10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005.

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

Commission File Number 0-14714

Astec Industries, Inc.

(Exact name of registrant as specified in its charter)

Tennessee	62-0873631
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1725 Shepherd Road, Chattanooga, Tennessee	37421
(Address of principal executive offices)	(Zip Code)

(423) 899-5898

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ý NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES ý NO o

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding at May 3, 2005
Common Stock, par value $0.20	20,126,634

ASTEC INDUSTRIES, INC.

INDEX

		Page Number
PART I - Financial Information
Item 1. Financial Statements
	Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004	1
	Consolidated Statements of Income for the Three Months Ended March 31, 2005 and 2004	2
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004	3
	Notes to Unaudited Consolidated Financial Statements	4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		12
Item 3. Quantitative and Qualitative Disclosures about Market Risk		21
Item 4. Controls and Procedures		21
PART II - Other Information
Item 1. Legal Proceedings		21
Item 6. Exhibits		22

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Astec Industries, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands)
Account Description	March 31, 2005 (Unaudited)	December 31, 2004 (Note 1)
ASSETS
Current Assets:
Cash and cash equivalents	$9,426	$8,349
Trade receivables, net	63,880	44,215
Other receivables	1,347	1,073
Inventories	130,059	126,970
Prepaid expenses and other	16,452	17,877
Total current assets	221,164	198,484
Property and equipment - net	97,985	96,526
Goodwill	19,099	19,126
Assets held for sale	4,886	4,886
Other assets	5,723	5,796
Total assets	$348,857	$324,818
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Revolving credit loan	15,393	$8,517
Notes payable and current maturities of long-term debt	3,310	3,310
Accounts payable - trade	43,551	35,451
Accrued product warranty	4,933	4,789
Other accrued liabilities	43,276	39,929
Total current liabilities	110,463	91,996
Long-term debt, less current maturities	24,655	25,857
Other non-current liabilities	14,461	15,134
Minority interest in consolidated subsidiary	530	575
Total shareholders' equity	198,748	191,256
Total liabilities and shareholders' equity	$348,857	$324,818

See Notes to Consolidated Financial Statements

Astec Industries, Inc. Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited)
		Three months ended
		March 31,
		2005	2004
Net sales		$161,635	$135,727
Cost of sales		126,602	106,895
Gross profit		35,033	28,832
Selling, general, administrative and engineering expenses		23,249	19,875
Income from operations		11,784	8,957
Interest expense		896	1,078
Other income (expense), net		32	(66)
Income from continuing operations before income taxes		10,920	7,813
Income taxes on continuing operations		4,106	2,991
Minority interest in earnings		22	10
Income from continuing operations		6,792	4,812
Income from discontinued operations		-	1,055
Income taxes on discontinued operations		-	415
Net income		$6,792	$5,452
Earnings per common share
Income from continuing operations:
	Basic	$0.34	$0.25
	Diluted	$0.33	$0.24
Income from discontinued operations:
	Basic	$ -	$0.03
	Diluted	$ -	$0.03
Net income:
	Basic	$0.34	$0.28
	Diluted	$0.33	$0.27
Weighted average common shares outstanding
	Basic	19,899,819	19,640,752
	Diluted	20,415,669	19,936,070

See Notes to Consolidated Financial Statements

Astec Industries, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Three months ended March 31,
	2005	2004
Cash flows from operating activities:
Net income	$6,792	$5,452
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,615	3,025
Provision for doubtful accounts	264	163
Provision for inventory reserve	842	825
Provision for warranty reserve	2,632	2,535
Deferred income tax provision	636	3,891
(Gain) loss on sale and disposition of fixed assets	9	(19)
Minority interest in (earnings) of subsidiary	(22)	(10)
(Increase) decrease in:
Trade and other receivables	(20,210)	(24,508)
Inventories	(3,931)	(571)
Prepaid expenses and other	696	1,142
Other non-current assets	(5)	(1,299)
Increase (decrease) in:
Accounts payable	8,100	14,451
Accrued product warranty	(2,488)	(1,779)
Other accrued liabilities	116	2,598
Income taxes payable	2,948	1,745
Other	115	114
Net cash provided (used) by operating activities	(891)	7,755
Cash flows from investing activities:
Proceeds from sale of property and equipment - net	9	22
Collections of finance receivables	21	17
Repayments of notes receivable	10	44
Expenditures for property and equipment	(4,245)	(683)
Net cash used by investing activities	(4,205)	(600)
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit agreement	6,876	(1,338)
Repayments under loan and note agreements	(1,202)	(2,657)
Purchase of Company shares by supplemental executive retirement plan	(56)	(57)
Proceeds from issuance of common stock	1,156	84
Net cash provided (used) by financing activities	6,774	(3,968)
Effect of exchange rate changes on cash	(601)	419
Net increase in cash and cash equivalents	1,077	3,606
Cash and cash equivalents at beginning of period	8,349	9,735
Cash and cash equivalents at end of period	$9,426	$13,341

See Notes to Consolidated Financial Statements

ASTEC INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Act of 1933. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

Certain reclassifications were made to the prior year presentation to conform to the current year presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Astec Industries, Inc. and subsidiaries annual report on Form 10-K for the year ended December 31, 2004.

Recent Accounting Pronouncements

As permitted under Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, the Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and accordingly, recognizes no compensation expense for the stock option grants as long as the exercise price is equal to or more than the fair value of the shares at the date of the grant. Because all option grants for 2004 and 2003 were at or above the fair value of the shares, no stock-based employee compensation cost is reflected in net income for those years.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment ("SFAS 123R"), which replaces SFAS No. 123 and supersedes APB No. 25. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first interim or annual period after January 1, 2006, with early adoption encouraged. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. Under SFAS 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include prospective and retroactive adoption options. Under the retroactive option, prior periods may be restated either as of the beginning of the year of a doption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. The Company is evaluating the requirements of SFAS 123R and expects that the adoption of SFAS 123R may have a material impact on the Company's consolidated results of operations and earnings per share. The Company has not yet determined the method of adoption or the effect of adopting SFAS 123R, and it has not determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS 123.

On October 22, 2004, President Bush signed the American Jobs Creation Act of 2004 (the "Jobs Creation Act"). The Jobs Creation Act provides a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. In return, the Jobs Creation Act also provides for a two-year phase-out (except for certain pre-existing binding contracts) of the existing Extraterritorial Income (ETI) exclusion tax benefit for foreign sales, which the World Trade Organization (WTO) ruled, was an illegal export subsidy. The European Union (EU) believes that the Jobs Creation Act fails to adequately repeal the illegal export subsidies because of the transitional provisions and has asked the WTO to review whether these transitional provisions are in compliance with their prior ruling. It is not possible to predict what impact this issue will have on future earnings pending the final resolution of this matter. Additionally, the Jobs Creation Act creates a temporary incen tive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85% dividend received deduction for certain dividends from controlled foreign corporations.

On December 21, 2004, FASB Staff Position (FSP) FAS 109-1, "Application of FASB Statement No. 109, Accounting for Income Taxes", to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, was issued. FSP FAS 109-1 clarifies that this tax deduction should be accounted for as a special deduction in accordance with Statement 109. As such, the special deduction has no effect on deferred tax assets and liabilities existing at the date of enactment. Rather, the impact of this deduction will be reported in the period in which the deduction is claimed on our tax return beginning in 2005. Although formal regulations are still pending, the Company has incorporated the expected impact of the new act in its first quarter tax provision. The impact of the tax act was not material to the first quarter financial results, and management does not believe the impact will be material to the 2005 financial statements.

