make some pretty deep cuts, and there used to be no choice, it is very painful, but it is one of the things we got to do.

Okay, and on the last quarter call you had mentioned that at the time the $32 million recorded on the SG&A was a pretty decent run rate going forward, and with a more muted outlook this quarter going forward than you had last quarter, does that number come down slightly.

It is down slightly, but I might even point out that there is a lot of R&D in that. We are not -- we continue to keep engineering in place and ship them more into new projects and new products. And I guess we see as an opportunity, and with our balance sheet where it is to really strengthen our position so that when we come out of this, we are going to be a much broader and stronger company covering more segments of the market and more markets. I see us three years from now being 40% infrastructure, 40% energy, and 20% mining, not that we intend at all to neglect the infrastructure side. We just see our growth being more in the particularly in the renewable energy and in that part of it.

Okay, then I guess just lastly, historically 3Q to 4Q there has been a drop off in the EPS. Just wondering whether you indicated that this year it would be roughly equal. Just wondering what would be different this year versus in previous years.

We have got more international sales proportionally, about half of our backlog is international and the most of the countries -- a lot of the countries these are shipping to, they’re counter-seasonal to where we are. So, they do want the shipment. I think that's probably the main thing. And plus we had some carryovers, I mentioned this, $26 million that didn’t get shipped, a big part of that will get shipped. So, we see it as being comparable.

Okay, great. Good luck to you next year.

Thank you.

Thank you. Our next question is coming from David Wells from Thompson Research.

Good morning everyone.

Hi David.

First off, starting with the underground business, maybe if you could talk about continuing to see decreases there and some of the drivers. Do you feel like we are reaching a bottom with regards to that business or is there still more pain to come? And you know, what are some of the early indicators that you're looking for to show that the kind of bleeding has stopped?

I guess David the thing that I see is there are two segments of that. The small utility items, I think you know I think we are going to be down there for another two years. It's just -- that's driven by homebuilding and residential, I mean commercial construction. So that segment of it of the small end, I don't see it improving a whole lot. With the price of oil going up and gas strengthening a little bit, there is a disconnect between natural gas and oil prices right now. I mean if you look at the price of natural gas, oil ought to be $43 a barrel. I think the weak dollar is affecting that some because natural gas is domestic, oil is a big part international and being affected by the weak dollar, but there is still a real, real disconnect there. We believe that gas prices are going to kick up. When it kicks up into the six-dollar range you're going to see a lot more drilling going on. There is a lot of gas drilling but there is not enough to get them to buy new rigs. So our -- I guess the two things I see going forward is we're going to be drilling for more natural gas in this country. Number two, when the utility starts switching to natural gas, which they are going to have to do with a lot of these changes in the emission laws coming about. They are going to kick out coal and put in natural gas. They're going to suck these pipelines dry. So there is going to be a lot more natural gas pipelines and distribution systems going in. So for the bigger trenches, the bigger directional drills, the drill rigs those things we believe as gas goes up it will -- that we will see a real return in that business.

All right, that's helpful. And then looking at the parts sales in the quarter, I guess on a sequential basis it picked up a little bit, and I was curious, where you saw, you know, any sort of improvement -- are aggregates volumes improving at kind of the plant level and there is more utilization of equipment that just drawn further parts down the channel or there are other parts of the business that are really driving that?

We are probably seeing the best parts increases both in asphalt and mobile. Aggregate is still weak. I don’t know -- on the aggregate side, we really need to see residential and commercial construction come back for that to get to be strong, but our biggest pickup has probably been in the asphalt and the mobile.

That's helpful, and then as well any color on kind of how concrete plants sales are going, and you know, have they accelerated? Are you seeing more interest at the kind of end-user level for that product?

