Segment profit for 2002 decreased $11,673,000, or 170.8%, to a loss of $4,837,000 from a net profit of $6,836,000 for 2000, due primarily to a lack of utilization of capacity and increased selling expenses from efforts focused on generating sales to offset the negative impact of the communications industry. 

## Liquidity and Capital Resources 

Total short-term borrowings, including current maturities of long-term debt, were $3,220,000 at December 31, 2002, compared to $2,368,000 at December 31, 2001. A financing agreement for imported, purchased inven- tory items accounted for $886,000 and $964,000 of the short-term borrowings at December 31, 2002 and 2001, respectively, while outstanding Industrial Development Revenue Bonds accounted for $500,000 of the current maturities of long-term debt at December 31, 2002 and December 31, 2001. Net cash provided by operating activities for the twelve months ended December 31, 2002 was $32,837,000 compared to $1,452,000 for the twelve months ended December 31, 2001. The increase in net cash provided by operating activities is primarily due to decreases in inventory and trade receivables, along with increases in trade accounts payable and other accrued liabilities during 2002. 

Long-term debt, less current maturities, increased to $130,645,000 at December 31, 2002 from $127,285,000 at December 31, 2001. At December 31, 2002, $80,000,000 was outstanding under the Note Purchase Agreement, $31,902,000 was outstanding under the revolving credit facility and $21,300,000 was outstanding under the long-term principal portion of Industrial Revenue Bonds. The increase in debt from December 31, 2001 related primarily to funding working capital needs for the Company. 

On September 10, 2001, the Company entered into an unsecured $125,000,000 revolving loan agreement with a syndicate of banks, which expires on September 10, 2004. At December 31, 2002, the Company was utilizing $31,902,000 of the amount available under the credit facility for borrowing and an additional $21,300,000 to support outstanding letters of credit (primarily for industrial revenue bonds). At the time of enter- ing into the credit facility, Astec Industries, Inc. was able to borrow up to $105,000,000 while Astec Financial Services, Inc., the Company’s captive finance company, was able to borrow up to $50,000,000, with the total borrowing by both companies limited to $125,000,000. Advances to Astec Financial Services, Inc. under this line of credit were limited to "Eligible Receivables" of Astec Financial Services, Inc. as defined in the credit agreement that governs the credit facility. 

Principal covenants under the loan agreement include (i) the maintenance of minimum levels of net worth, leverage and fixed charge coverage ratios, (ii) a limitation on capital expenditures and rental expense, (iii) a prohibition against the payment of dividends and (iv) a prohibition on large acquisitions except upon the con- sent of the lenders. There is a provision in the loan agreement allowing the borrowing of $10,000,000 from any source for needs beyond the revolver provisions. 

As of December 31, 2001, the Company was not in compliance with two financial ratio covenants contained in its credit facility. These covenant violations were waived by a required majority of the members of the Company’s banking syndicate effective December 31, 2001. On March 12, 2002, the Company executed the first amendment to the credit facility, which decreased the maximum amount available from $125,000,000 to $100,000,000, relaxed certain financial ratio covenants for 2002, provided security for the lenders in certain sit- uations, and added a .375% interest rate surcharge, and waived the violations of financial ratios under the orig- inal agreement. A second amendment to the credit agreement, dated May 13, 2002, waived non-compliance of the financial covenants for the quarter ended March 31, 2002 and amended the leverage ratio sliding scale on which interest and various fee rates are determined. Borrowings under the credit facility, as amended by the second amendment to the credit agreement, bear interest at a rate equal to the London Interbank Offering Rate ("LIBOR") plus from 1.0% to 3.25%, depending on the leverage ratio as defined by the credit agreement and applied to the sliding scale. On August 7, 2002, the Company entered into a third amendment to the credit agreement. The third amendment waived non-compliance with the leverage and fixed charge coverage ratio covenants as of June 30, 2002. 

At September 30, 2002 the Company and Astec Financial Services were not in compliance with the leverage and fixed charge coverage ratio covenants of the amended revolving credit facility. On October 24, 2002, the Company and Astec Financial Services entered into a forbearance agreement with its lenders under the credit agreement and Bank One, NA, as agent under the credit agreement. Under the forbearance agreement, among other things, (i) the total commitment available to the Company and Astec Financial Services under the credit agreement was reduced from $100,000,000 to $75,000,000 and (ii) the Company was prohibited from making any acquisitions, other than specified acquisitions pursuant to agreements to which the Company had already entered. On November 14, 2002, the Company entered into the fourth amendment to the credit facility, which waived the violations of financial ratios for the quarter ended September 30, 2002; decreased the maxi- mum commitment available from $75,000,000 to $58,200,000; relaxed through June 30, 2003 the two financial ratio covenants that were breached as of September 30, 2002; added a minimum earnings before interest expense, income tax expense, depreciation, and amortization covenant for the fourth quarter of 2002; provided additional security to the lenders in the form of real estate mortgages on certain of the Company’s property; 