On December 21, 2004, FSP FAS 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004," was issued. FSP 109-2 provides companies additional time, beyond the financial reporting period during which the Jobs Creation Act took effect, to evaluate the Jobs Creation Act's impact on a company's plan for reinvestment or repatriation of certain foreign earnings for purposes of applying Statement 109. FSP 109-2 was effective upon issuance. As of March 31, 2005, management had not decided on whether, and to what extent the Company might repatriate foreign earnings, and accordingly, the financial statements do not reflect any provisions for taxes on unremitted foreign earnings. Management has not yet completed its analysis of the Jobs Creation Act and at this time is unable to determine its effect on the financial statements.

Note 2. Stock-based Compensation

The following summary presents the Company's net income and per share earnings that would have been reported had the Company determined stock compensation cost using the fair value method of accounting set forth under SFAS 123. There is no stock-based employee compensation cost in net income as reported.

The pro forma impact on net income shown below may not be representative of future effects.

	(in thousands, except per share amounts)
	Three months ended March 31,
	2005	2004
Net income, as reported	$6,792	$5,452
Stock compensation expense under SFAS 123, net of taxes	(99)	(17)
Adjusted net income	$6,693	$5,435
Basic earnings per share, as reported	$0.34	$0.28
Stock compensation expense under SFAS 123, net of taxes	-	-
Adjusted basic earnings per share	$0.34	$0.28
Diluted earnings per share, as reported	$0.33	$0.27
Stock compensation expense under SFAS 123, net of taxes	-	-
Adjusted diluted earnings per share	$0.33	$0.27

Note 3. Receivables

Receivables are net of allowances for doubtful accounts of $2,238,000 and $2,093,000 for March 31, 2005 and December 31, 2004, respectively.

Note 4. Inventories

Inventories are stated at the lower of first-in, first-out cost or market and consist of the following:

	(in thousands)
	March 31, 2005	December 31, 2004
Raw Materials	$58,632	$ 58,066
Work-in-Process	32,327	28,773
Finished Goods	31,318	28,869
Used Equipment	7,782	11,262
Total	$130,059	$ 126,970

Note 5. Earnings Per Share

Basic and diluted earnings per share are calculated in accordance with SFAS No. 128. Basic earnings per share exclude any dilutive effects of options, warrants and convertible securities.

The following table sets forth the computation of basic and diluted earnings per share:

		Three Months Ended March 31,
		2005	2004
Numerator:
	Income from continuing operations	$6,792	$4,812
	Income from discontinued operations	-	640
	Net income	$6,792	$5,452
Denominator:
	Denominator for basic earnings per share	19,899,819	19,640,752
Effect of dilutive securities:
	Employee stock options	399,933	192,520
	Supplemental Executive Retirement Plan	115,917	102,798
Denominator for diluted earnings per share		20,415,669	19,936,070
Income from continuing operations:
	Basic	$0.34	$0.25
	Diluted	$0.33	$0.24
Income from discontinued operations:
	Basic	-	$0.03
	Diluted	-	$0.03
Net income:
	Basic	$0.34	$0.28
	Diluted	$0.33	$0.27

For the three months ended March 31, 2005 and 2004, options of approximately 1,230,000 and 2,208,000, respectively, were antidilutive and were not included in the diluted EPS computation.

Note 6. Property and Equipment

Property and equipment is stated at cost. Property and equipment is net of accumulated depreciation of $93,871,000 and $91,537,000 as of March 31, 2005 and December 31, 2004, respectively.

Note 7. Comprehensive Income

Total comprehensive income for the three months ended March 31, 2005 and 2004 was $6,218,000 and $5,883,000, respectively.

The components of comprehensive income or loss for the periods indicated are set forth below:

	(in thousands)
	Three months ended March 31,
	2005	2004
Net income	$6,792	$5,452
Net increase in accumulated fair value of derivative financial instruments	115	115
Increase (decrease) in foreign currency translation	(689)	316
Total comprehensive income	$6,218	$5,883

Note 8. Contingent Matters

Certain customers have financed purchases of Astec products through arrangements in which the Company is contingently liable for customer debt of approximately $15,285,000 and for residual value guarantees aggregating approximately $1,305,000 at March 31, 2005 and contingently liable for customer debt of approximately $16,262,000 and for residual value guarantees aggregating approximately $1,305,000 at December 31, 2004. The General Electric Capital Corporation credit facility dated May 14, 2003 limits contingent liabilities or guaranteed indebtedness created after May 14, 2003 to an aggregate total of $5,000,000 at any time, or to $2,000,000 for any one customer. As of March 31, 2005, guaranteed indebtedness created subject to the current loan agreement dated May 14, 2003 was $304,000. At March 31, 2005, the maximum potential amount of future payments for which the Company would be liable is equal to $16,590,000. Because the Company does not believe it will be called on to fulfill any of these contingencies, the carrying amounts on the consolidated balance sheets of the Company for these contingent liabilities are zero.

In addition, the Company is contingently liable under the General Electric Capital Corporation credit agreement for letters of credit of approximately $16,332,000, of which $9,338,000 is related to Industrial Revenue Bonds. Under the Company's credit facility, the terms of letters of credit are limited to one year. Under the credit facility of the Company's South African subsidiary, the Company is contingently liable for approximately $288,000 in performance and retention bonds. As of March 31, 2005, the maximum potential amount of future payments for which the Company would be liable is approximately $16,620,000, of which $9,200,000 is recorded as debt in the accompanying consolidated balance sheet.

Management has reviewed all claims and lawsuits and, upon the advice of counsel, has made adequate provision for any estimable losses. However, the Company is unable to predict the ultimate outcome of the outstanding claims and lawsuits.

Note 9. Segment Information

	(in thousands)
	Three months ended
	March 31, 2005
	Asphalt Group	Aggregate and Mining Group	Mobile Asphalt Paving Group	Underground Group	All Others	Total
Revenues from external customers	$53,535	$57,845	$28,807	$21,448	-	$161,635
Intersegment revenues	1,886	4,205	1,279	-	1,098	8,468
Gross profit (loss)	10,657	13,601	7,015	3,774	(14)	35,033
Gross profit percentage	19.9%	23.5%	24.4%	17.6%	-	21.7%
Segment profit (loss)	$5,656	$5,184	$3,430	$157	$(7,549)	$6,878

	(in thousands)
	Three months ended
	March 31, 2004
	Asphalt Group	Aggregate and Mining Group	Mobile Asphalt Paving Group	Underground Group	All Others	Total
Revenues from external customers	$43,263	$50,356	$24,131	$17,977	-	$135,727
Intersegment revenues	1,831	1,435	393	-	-	3,659
Gross profit	8,653	12,171	6,130	2,122	(244)	28,832
Gross profit percentage	20.0%	24.2%	25.4%	11.8%	-	21.2%
Segment profit (loss)	$4,296	$5,128	$2,728	$(636)	$(6,624)	$4,892

Reconciliation of the reportable segment totals for profit or loss to the Company's consolidated totals is as follows:

	(in thousands)
	Three months ended March 31,
	2005	2004
Profit:
Total profit for reportable segments	$14,427	$11,516
Other profit (loss)	(7,549)	(6,624)
Total profit	6,878	4,892
Minority interest in earnings	(22)	(10)
Recapture (elimination) of intersegment profit	(64)	(70)
Income from continuing operations	6,792	4,812
Income from discontinued operations, net of tax	-	640
Consolidated net income	$6,792	$5,452

Note 10. Discontinued Operations

On June 30, 2004, the Company completed the sale and transfer of substantially all of the assets and substantially all of the liabilities of Superior Industries of Morris, Inc. The adjusted sales price at the closing date was approximately $23,600,000. Discontinued operations, after tax, are presented as discontinued operations in the Consolidated Statements of Income, as required by SFAS No. 144.