It's taken a little longer than -- I'm patient with on this particular first plant and we are running it today, making roller compacted concrete. It's a pretty revolutionary concept that we are really excited about. I see the sales of that going to more down project roller compacted concrete dams. Highway projects are still weak. Generally concrete is going to be used on new projects. This plant will be produced in RCC for the Volkswagen parking areas here in Chattanooga at the new Volkswagen plant. There is not much as much highway demand as they are more around the world for dams and projects like that where big high-volume continuous plants would really fit, but we are pretty excited that we've got some unique that'll be that will do well going forward. Smaller versions of that are ideal for bridge construction and things like that that I think will change the rules of the game a little bit in that business.

That's helpful, and then lastly I was curious if you could give any color on you know, what your priorities would be on an acquisition basis, you know, as you look at a fairly tumultuous market, you know, are there assets that you are seeing come to market that you find attractive, and if so any color on where those would fit in with your product portfolio currently?

We've looked at one or two that you know, that would fit the -- still we find that there are still people thinking about two-year-old prices on them and two-year-old performance metrics, and so we see -- we see some books out on companies, but we don't see many of them getting sold. And I guess we look at more how the performance of our company is right now and how we see the next year so and we can't see them as being much different. So the processing I think it still a little unreasonable on some of those that are out there.

All right. Thank you very much.

Thank you.

Thank you. Our next question is coming from Chris Weltzer from Robert W. Baird. Chris Weltzer – Robert W. Baird: Good morning guys.

Good morning Chris. Chris Weltzer – Robert W. Baird: Sorry to lay over this point but just overall clear, when you say fourth-quarter similar to third-quarter you're talking about both revenue and EPS?

Yes. Chris Weltzer – Robert W. Baird: Okay, thank you. Wondering if you could talk a little bit about pricing pressure and your ability to get price internationally. I think historically you talked about being able to get a little bit better margins on equipment you sell internationally. Is that still true?

It's got -- it's certainly been -- it certainly improved with the dollar weakening like it has. I mean it just -- you know, I think people don't realize the swings. Last October, we acquired that company in Australia and it was a dollar and a dime Australian and in three weeks it went to a $1.65. This morning we are back to $1.07. Well, obviously during the six months there we went in to kind of nothing going on. We have been pleased that that little company has remained profitable during this, but now they got a lot of prospects and obviously when they drop, when the dollar weakens it's just like us cutting our price. So it's a lot easier right now for us to be competitive internationally than it has been. Domestic -- we see a lot of processing pressures, more processing pressures domestically than we do internationally. Chris Weltzer – Robert W. Baird: Okay. In your outlook for 2010, you know, being roughly flat with 2009. Does that incorporate, you know, a mix towards more international business relative to domestic, given, you know, your backlog is 50% international at this point?

Yes, I think we will have a, you know, I could see us being up 40% international. Chris, it could be even a little north of that. I think the domestic market is going to be tough with this uncertainty out of Washington. I think that's the major thing. It seems though states are getting a little better shape. They have at least made some adjustments, but the states are still showing on revenue and the federal government is sitting there like they are with the uncertainty of two things, is how much is the funding going to be and where is it going to be spent. It is just the uncertainty that makes people cautious, and so I see it leaning more towards international. Chris Weltzer – Robert W. Baird: Thank you, and then with regards to spending to get ready for Tier 4. Is that going to ramp up, you know, even farther in 2010, and is there any way to quantify how much extra you are going to have to spend?

It's hard to tell. Some of the engines -- some of the big engines we are seeing as much as a 30% and 40% price increase on the things. The biggest thing on the Tier 4 is the envelope that it takes to fit them into a machine is about twice the size of the Tier 3. It is really a sad overreaction. To me Tier 4s will burn more fuel and when you take the sum total, we are probably going to have more machines when it's all over with. Tier 4 can't be sold in most other countries because they don't have the ultra-low sulfur fuel available. So we are going to build the machines to be able to fit Tier 3 and Tier 4 engines in them. If you put a higher sulfur fuel in it, you will trash the engine in about a month. So it's a major change not only for us for anybody building mobile equipment. Chris Weltzer – Robert W. Baird: What about your own R&D spending to get ready for this?

