by the Board) following the (i) public announcement that a person or group of affiliated or associated persons (the “Acquiring Person”) has acquired, obtained the right to acquire, or otherwise obtained beneficial ownership of 15% or more of the then outstanding shares of Common Stock, or (ii) commencement of a tender offer or exchange offer that would result in an Acquiring Person beneficially owning 15% or more of the then outstand- ing shares of Common Stock. The Board of Directors may terminate the Rights without any payment to the holders thereof at any time prior to the close of business ten business days following announcement by the Company that a person has become an Acquiring Person. The Rights, which do not have voting power and are not entitled to dividends, expire on December 21, 2005. In the event of a merger, consolidation, statutory share exchange or other transaction in which shares of Common Stock are exchanged, each Unit of Preferred Stock will be entitled to receive the per share amount paid in respect of each share of Common Stock. 

## 14. Financial Instruments 

Credit Risk - The Company sells products to a wide variety of customers. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains an allowance for doubtful accounts at a level which management believes is sufficient to cover potential credit losses. As of December 31, 2002, concentrations of credit risk with respect to receivables are limited due to the wide variety of customers. 

Fair Value of Financial Instruments - The book value of the Company’s financial instruments approximates their fair value. Financial instruments include cash, accounts receivable, finance receivables, accounts payable, long- and short-term debt and one interest rate swap agreement. Excluding the $80,000,000 senior secured note, the Company’s short and long-term debt is floating rate debt and, accordingly, book value approximates its fair value. The fair value of amounts outstanding under the senior secured note agreement are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements and were $78,822,000 at December 31, 2002. 

Derivative Financial Instruments - The Company only uses derivatives for hedging purposes. The Company enters into interest-rate swap agreements that effectively convert a portion of its floating-rate debt to a fixed rate, thus reducing the impact of interest rate changes on future income. On April 6, 2000, the Company’s cap- tive finance subsidiary, Astec Financial Services, Inc., entered into a swap agreement with a notional amount of $7,500,000, with a fixed interest rate of 7.08 percent, that is effective for five years. At December 31, 2002 the fair value of the $7,500,000 interest rate swap was $(947,494). The fair value of the swap agreement is based upon quoted market prices. 

## 15. Operations by Industry Segment and Geographic Area 

The Company has four reportable operating segments. These segments are combinations of business units that offer different products and services. The business units are each managed separately because they man- ufacture and distribute distinct products that require different marketing strategies. A brief description of each segment is as follows: 

Asphalt Group - This segment consists of three operating units that design, manufacture and market a com- plete line of portable, stationary and relocatable hot-mix asphalt plants and related components and a variety of heaters, heat transfer processing equipment and thermal fluid storage tanks. The principal purchasers of these products are asphalt producers, highway and heavy equipment contractors and foreign and domestic governmental agencies. 

Aggregate and Mining Group - This segment consists of eight operating units that design, manufacture and market a complete line of rock crushers, feeders, conveyors, screens and washing equipment. The principal purchasers of these products are open mine and quarry operators. 

Mobile Asphalt Paving Group - This segment consists of two operating units that design, manufacture and mar- ket asphalt pavers, asphalt material transfer vehicles, milling machines and paver screeds. The principal pur- chasers of these products are highway and heavy equipment contractors and foreign and domestic governmental agencies. 

Underground Group - This segment consists of two operating units that design, manufacture and market auger bor- ing machines, directional drills, fluid/mud systems, chain and wheel trenching equipment, rock saws, road miners and 