The carrying amounts of the major classes of assets and liabilities disposed on June 30, 2004 were as follows:

		2004
Assets:
	Cash	$ 118,000
	Accounts receivable	3,636,000
	Inventory	2,736,000
	Prepaid and other assets	32,000
	Property and equipment	8,154,000
	Goodwill	2,438,000
Total assets		17,114,000
Liabilities:
	Accounts payable	3,141,000
	Other liabilities	836,000
Total liabilities		3,977,000
Net assets and liabilities		$13,137,000

As of March 31, 2005 the Company retained on its books prepaid assets of $145,000, and taxes payable of $1,218,000 which relate to the operations of Superior Industries of Morris, Inc. prior to disposition.

Note 11. Legal Matters

There have been no material developments in legal proceedings previously reported. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contingencies" in Part I - Item 2 of this Report.

Note 12. Seasonality

Approximately 25% of the Company's business volume typically occur during the first three months of the year. During the normal seasonal trend, the first three quarters of the year are the Company's stronger quarters for business volume, with the fourth quarter normally being the weakest quarter.

Note 13. Financial Instruments

For the three months ended March 31, 2005, the Company had Other Comprehensive Income ("OCI") amortized through interest expense of approximately $115,000. Monthly amortization of OCI through interest expense is expected to approximate $38,000 through April 2005.

Note 14. Goodwill

At March 31, 2005 and December 31, 2004, the Company had unamortized goodwill of approximately $19,099,000 and $19,126,000, respectively.

The changes in the carrying amount of goodwill by operating segment for the quarter ended March 31, 2005 are as follows:

	(in thousands)
	Asphalt Group	Aggregate and Mining Group	Mobile Asphalt Paving Group	Underground Group	Total
Balance December 31, 2004	$ 1,157	$16,323	$ 1,646	$ -	$19,126
Foreign currency translation		(27)			(27)
Balance March 31, 2005	$ 1,157	$16,296	$ 1,646	$ -	$19,099

Note 15. Long-term Debt

On May 14, 2003, the Company refinanced its revolving credit facility and senior note agreement with new credit facilities of up to $150,000,000, secured by the Company's assets. The Company entered into a credit facility of up to $145,000,000 with General Electric Capital Corporation ("GECC"), while the Company and its Canadian subsidiary, Breaker Technology, Ltd., entered into a credit facility of up to $5,000,000 with General Electric Capital Canada, Inc. ("GEC Canada"). As part of the $145,000,000 GECC agreement, the Company entered into a term loan in the amount of $37,500,000 with an interest rate of one-percent (1%) above the higher of the Wall Street Journal prime rate and the Federal Funds Rate plus one-half of one percent (1/2%) or, at the election of the Company, three-percent (3%) above the London Interbank Offered Rate ("LIBOR"). The term loan maturity date is May 14, 2007. In addition to the required quarterly term-loan payments, during 2004, the Company made additional t erm-loan payments of approximately $11,134,000 related to the sale of certain assets and the release of certain assets as term loan security. As a result of these payments, the term loan was re-amortized. The term loan currently requires quarterly principal payments of $702,485 on the first day of each quarter, and a final payment of the principal balance due on May 14, 2007.

The May 14, 2003 credit agreement also included a revolving credit facility of up to $107,500,000, of which available credit under the facility is based on a percentage of the Company's eligible accounts receivable and inventories. Availability under the revolving facility is adjusted monthly and interest is due in arrears. The revolving credit facility has a maturity date of May 14, 2007 and at inception, the interest rate on the revolving credit loan was one-percent (1%) above the higher of the Wall Street Journal prime rate and the Federal Funds Rate plus one-half of one percent (1/2%) or, at the election of the Company, three-percent (3%) above LIBOR. The credit facility contains certain restrictive financial covenants relative to operating ratios and capital expenditures.

On September 30, 2003, related to the syndication of the loan by GECC, the Company entered into an amendment to the credit agreement that reduced the availability under the credit facility from $107,500,000 to $82,500,000. In addition, the amendment increased the interest rate on the term loan and the revolving facility to one and one-half (1.5%) percent above the higher of Wall Street Journal prime rate and the Federal Funds Rate plus one-half of one percent (1/2%) or, at the election of the Company, to three and one-half (3.5%) percent above LIBOR. The Company requested the reduction in the revolving credit facility to reduce the fees paid for the daily available, but unused portion of the revolving facility.

On October 29, 2003, related to the syndication of the loan by GECC, the Company amended its credit agreement to, among other things: (1) raise the threshold of required lender approval to at least eighty-one percent (81%) for certain material amendments to the credit agreement; and (2) require any over-advances (over the borrowing base formula contained therein) be repaid, at the latest, within sixty (60) days. On March 3, 2004, the Company amended its credit facility to revise the fixed charge coverage ratio for the second, third and fourth quarters of 2004.

On April 1, 2005, the Company entered into the sixth amendment to the credit agreement that amended interest rates on the GECC revolving and term loan facilities to more favorable rates than those rates under the previous terms. Under the sixth amendment, interest rates are based on applicable index rates plus a sliding scale of applicable index margins from zero to 0.75%, or at the option of the borrower, the LIBOR margin plus an applicable index margin from 2.0% to 2.75% based on a level of total funded debt ratio. In addition, the amendment permits the Company to hold inventory notes or customer financing of no more than $4,000,000 at any time.

The Company was in compliance with the financial covenant requirements under its credit facility as of March 31, 2005.

The Company's Canadian subsidiary, Breaker Technology Ltd, has available a credit facility issued by GEC Canada dated May 14, 2003 with a term of four years for $5,000,000 to finance short-term working capital needs, as well as to cover the short-term establishment of letter of credit guarantees. At March 31, 2005, Breaker Technology Ltd had a balance of approximately $259,000 under the credit facility and approximately $298,000 in letter of credit guarantees under the facility. This amount is included in total letter of credit guarantees disclosed in "Note 8 - Contingent Matters" above. The Company is the primary guarantor to GEC Canada of payment and performance for this $5,000,000 credit facility. The term of the guarantee is equal to the related debt. The maximum potential amount of future payments the Company would be required to make under its guarantee at March 31, 2005 was $298,000.

On April 1, 2005, Breaker Technology, Ltd. entered into the third amendment to the credit agreement with GEC Canada to amend the interest rates on the GEC Canada revolving credit facility to more favorable rates than those rates under the previous terms. Under the amendment, interest rates are based on applicable index rates plus a sliding scale of applicable index margins from 2.0% to 2.75% based on a level of total funded debt ratio.