Basically, I guess I'd hate to put a $1 size only, but I can tell you in all the mobile equipment businesses any R&D other than Tier 4 has stopped. We are just -- it paralyzes your R&D. Most of our R&D that's what I would say real productive is in the non-mobile businesses. Everything in mobile just about as you know, in a mobile equipment at underground at American Olivers, at Peterson, all of these things are having to spend a huge amount of time on just refitting the -- redoing the machines to make Tier 4. Chris Weltzer – Robert W. Baird: And is that spending higher in 2010 than it is this year?

It's about the same as this year. Chris Weltzer – Robert W. Baird: Okay, thank you guys.

Thank you.

Thank you. Our next question is coming from Walt Liptak from Barrington Research.

Hi (inaudible). Looks like most of my questions have been answered already but let me just throw in [ph] a couple. You mentioned on the -- under-absorption manufacturing hours down 33% in the quarter. What's the expectation for the fourth quarter for manufacturing hours?

On under-absorption, I don't see it improving a lot, Walt.

Okay, so you'd be down at least 33% in manufacturing hours, right.

It probably will be flat with the third-quarter.

Hey, you got a couple of holidays at Thanksgiving and couple at Christmas.

Yes, yes.

It's always a little bit more difficult operationally with all the holidays and everything.

Yes. Okay. So given that would you think that the under-absorption trough [ph] in the fourth quarter?

Did you say trough?

In terms of like gross margin, do we see a trough gross margin in the fourth quarter? Or do you think the third quarter is the trough?

Yes, we think so, you know. But I don't expect it to be much different from the third-quarter.

Okay, and then let me try one on the cost cuts. Is there, you know, when you talk about cost cuts (inaudible) are there consolidation opportunities to put the two plants together or anything like that to reduce costs.

Typically no. I mean it's -- the problem is we've got different products in each plant. I guess if we felt like long range, it was going to stay in this thing. Yes, there is probably one or two that we would consider something that. This is a cyclic business and its, you know, I've never seen it drop off of a cliff, where we lose 50% of our volume like we have in some of the companies, but I'm also convinced it's not going to last and I think it's with our present balance sheet, we don't see the need of doing any -- you can do some real dumb things in these downturns and overreact, and we're trying to keep on balance and we don't see the need for any consolidations at this point.

Okay, I understand. So given that would you think that in terms of CNA and engineering expense what sort of a run rate we could stay given the discussion about Tier 4.

Yes, I think we've got the same run rate. You know, and there is quite a bit R&D in that, as we said it is Tier 4 and is regular new products, but we expect to stay about the same.

Okay, then one last one. You talked about cash flow and inventory and working capital a little bit. In 2010, would there be more of an -- or is there an incremental focus, would there be an incremental focus on working capital, and if so you know, how much working capital (technical difficulty)?

You know, I guess, I can answer that in two or three ways. We're being very cautious on CapEx going forward, the main CapEx that we spent this year was finishing that plant at American Augers, since we had it started and we are going to be extremely cautious on CapEx for next year. We would generate cash obviously from that. We intend in all of these businesses to get to either maintain or get the inventory levels down and back in back, you know, more, I guess more to this run rate that we've got right now. The only thing it makes me a little cautious in that is as we developed some of these other products we're going to be adding some inventory related to them, but I would think to answer your question you will see a slight drop in inventory.

Okay, thanks very much.

Thank you. Our next question is coming from Kristine Kubacki from Avondale Partners.

Good morning.

Good morning.

Just that most of my questions have been answered, but a little bit more of a bigger picture items, but what's your understanding on the used equipment population. Could we expect an overhang as the economy turns or when we get a Highway Bill or will the age in the use of those equipments drive a replacement cycle?

I think the age of it will drive, you know, a replacement cycle. In the asphalt plant side of it, you don't have a huge amount of used equipment. We in fact, we actually acquired. There is not -- the -- the double barrel is popular enough that there is just not hardly any used ones on the market. We have this year actually bought four used plants and we’ve resold three of them, and so in that area in the mobile equipment and the other we don't see any inordinate increase in the amount of used equipment out there. People are -- now there is you know, you start looking at the grading equipment and excavators. There is a lot in that area but in our business segments we are not overloaded with used equipment right now.