The Company's South African subsidiary, Osborn Engineered Products SA (Pty) Ltd., has available a credit facility dated January 10, 2005 with Firstrand Bank Limited of approximately $3,218,000 to finance short-term working capital needs, as well as to cover the short-term establishment of letter of credit performance guarantees. The credit facility has no maturity date. The interest rate on the facility is a variable prime rate, currently 11%, which is a reasonable interest rate in South Africa. As of March 31, 2005, Osborn Engineered Products had no outstanding borrowings under the credit facility, but approximately $288,000 in performance and retention bonds guaranteed under the facility. The facility is secured by Osborn's accounts receivable, retention and cash balances. The available facility fluctuates monthly based upon 50% of the Osborn's accounts receivables and retention at the end of the prior month. As of March 31, 2005, Osborn Engineered Products had available credit under the facility of approximately $2,646,000.

Note 16. Product Warranty Reserves

Changes in the Company's product warranty liability for the three months ended March 31, 2005 and 2004 are as follows:

	(in thousands)
	2005	2004
Reserve balance at beginning of period	$4,789	$3,613
Warranty liabilities accrued during the period	2,632	2,535
Warranty liabilities settled during the period	(2,488)	(1,779)
Reserve balance at the end of the period	$4,933	$4,369

The Company warrants its products against manufacturing defects and performance to specified standards. The warranty period and performance standards vary by market and uses of its products. The Company estimates the costs that may be incurred under its warranties and records a liability at the time product sales are recorded. The warranty liability is primarily based on historical claim rates, nature of claims and the associated cost.

Note 17. Assets Held for Sale

The Company's Trencor, Inc. manufacturing operations formerly located in Grapevine, Texas were relocated to the Loudon, Tennessee facility during the fourth quarter of 2002. The Company is attempting to sell its Grapevine, Texas facility. The Grapevine, Texas facility is currently under contract for sale with a scheduled closing date of June 15, 2005. At the option of the buyer, the closing date was extended to June 15, 2005 for additional consideration. There can be no assurances when, or if, the current contract will close. If the buyer rescinds the contract after May 16, 2005, the buyer will forfeit the earnest money and any consideration paid for contract extensions.

As of March 31, 2005, the carrying value of equipment, land and building classified on the consolidated balance sheet as assets held for sale totaled approximately $4,886,000. These assets are included in the assets of the Underground segment.

Note 18. Post Retirement Benefits

The Company expects to contribute approximately $250,000 to its pension plan and $100,000 to its post-retirement benefit plan during 2005. As of March 31, 2005, approximately $70,000 of the contributions had been made to the pension plan and approximately $38,000 was paid for post-retirement benefits.

The components of net periodic pension cost for the three months ended March 31, 2005 and 2004 are as follows:

	(in thousands)
	Pension Benefit		Post-retirement Benefits
	2005	2004	2005	2004
Service cost	$ -	$ -	$28	$24
Interest cost	140	134	25	21
Expected return on assets	(127)	(121)	-	-
Amortization of prior service cost	-	-	7	7
Amortization of net (gain) loss	31	12	(8)	(11)
Net periodic benefit cost	$ 44	$ 25	$52	$41

The Company's two post-retirement medical insurance plans provide prescription drug benefits that may be affected by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "MPDIM Act"), signed into law in December 2003. In May 2004, the FASB issued FSP No. 106-2 ("FSP 106-2"), Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. FSP 106-2 supersedes FSP 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, and provides authoritative guidance on accounting for the federal subsidy specified in the MPDIM Act. The MPDIM Act provides for a federal subsidy equal to 28% of certain prescription drug claims for sponsors of retiree health care plans with drug benefits that are at least actuarially equivalent to those to be offered under Medicare Part D, beginning in 2006. The Company has been unable to conclude whet her the prescription drug benefits provided under its plans are actuarially equivalent to the prescription drug benefits offered under Medicare Part D. Therefore, the effects of the MPDIM Act on the Company's medical plans were not included in the measurement of the accumulated post-retirement benefit obligation or net periodic post-retirement benefit cost for 2004 as allowed under FSP 106-2. The Company is evaluating the impact that the subsidy will have on the financial statements when it becomes effective in 2006, but at this time, is unable to determine the impact it will have on the financial statements.

Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements contained anywhere in this Quarterly Report on Form 10-Q that are not limited to historical information are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are sometimes identified by the words, "believes," "anticipates," "intends," and "expects" and similar expressions. Such forward-looking statements include, without limitation, statement s regarding the Company's expected sales during 2005, the Company's expected effective tax rates for 2005, the Company's expected capital expenditures in 2005, the expected benefit of financing arrangements, the ability of the Company to meet its working capital and capital expenditure requirements through March 31, 2006, the impact of the enactment of the highway bill, the improving economic environment as it affects the Company, the timing and impact of the improving economy, the Company being called upon to fulfill certain contingencies, the timing and effects of the sale of the Grapevine, Texas facility, the expected contributions by the Company to its pension plan and other benefits, the rise of interest rates and the impact of such rise on the financial results of the Company, the changes in the price of steel and oil, the cost of compliance with the requirements of the Sarbanes-Oxley Act of 2002, and the expected increase of the Company's presence in international markets.

These forward-looking statements are based largely on management's expectations which are subject to a number of known and unknown risks, uncertainties and other factors discussed in this report and in other documents filed by the Company with the Securities and Exchange Commission, which may cause actual results, financial or otherwise, to be materially different from those anticipated, expressed or implied by the forward-looking statements. All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements to reflect future events or circumstances.

In addition to the risks and uncertainties identified elsewhere herein and in other documents filed by the Company with the Securities and Exchange Commission, most recently in the Company's Annual Report on Form 10-K for the year ended December 31, 2004, the risk factors described in the section under the caption "Risk Factors" should be carefully considered when evaluating the Company's business and future prospects.

Overview

The Company is a leading manufacturer and marketer of road building equipment. The Company's businesses:

• design, engineer, manufacture and market equipment that is used in each phase of road building, from quarrying and crushing the aggregate to testing the mix for application of the road surface;
• manufacture certain equipment and components unrelated to road construction, including trenching, auger boring, directional drilling, industrial heat transfer; and
• manufacture and sell replacement parts for equipment in each of its product lines.

The Company has four reportable operating segments, which include the Asphalt Group, the Aggregate and Mining Group, the Mobile Asphalt Paving Group and the Underground Group. The business units in the Asphalt Group design, manufacture and market a complete line of asphalt plants and related components, heating and heat transfer processing equipment and storage tanks for the asphalt paving and other non-related industries. The business units in the Aggregate and Mining Group design, manufacture and market equipment for the aggregate, metallic mining and recycling industries. The business units in the Mobile Asphalt Paving Group design, manufacture and market asphalt pavers, material transfer vehicles, milling machines, screeds and trench compaction machines. The business units in the Underground Group design, manufacture and market a complete line of trenching equipment and directional drills for the underground construction market. The Company also has one other category that contains the business units that do not meet the requirements for separate disclosure as an operating segment. The business units in the other category include Astec Insurance Company and Astec Industries, Inc., the parent company.

On June 30, 2004, the Company sold substantially all of the assets and liabilities of Superior Industries of Morris, Inc. (Superior) to Superior Industries, LLC. Superior was part of the Company's Aggregate and Mining Group. Superior's financial results are included in the income from discontinued operations line and are excluded from all other lines on the statement of operations.

The Company's financial performance is affected by a number of factors, including the cyclical nature and varying conditions of the markets it serves. Demand in these markets fluctuates in response to overall economic conditions and is particularly sensitive to the amount of public sector spending on infrastructure development, privately funded infrastructure development, changes in the price of crude oil (fuel costs) and changes in the price of steel.

Public sector spending at the federal, state and local levels has been driven in large part by federal spending under the six-year federal-aid highway program, the Transportation Equity Act for the 21st Century ("TEA-21"), enacted in June 1998. TEA-21 authorized the appropriation of $217 billion in federal aid for road, highway and bridge construction, repair and improvement and other federal highway and transit projects for federal fiscal years October 1, 1998 through September 30, 2003. A new appropriation was enacted setting funding at a level of $33.6 billion for October 1, 2003 through September 30, 2004, but authorizing payment of such funds through February 29, 2004. The date has been extended until May 31, 2005. A new six-year bill is under consideration by the Bush Administration in the amount of $284 billion, which exceeds the pre-election maximum of $256 billion. On March 10, 2005, the U.S. House of Representatives approved the $284 billion bill by a vote of 417 to 9. The four Senate sub-committees required to approve the pending highway legislation have done so as of April 19, 2005. Remaining steps to finalize the bill include a positive final vote by the full Senate, approval by the Senate/House Conference Committee and the signing of the bill into law by President Bush.

In addition to public sector funding, the economies in the markets the Company serves, the price of oil and the price of steel affect the Company's financial performance. Economic downturns, like the one experienced in 2001 through 2003, generally result in decreased purchasing by the Company's customers, which in turn, causes reductions in sales and increased pricing pressure on the Company's products. Rising interest rates also typically have the effect of negatively impacting customers' attitudes toward purchasing equipment. The Company expects interest rates to rise during the year, but it does not expect such increases to have a material impact on the financial results of the Company. In addition, significant portions of the Company's revenues relate to the sale of equipment that produces asphalt mix. A major component of asphalt is oil. A rise in the price of oil increases the cost of providing asphalt, which could likely decrease demand for asp halt, and therefore decrease demand for the Company's products. Steel is a major component in the Company's equipment. As steel prices increased during 2004 the cost of manufactured parts as well as the cost of purchased parts and components have also increased. Although the Company has instituted price increases in response to rising steel prices, purchased parts and component prices, if the Company is not able to raise the prices of its products enough to cover the increased costs of goods, the Company's financial results will be negatively affected. The Company believes that steel prices will be flat or will decline during the year, and expects oil prices to increase during the year. The Company's customers appear to be adapting their prices in response to the fluctuating oil prices and the fluctuations do not appear to be impairing the equipment purchases by them at this time. In addition to the factors stated above, many of the Company's markets are highly competitive, and its products compete worldwide with a number of other manufacturers and distributors that produce and sell similar products.

The Company believes that, based on its backlog and customer activity, the economic environment as it impacts the Company will continue to improve. The Company also believes that the highway bill, if and when enacted, will result in sustained or increased federal availability of highway funds and such funding should have a positive impact on customers' attitudes toward purchasing new equipment. In addition, the Company believes that an improving economy should increase state highway funding revenues and private commercial projects.

Results of Operations

For the three months ended March 31, 2005, net sales increased $25,908,000, or 19.1%, to $161,635,000 from $135,727,000 for the three months ended March 31, 2004. Sales are generated primarily from new equipment purchases made by customers for use in construction for privately funded infrastructure development and public sector spending on infrastructure development. For the quarter ended March 31, 2005 compared to the quarter ended March 31, 2004, (1) net sales for the Asphalt Group increased approximately $10,272,000 or 23.7%; (2) excluding the sales of Superior for the quarter ended March 31, 2004, net sales of the Aggregate and Mining Group increased approximately $7,489,000 or 14.9%; (3) net sales for the Underground Group increased approximately $3,471,000 or 19.3%; and (4) net sales for the Mobile Asphalt Group increased approximately $4,676,000 or 19.4%. For the quarter ended March 31, 2005, compared to the same period of 2004, the Company believes that the increase in the sales for all business segments related to a general improvement in the economy and increased market confidence of customers and dealers. Net sales for the quarter ended March 31, 2004 exclude discontinued operations of Superior Industries of Morris, Inc.

International sales for the quarter ended March 31, 2005 compared to the same period of 2004 decreased $299,000, or 1.0%. International sales, excluding the international sales of Superior, were $28,471,000 for the quarter ended March 31, 2005, compared to $28,770,000 for the quarter ended March 31, 2004. For the quarters ended March 31, 2005 and 2004, international sales accounted for approximately 17.6% and 21.2% of net sales, respectively. International sales increased for the first quarter of 2005 compared to the same period in 2004, in South America and the West Indies, while for comparable periods sales decreased in Europe and Canada. The Company believes the sustained level of international sales relates to the weakened US dollar compared to other foreign currencies and the overall economic condition.

Gross profit for the quarter ended March 31, 2005 increased $6,201,000, or 21.5%, to $35,033,000 from $28,832,000 for the quarter ended March 31, 2004. Gross profit as a percentage of sales for the quarters ended March 31, 2005 and 2004 was 21.7% and 21.2%, respectively. The gross profit percentage increase for the quarter ended March 31, 2005 compared to the same period of 2004 related primarily to increased parts sales volume and equipment sales volume in all segments, while the gross profit percentage was negatively impacted by increased steel and purchase parts prices that the Company was unable to offset completely with price increases; and underutilization of overhead in the manufacturing facilities.

Selling, general, administrative and engineering expenses for the quarter ended March 31, 2005 were $23,249,000 or 14.4% of net sales, compared to $19,875,000 or 14.6% of net sales for the quarter ended March 31, 2004, an increase of $3,374,000 or 17.0%. For the quarter ended March 31, 2005 compared to the same period of 2004, the Company's accounting fees, primarily related to Sarbanes-Oxley compliance, increased approximately $321,000, sales commissions related to the increase in sales volume increased approximately $379,000, insurance expense due to claims experience increased approximately $654,000 and research and development expense increased approximately $269,000. The Company expects its future cost of compliance with the requirements of Sarbanes-Oxley will decrease compared to the prior year cost. The Company is unable to predict future healthcare costs. The Company's goal is to limit total selling, general, administrative and engineering expenses to 14% of sales.

For the quarter ended March 31, 2005 compared to the quarter ended March 31, 2004, interest expense decreased $182,000, or 16.9%, to $896,000 from $1,078,000. Interest expense as a percentage of net sales was 0.6% and 0.8% for the quarters ended March 31, 2005 and 2004, respectively. The decrease in interest expense for the quarter ended March 31, 2005 compared to the same period of 2004 related primarily to the decrease in outstanding debt as of March 31, 2005 compared to the debt level as of March 31, 2004, for which the interest expense relates. The decrease in outstanding debt as of March 31, 2005 compared to March 31, 2004 resulted primarily from profitable operations and $23,600,000 of proceeds from the sale of Superior Industries of Morris, Inc. on June 30, 2004.

For the quarter ended March 31, 2005, the Company recorded income tax expense on continuing operations of $4,106,000, compared to income tax expense from continuing operations of $2,991,000 for the quarter ended March 31, 2004. The increase in tax expense for the quarter ended March 31, 2005 relates to the increase in taxable income for 2005 compared to the prior year. Due to the Manufacturers Domestic Production Tax Credit, the Company expects the effective tax rate for continuing operations for 2005 to decrease approximately 1.0% compared to historical effective rates. The effective tax rates for the quarters ended March 31, 2005 and 2004 were 37.6% and 38.3%, respectively.

For the quarter ended March 31, 2005 the Company had income from continuing operations of $6,792,000 compared to income from continuing operations of $4,812,000 for the quarter ended March 31, 2004.