Okay, that's helpful. And then I know it's a little bit early to ask this question, but given how much right-sizing you've done with your operation, what kind of lag would you expect when we get a Highway Bill, does get passed and when you could ramp up production. Or is there enough leeway there as we see things to the workings in Congress that you'd be able to get the production back ramped up?

If they get the bill and bring it on, we can handle it.

Good answer. Thank you very much.

Thank you.

Thank you. Our next question is coming from Morris Ajzenman from Griffin Securities. Morris Ajzenman – The Griffin Securities: Hi guys. Not to beat a dead horse here, but one last shot at this working capital question that keeps on coming up. When I look sequentially from the second to the third quarter, it looks like you generated about $20 million, $25 million in cash basically from reduction in accounts receivable it looks like (inaudible), $20 billion generation from working capital improvement. You know, we've gone around trying to get some sort of handle on how inventories you know, play out going forward, and I guess rest of working capital, but is that $20 million, is that number not a number that is representative that we can see improvements over the next few quarters.

Morris, I see some improvements I guess. The ones it's hard for us is basically these businesses that are all 50%. You know, it's hard to maintain any semblance of manufacturing if you are working that down, and to be frank with you we've got strong balance sheet and we've got the finances we haven't seen the need to cutting it absolutely to the bone. We think when it does come back that would be a major mistake. So as a result, you know, we haven't done anything crazy on getting rid of the inventory to work it down. We realize it's too high but I would rather ride with it for a couple of more quarters before, you know, I think the latch at the end of the tunnel, but I think you're looking out there at the end of next year before that happens if they don't do something with the darn Highway Bill. Morris Ajzenman – The Griffin Securities: And what about Accounts Receivable, that is down sequentially, I think $22 million?

We managed that pretty darn good, and we will continue to do that. We don't see any -- we don't have any problems really with that receivables. Morris Ajzenman – The Griffin Securities: Two quick things, one you talked about R&D being up, but if you gave out a number I missed it. But do you have a number of R&D year-over-year in the third quarter, the increase, and secondly what that R&D number would be without the Tier 4 spending year-over-year?

I think that 900,000 year-over-year but there is -- we expense all of that. So you know, it's not anything that we're capitalizing. Morris Ajzenman – The Griffin Securities: So R&D is up $900,000 year-over-year?

Yes, close to million dollars year-over-year. Morris Ajzenman – The Griffin Securities: Lastly, you know we all know few weeks ago that the Highway Bill expired without renewal. And I'm hearing different things crosscurrents, but what's your take on the current month-to-month spend rate. Is it the same monthly spend rate that was over the past six years, less, what are you seeing out there right now on the interim basis?

Well, I think you got two factors in there. You got number one, the federal level was at $41 billion for the year and the stimulus adds to that, probably about $15 billion this year and about $13 billion next year. So federal level is way up. State-level always probably down as much as the stimulus was in it. So we are seeing year-over-year, I would -- my estimation would be the spending level in the third and fourth quarter of this year would probably be 15% less than it was last year just because the states are spending less. The federal money has helped it, but most of the customers really on highway fire a work are doing all right. There is just no commercial work out there, and as a result it makes the pricing extremely competitive for them. I'd say that you know, as far as our market is concerned, the bigger companies, bigger public companies, are the ones that have really cut back the most are being very cautious on any expenditures. The privately owned entrepreneurs with the tax credits that are out there, the accelerated depreciation they still buy you know our businesses turn more and more to the privately owned entrepreneur type operators than to the big companies as far as the mix of business. Morris Ajzenman – The Griffin Securities: Thank you.

Did that answer your question? Morris Ajzenman – The Griffin Securities: Yes, thank you.

Thank you.

Thank you. Our next question is coming from Alan Brochstein from AB Analytical Services.

Good morning.