For the quarter ended March 31, 2004, the Company had income from discontinued operations, net of tax, related to the operations of Superior Industries of Morris, Inc., of approximately $640,000. The effective tax rate for discontinued operations was comparable to historical effective tax rates for continuing operations.

For the quarter ended March 31, 2005 the Company had net income of $6,792,000 compared to net income of $5,452,000 for the quarter ended March 31, 2004. Earnings per diluted share for the quarter ended March 31, 2005 were $0.33 compared to earnings per diluted share for the quarter ended March 31, 2004 of $0.27. Diluted shares outstanding for the quarters ended March 31, 2005 and 2004 were 20,415,669 and 19,936,070, respectively.

Backlog of orders for continuing operations at March 31, 2005 was $111,171,000, compared to $103,503,000 at March 31, 2004, an increase of $7,668,000 or 7.4%. The March 31, 2004 backlog has been updated to exclude the discontinued operations of Superior Industries of Morris, Inc. The increase in the backlog of orders at March 31, 2005 compared to March 31, 2004 related to increased domestic orders totaling approximately $16,258,000, which was offset by decreased international orders of approximately $8,590,000. The increase in orders at March 31, 2005 compared to March 31, 2004 related primarily to increased backlog of orders for the Company's Aggregate and Mining Group, Asphalt Group and Mobile Asphalt Paving Group, which increased approximately $10,596,000, $3,655,000 and 1,644,000, respectively. The increased backlog of orders was partially offset by decreased backlog of orders for the Underground Group, whose March 31, 2005 backlog decreased approximately $8,227,000 from March 31, 2004 . The Company is unable to determine whether the increase in backlog was experienced by the industry as a whole.

Liquidity and Capital Resources

On May 14, 2003, the Company refinanced its revolving credit facility and senior note agreement with new credit facilities of up to $150,000,000, secured by the Company's assets. The Company entered into a credit facility of up to $145,000,000 with General Electric Capital Corporation ("GECC"), while the Company and its Canadian subsidiary, Breaker Technology, Ltd., entered into a credit facility of up to $5,000,000 with General Electric Capital Canada, Inc. ("GEC Canada"). As part of the $145,000,000 GECC agreement, the Company entered into a term loan in the amount of $37,500,000 with an interest rate of one-percent (1%) above the higher of the Wall Street Journal prime rate and the Federal Funds Rate plus one-half of one percent (1/2%) or, at the election of the Company, three-percent (3%) above the London Interbank Offered Rate ("LIBOR"). The term loan maturity date is May 14, 2007. In addition to the required quarterly term-loan payments, during 2004, the Company made additional t erm-loan payments of approximately $11,134,000 related to the sale of certain assets and the release of certain assets as term loan security. As a result of these payments, the term loan was re-amortized. The term loan currently requires quarterly principal payments of $702,485 on the first day of each quarter, and a final payment of the principal balance due on May 14, 2007.

The May 14, 2003 credit agreement also included a revolving credit facility of up to $107,500,000, of which available credit under the facility is based on a percentage of the Company's eligible accounts receivable and inventories. Availability under the revolving facility is adjusted monthly and interest is due in arrears. The revolving credit facility has a maturity date of May 14, 2007 and at inception, the interest rate on the revolving credit loan was one-percent (1%) above the higher of the Wall Street Journal prime rate and the Federal Funds Rate plus one-half of one percent (1/2%) or, at the election of the Company, three-percent (3%) above LIBOR. The credit facility contains certain restrictive financial covenants relative to operating ratios and capital expenditures.

On September 30, 2003, related to the syndication of the loan by GECC, the Company entered into an amendment to the Credit Agreement that reduced the availability under the credit facility from $107,500,000 to $82,500,000. In addition, the amendment increased the interest rate on the term loan and the revolving facility to one and one-half (1.5%) percent above the higher of Wall Street Journal prime rate and the Federal Funds Rate plus one-half of one percent (1/2%) or, at the election of the Company, to three and one-half (3.5%) percent above LIBOR. The Company requested the reduction in the revolving credit facility to reduce the fees paid for the daily available, but unused portion of the revolving facility. As of March 31, 2005, total availability under the revolving credit facility was approximately $78,632,000.

On October 29, 2003, related to the syndication of the loan by GECC, the Company amended its credit agreement to, among other things: (1) raise the threshold of required lender approval to at least eighty-one percent (81%) for certain material amendments to the credit agreement; and (2) require any over-advances (over the borrowing base formula contained therein) be repaid, at the latest, within sixty (60) days. On March 3, 2004, the Company amended its credit facility to revise the fixed charge coverage ratio for the second, third and fourth quarters of 2004.

On April 1, 2005, the Company entered into the sixth amendment to the credit agreement that amended interest rates on the GECC revolving and term loan facilities to more favorable rates than those rates under the previous terms. Under the sixth amendment, interest rates are based on applicable index rates plus a sliding scale of applicable index margins from zero to 0.75%, or at the option of the borrower, the LIBOR margin plus an applicable index margin from 2.0% to 2.75% based on a level of total funded debt ratio. In addition, the amendment permits the Company to hold inventory notes or customer financing of no more than $4,000,000 at any time.

The Company was in compliance with the financial covenants of the credit agreement at March 31, 2005.

On April 1, 2005, Breaker Technology, Ltd. entered into the third amendment to the credit agreement with GEC Canada to amend the interest rates on the GEC Canada revolving credit facility to more favorable rates than those rates under the previous terms. Under the amendment, interest rates are based on applicable index rates plus a sliding scale of applicable index margins from 2.0% to 2.75% based on a level of total funded debt ratio.

Total short-term borrowings, including current maturities of long-term debt, were $18,703,000 at March 31, 2005, compared to $11,827,000 at December 31, 2004. As of March 31, 2005, short-term borrowings included the GECC revolving credit facility of $15,134,000, current portion of the GECC term loan totaling $2,810,000, the current portion of Industrial Revenue Bonds totaling $500,000 and Breaker Technology's portion of the GEC Canada revolving credit facility totaling $259,000. At December 31, 2004, short-term borrowings consisted of the GECC revolving line of credit totaling $8,517,000, the current portion of the GECC term loan totaling $2,810,000 and the current portion of Industrial Revenue Bonds totaling $500,000. Short-term borrowings increased during the first quarter of 2005 due to the increase in inventories in preparation of second quarter sales volume, which is typically the Company's strongest quarter in terms of sales volume.

Net cash used by operating activities for the quarter ended March 31, 2005 was $891,000 compared to net cash provided by operating activities of $7,755,000 for the quarter ended March 31, 2004. The decrease in cash from operating activities for the quarter ended March 31, 2005 compared to the same period of 2004 related primarily to the increase in inventories, a lesser increase in accounts payable and accrued liabilities for the current quarter compared to the same prior year quarter, and a decrease in deferred tax assets. Parts and machine inventories at March 31, 2005 increased over the levels at December 31, 2004 in relation to increased backlog of sales and expected overall sales volume during the second quarter of 2005, which is typically the strongest quarter for sales volume. Accounts payable and accrued liabilities increased from December 31, 2004 to March 31, 2005 in relation to increased manufacturing and related activity.

As of March 31, 2005, long-term debt, less current maturities, was $24,655,000, compared to $25,857,000 at December 31, 2004. At March 31, 2005, $15,455,000 was outstanding under the long-term principal portion of the GECC term loan and $9,200,000 was outstanding under the long-term principal portion of Industrial Revenue Bonds.

The Company's South African subsidiary, Osborn Engineered Products SA (Pty) Ltd., has available a credit facility dated January 10, 2005 with Firstrand Bank Limited of approximately $3,218,000 to finance short-term working capital needs, as well as to cover the short-term establishment of letter of credit performance guarantees. The credit facility has no maturity date. The interest rate on the facility is a variable prime rate, currently 11%, which is a reasonable interest rate in South Africa. As of March 31, 2005, Osborn Engineered Products had no outstanding borrowings under the credit facility, but approximately $288,000 in performance and retention bonds guaranteed under the facility. The facility is secured by Osborn's accounts receivable, retention and cash balances. The available facility fluctuates monthly based upon 50% of Osborn's accounts receivables and retention at the end of the prior month. As of March 31, 2005, Osborn Engineered Pro ducts had available credit under the facility of approximately $2,646,000.

The Company believes that its current working capital, cash flows generated from future operations and available capacity remaining under its credit facility will be sufficient to meet the Company's working capital and capital expenditure requirements through March 31, 2006.

Capital expenditures for 2005 are forecasted to total approximately $14,000,000. The Company expects to finance these expenditures using internally generated funds and amounts available from its credit facilities. Net cash used by investing activities for the quarter ended March 31, 2005 was approximately $4,205,000, compared to net cash used by investing activities of $600,000, for the quarter ended March 31, 2004. Capital expenditures for the quarter ended March 31, 2005 were $4,245,000, compared to $683,000 for the quarter ended March 31, 2004.

Contingencies

The Company is engaged in certain pending litigation involving claims or other matters arising in the ordinary course of business. Most of these claims involve product liability or other tort claims for property damage or personal injury against which the Company is insured. As a part of its litigation management program, the Company maintains adequate general liability insurance coverage for product liability and other similar tort claims. The coverage is subject to a substantial self-insured retention under the terms of which the Company has the right to coordinate and control the management of its claims and the defense of these actions.

Management has reviewed all claims and lawsuits and, upon the advice of its litigation counsel, has made provision for any estimable losses. Notwithstanding the foregoing, the Company is unable to predict the ultimate outcome of any outstanding claims and lawsuits.

Risk Factors

A decrease or delay in government funding of highway construction and maintenance may cause our revenues and profits to decrease.

Many of our customers depend substantially on government funding of highway construction and maintenance and other infrastructure projects. Any decrease or delay in government funding of highway construction and maintenance and other infrastructure projects could cause our revenues and profits to decrease. Federal government funding of infrastructure projects is usually accomplished through bills, which establish funding over a multi-year period. On September 30, 2003, the six-year federal-aid highway program, the Transportation Equity Act for the 21^st Century ("TEA-21"), expired. A six-year TEA-21 reauthorization bill is currently being negotiated by Congress. Legislation has been entered into to extend authorization of the funding through May 31, 2005. Short-term extensions are necessary to keep federal highway and transit funds flowing while Congress continues working to enact the six-year TEA-21 reauthorization measure. If the reauthorization measure is not enacted into law by the May 31, 2005 extension deadline and if further extensions are not entered into, highway funding may stop until such reauthorization bill or extensions are enacted. Even if entered into, the highway legislation may be revised in future congressional sessions and federal funding of infrastructure may be decreased in the future, especially in the event of an economic recession. In addition, Congress could pass legislation in future sessions, which would allow for the diversion of highway funds for other national purposes or could restrict funding of infrastructure projects unless states comply with certain federal policies.

We are contingently liable for certain customer debt. If we must repay a significant portion of the total contingent liability, it could adversely affect our available liquidity.

Certain customers have financed purchases of our products through arrangements in which we are contingently liable for customer debt and for residual value guarantees. The remaining terms of these obligations range from 1 to 62 months in duration. If our customers default on this debt, we will have to pay the agreed contingency to the lender on behalf of the customer. The financed equipment collateralizes the underlying debt and under contract terms can reduce the amount of our contingent liability in the case of customer default. In the event of customer default, recovery from the lender from the sale of collateral may not be sufficient to repay amounts paid by us related to contingent liabilities. Significant cash payments for which we are contingently liable could adversely affect our available operating funds.

An increase in the price of oil or decrease in the availability of oil could reduce demand for our products. Significant increases in the purchase price of certain raw materials used to manufacture our equipment could have a negative impact on the cost of production and related gross margins.

A significant portion of our revenues relates to the sale of equipment that produces asphalt mix. A major component of asphalt is oil, and asphalt prices correlate with the price and availability of oil. An increase in the price of oil or a decrease in the availability of oil would increase the cost of producing asphalt, which would likely decrease demand for asphalt, resulting in decreased demand for our products. This would likely cause our revenues and profits to decrease. In fact, rising gasoline, diesel fuel and liquid asphalt prices during 2004 significantly impacted the operating and raw material costs of our contractor and aggregate producer customers, and if they did not properly adjust their pricing, reduced their profits and caused delays in some of their capital equipment purchases.

We were notified of and incurred steel price increases and steel surcharges beginning in early 2004. Factors contributing to the increased steel costs were: (1) China's strong economy and its increased steel consumption and purchase of U.S. scrap steel; (2) the weakened U.S. dollar's dissuasion of foreign steel exports to the U.S.; (3) shortages of coke and iron ore; and (4) increased demand for steel in Korea and the U.S. During early 2004, some types of steel were available on an allocation basis determined by prior year purchases, although currently needed steel is readily available. We are passing along a portion of the increased steel costs to our customers by way of surcharges and price increases. Continued significant steel cost increases, in addition to potential limitation of the steel supply by mills, could negatively impact our gross margins and financial results, however, the Company expects steel prices will be flat or will decline during 2005.

Downturns in the general economy or the commercial construction industry may adversely affect our revenues and operating results.

General economic downturns, including downturns in the commercial construction industry, could result in a material decrease in our revenues and operating results. Demand for many of our products, especially in the commercial construction industry, is cyclical. Sales of our products are sensitive to the states of the U.S., foreign and regional economies in general, and in particular, changes in commercial construction spending and government infrastructure spending. In addition, many of our costs are fixed and cannot be quickly reduced in response to decreased demand. The following factors could cause a downturn in the commercial construction industry:

• a decrease in the availability of funds for construction;
• labor disputes in the construction industry causing work stoppages;
• rising gas and fuel oil prices;
• rising steel prices and steel-up charges;
• rising interest rates;
• energy or building materials shortages; and
• inclement weather.

We may be unsuccessful in complying with the financial ratio covenants or other provisions of our amended credit agreement.

As of March 31, 2005, we were in compliance with the financial covenants contained in our credit agreement dated as of May 14, 2003, as amended. We may be unable to comply with the financial covenants in our credit facility. If such violations occur, the lenders could elect to pursue their contractual remedies under the credit facility, including requiring immediate repayment in full of all amounts outstanding. We may also be unable to secure adequate or timely replacement of financing to repay our lenders in the event of an unanticipated repayment demand.

Acquisitions that we have made in the past and future acquisitions involve risks that could adversely affect our future financial results.