Hi, thanks for taking my call and gosh, everybody is trying to hit this inventory thing and it's been my key focus. I'd set a slightly bigger picture question on maybe a different angle, and that is, you know, I understand what you're doing. This stuff doesn’t become obsolete, you can afford to carry it. I guess and so you've made that decision. I guess I'm curious though -- are your competitors doing the same thing? Or is there a chance you're missing out on some sales because your competitors are blowing stuff out at lower prices. What's your view on the competitive situation?

There is a different group of competitors in each of our segments. I really -- let's take the asphalt plant side of it. We've seen we have gained market share this year. We feel pretty good on that. The inventory levels in that is not -- it's not because it's not sold, it's because of the customer not taking it. And I will repeat, in Astec Inc., you know, we are setting our $35 million, $40 million of inventory on asphalt plants, but every bit of that is sold. It's just not shipped yet and we are waiting on shipments. So when I give that number that's parts and everything else. So that's not a problem and not one we need to adjust. Roadtec, we had a tremendous buildup in inventory or big buildup in the fourth quarter of last year. We have pretty well worked that down and we'll continue probably at this -- it's at a comfortable level now, and we don't see that as being a problem. In the track-mounted crushers some of those we've got more than we need in inventory, and are slowly working that down in the trenchers, the little utility trenchers, we got more than we need. In the big trenchers we got more than we need. Those are two areas that is overpopulated probably in the big -- in the wood chippers, we probably got more than we need in that. So it's you know, I don't see it as a major problem other than one or two companies. It's opportunity to work down but as a result of again the fact that we are all right on cash rather than dump inventory, I'd rather wait and get the right price out of it and sell it as we can.

Pardon me. I just wanted to make sure I understand this correctly. Essentially there is no demand. So it's not that the demand is being filled by somebody -- an irrational competitor, who maybe doesn't have the great balance sheet that you guys have.

I think you're correct. I mean it's just a lack of demand, I think.

It makes more sense to cut your prices if they're going to buy it at a higher price eventually.

Right.

Okay, and my second question is I understand you all go through distribution for your international to a great degree, right?

That's correct.

So your gross margins are probably going to come down a little bit as you ship more to international with the margin. But I was really beneath the line, will that change your net margins at all?

No, and typically the international that we go through is more of a -- I wouldn't call them brokers but they're not stocking dealers, they are more of representatives you know, but they do not stock the equipment. Few exceptions, we have a Russian dealer that does, but most of it on the mobile equipment they stock some, but again there are limited on how much credit we give them and --

It's an agent commission versus a dealer discount.

Right.

Okay, so I guess as we think about next year you guys were kind enough to share your preliminary views that there would be kind of a flat top line kind of year with the shift towards international. I'm just trying to look at some of the factors that might affect your profitability and you know, the R&D is a little confusing, I guess because you mentioned some of the R&D is not really productive. You just have to do it some of the stuff. I think you said R&D will be kind of flat if I understood, but you also have this impact of the tax credit -- kind of helped your earnings this year. So I guess just overall R&D's impact including the tax effect for year-over-year should we view that since you made this bigger spend next year, there's a possibility of less of an impact next year?

I think on balance you know, there'll be less R&D on the Tier 4 engines as we face demand. Probably there will be more warranty with the Tier 4 that will come in that is an expense that we expect to have. We always have as these Tier changes. On balance, you know if I take all the companies, I guess my best gut feeling right now is our performance next year is pretty well going to be flat. I just -- I don't think it is going to be --

The bottom line also.

Yes.

Okay, right. And then just one last question, you were really excited when oil prices were higher. I can’t remember, maybe it's more natural gas than oil but this custom job that you did to help do some shallow drilling. Was that oil and gas or just gas?

It's both, but yes we are quite excited that that still will come back. I mean we built a factory to build.

Right, and I just wanted to -- it was changing because with oil prices jumping up, and even I guess it is too early to tell that natural gas prices seem to be picking up a little bit. I am just wondering if you're having any luck getting more customers for that type of thing at least in your backlog?

We saw it basically, Alan, just totally stopped for about nine months. I mean zero. We are seeing more prospects, more quotations right now. There is lot of gas being discovered and being drilled but all of the rigs that we built are working, but nobody is yet putting down the money to buy another one. I guess what I think is if we see some sustained time at about six dollars a thousand [ph] on natural gas, and with all staying about where it is, you're going to see a pretty good pickup in that business, but right now there are still people trying to overcome the shock of what happened last October.

Right. Do you think that the growth in that business is going to be your existing customers doing more or do you have any success in selling the concept to other customers?

I think both. We've got a lot of people looking at these rigs, and I think there is opportunity for both existing and new customers.

Okay, and then one last question. I appreciate you taking all of these. You talked about this $12 million pellet plant that's potentially going into Europe primarily at least initially.

It will be here in the states but shipping their products to Europe.

Right. How many of those -- what's the size of that market potentially you think?

We think it could potentially be huge but it's you know, it depends a lot in the states here what they do on this cap and trade thing, but I was telling the guys one utility, we are talking about right now, most utility power plants are coal-fired and they just blow the coal into furnace. If you take one of our asphalt plant burners, we can burn oil, gas, coal, or wood. So it is a multiple fuel burner and we can burn various portions of it in any time. We are looking at one utility of fitting three. They have 12 burners on one power plant. We fit four of these asphalt plant burners on it and fired it with wood on those four burners take a half million tons of pellets a year. And that's -- it could eat up a lot and lot of wood fuel. So there is -- if the utilities, which are going to have to go renewable it looks like, I know in Australia they just passed the 20% renewable. In Europe, it's about 10%, it would be up to 20% in the 2020. As all of these kick in, there is going to be a big demand for pellet plants.

Okay, well thanks and thank you for taking my call.

Yes.

Thank you. Our next question is a follow-up from Arnie Ursaner from CJS Securities.

Hi Arnie. Arnie Ursaner – CJS Securities: I guess we are going to try to beat this to death a little bit more. On your inventory can you quantify what the dollar value of working processes and the dollar value of finished goods?

No Arnie. You think we keep records about that, don't you? What do you want to know?

Finished goods and work in process. Arnie Ursaner – CJS Securities: Obviously, steel pricing is down. So if the volume of steel inventory you have where the same your steel inventories would have been much lower. We know you have the impact of the acquisition, which you quantified. What I'm trying to get a feel for is the dollar value of finished goods inventories versus work in process.

Finished goods was -- at the current year was $98 million versus $66 million last year. Arnie Ursaner – CJS Securities: Okay.

(inaudible) was $56 million versus $54 million. Arnie Ursaner – CJS Securities: Got it.

Rolls 109 versus 129.

109 this year versus 129 last year. Arnie Ursaner – CJS Securities: Okay. And final question from me is again, I'm trying to -- obviously you mentioned your view that next year could be flattish with pretty strong performance from international, up 40% or so. I guess I'm trying to focus on the domestic outlook that you're looking at. In this year, we had the benefit of the stimulus package. Contractors at least had some carryover work in commercial or nonresidential commercial activity. As I look towards next year, it seems to me we may or may not have any additional stimulus package next year, and the Highway Bill not likely to be voted on until after the November elections. The states continuing under pressure. It would seem to be your contractors are going to be extremely hard-pressed to place virtually any orders until 2011, am I thinking about 2010 the wrong way in your opinion?

No. I'd say that's about where I am. That's why I say I think next year domestically is going to be down, but it'll be up internationally and the broadness of our products will be better. I think that Arnie if I have to weigh it all, I think the oil and gas business will come back next year or be better. I think we will start to see some benefit of these renewable fuels. I think that international will be quite a bit stronger, but I think domestically it will be weaker. Arnie Ursaner – CJS Securities: Okay, thank you very much.

Thank you. At this time we have no further questions. I'd like to turn the call back over to the speakers for any closing comments.

All right. Thank you Shane. We appreciate your participation on our third quarter conference call. 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 November 3, 2009, and an archived web cast will be available for 90 days. The transcript will be available under the investor relations section of the Astec industries website within the next seven days. All of that information is contained in the news release that was sent out earlier today. We appreciate your time. Thank you.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.