We have completed ten acquisitions since 1994, one of which was disposed during 2004, and may acquire additional businesses in the future. We may be unable to achieve the benefits expected to be realized from our acquisitions. In addition, we may incur additional costs and our management's attention may be diverted because of unforeseen expenses, difficulties, complications, delays and other risks inherent in acquiring businesses, including the following:

• we may have difficulty integrating the financial and administrative functions of acquired businesses;
• acquisitions may divert management's attention from our existing operations;
• we may have difficulty in competing successfully for available acquisition candidates, completing future acquisitions or accurately estimating the financial effect of any businesses we acquire;
• we may have delays in realizing the benefits of our strategies for an acquired business;
• we may not be able to retain key employees necessary to continue the operations of the acquired business;
• acquisition costs may deplete significant cash amounts or may decrease our operating income;
• we may choose to acquire a company that is less profitable or has lower profit margins than our company; and
• future acquired companies may have unknown liabilities that could require us to spend significant amounts of additional capital.

Competition could reduce revenue from our products and services and cause us to lose market share.

We currently face strong competition in product performance, price and service. Some of our national competitors have greater financial, product development and marketing resources than we have. If competition in our industry intensifies or if our current competitors enhance their products or lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products. This may reduce revenue from our products and services, lower our gross margins or cause us to lose market share.

As an innovative leader in the asphalt and aggregate industries, we occasionally undertake the engineering, design, manufacturing and construction of equipment systems that are new to the market. Estimating the cost of such innovative equipment can be difficult and could result in our realization of significantly reduced or negative margins on such projects.

In the past, we have experienced negative margins on certain large, specialized aggregate systems projects. These large contracts included both existing and innovative equipment designs, on-site construction and minimum production levels. Since it can be difficult to achieve the expected production results during the project design phase; field testing and redesign may be required during project installation, resulting in added cost. In addition, due to any number of unforeseen circumstances, which can include adverse weather conditions, projects can incur extended construction and testing delays, which can cause significant cost overruns. We may not be able to sufficiently predict the extent of such unforeseen cost overruns and may experience significant losses on specialized projects.

We may face product liability claims or other liabilities due to the nature of our business. If we are unable to obtain or maintain insurance or if our insurance does not cover liabilities, we may incur significant costs which could reduce our profitability.

We manufacture heavy machinery, which is used by our customers at excavation and construction sites and on high-traffic roads. Any defect in, or improper operation of, our equipment can result in personal injury and death, and damage to or destruction of property, any of which could cause product liability claims to be filed against us. The amount and scope of our insurance coverage may not be adequate to cover all losses or liabilities we may incur in the event of a product liability claim. We may not be able to maintain insurance of the types or at the levels we deem necessary or adequate or at rates we consider reasonable. Any liabilities not covered by insurance could reduce our profitability or have an adverse effect on our financial condition.

If we become subject to increased governmental regulation, we may incur significant costs.

Our hot-mix asphalt plants contain air pollution control equipment that must comply with performance standards promulgated by the Environmental Protection Agency. These performance standards may increase in the future. Changes in these requirements could cause us to undertake costly measures to redesign or modify our equipment or otherwise adversely affect the manufacturing processes of our products. Such changes could have a material adverse effect on our operating results.

Also, due to the size and weight of some of the equipment that we manufacture, we often are required to comply with conflicting state regulations on the maximum weight transportable on highways and roads. In addition, some states regulate the operation of our component equipment, including asphalt mixing plants and soil remediation equipment, and most states regulate the accuracy of weights and measures, which affect some of the control systems that we manufacture. We may incur material costs or liabilities in connection with the regulatory requirements applicable to our business.

If we are unable to protect our proprietary technology from infringement or if our technology infringes technology owned by others, then the demand for our products may decrease or we may be forced to modify our products which could increase our costs.

We hold numerous patents covering technology and applications related to many of our products and systems, and numerous trademarks and trade names registered with the U.S. Patent and Trademark Office and in foreign countries. Our existing or future patents or trademarks may not adequately protect us against infringements, and pending patent or trademark applications may not result in issued patents or trademarks. Our patents, registered trademarks and patent applications, if any, may not be upheld if challenged, and competitors may develop similar or

superior methods or products outside the protection of our patents. This could reduce demand for our products and materially decrease our revenues. If our products are deemed to infringe upon the patents or proprietary rights of others, we could be required to modify the design of our products, change the name of our products or obtain a license for the use of some of the technologies used in our products. We may be unable to do any of the foregoing in a timely manner, upon acceptable terms and conditions, or at all, and the failure to do so could cause us to incur additional costs or lose revenues.

Our success depends on key members of our management and other employees.

Dr. J. Don Brock, our Chairman and President, is of significant importance to our business and operations. The loss of his services may adversely affect our business. In addition, our ability to attract and retain qualified engineers, skilled manufacturing personnel and other professionals, either through direct hiring or acquisition of other businesses employing such professionals, will also be an important factor in determining our future success.

Difficulties in managing and expanding in international markets could divert management's attention from our existing operations.

In 2004, international sales represented approximately 24% of net sales. For the first quarter of 2005, international sales accounted for approximately 17.6% of net sales. We plan to continue to increase our presence in international markets. In connection with any increase in international sales efforts, we will need to hire, train and retain qualified personnel in countries where language, cultural or regulatory barriers may exist. Any difficulties in expanding our international sales may divert management's attention from our existing operations. In addition, international revenues are subject to the following risks:

• fluctuating currency exchange rates which can reduce the profitability of foreign sales;
• the burden of complying with a wide variety of foreign laws and regulations;
• dependence on foreign sales agents;
• political and economic instability of governments; and
• the imposition of protective legislation such as import or export barriers.

Our quarterly operating results are likely to fluctuate, which may decrease our stock price.

Our quarterly revenues, expenses and operating results have varied significantly in the past and are likely to vary significantly from quarter to quarter in the future. As a result, our operating results may fall below the expectations of securities analysts and investors in some quarters, which could result in a decrease in the market price of our common stock. The reasons our quarterly results may fluctuate include:

• general competitive and economic conditions;
• delays in, or uneven timing in, the delivery of customer orders;
• the introduction of new products by us or our competitors;
• product supply shortages; and
• reduced demand due to adverse weather conditions.

Period-to-period comparisons of such items should not be relied on as indicators of future performance.

Our Articles of Incorporation, Bylaws, Rights Agreement and Tennessee law may inhibit a takeover, which could delay or prevent a transaction in which shareholders might receive a premium over market price for their shares.

Our charter, bylaws and Tennessee law contain provisions that may delay, deter or inhibit a future acquisition or an attempt to obtain control of us. This could occur even if our shareholders are offered an attractive value for their shares or if a substantial number or even a majority of our shareholders believe the takeover is in their best interest. These provisions are intended to encourage any person interested in acquiring us or obtaining control of us to negotiate with and obtain the approval of our Board of Directors in connection with the transaction. Provisions that could delay, deter or inhibit a future acquisition or an attempt to obtain control of us include the following:

• having a staggered Board of Directors;
• requiring a two-thirds vote of the total number of shares issued and outstanding to remove directors other than for cause;
• requiring advanced notice of actions proposed by shareholders for consideration at shareholder meetings;
• limiting the right of shareholders to call a special meeting of shareholders;
• requiring that all shareholders entitled to vote on an action provide written consent in order for shareholders to act without holding a shareholders meeting; and
• being governed by the Tennessee Control Share Acquisition Act.

In addition, the rights of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of our preferred stock that may be issued in the future and that may be senior to the rights of holders of our common stock. On December 22, 1995, our Board of Directors approved a Shareholder Protection Rights Agreement, which provides for one preferred stock purchase right in respect of each share of our common stock ("Rights Agreement"). These rights become exercisable upon a person or group of affiliated persons acquiring 15% or more of our then-outstanding common stock by all persons other than an existing 15% shareholder. This Rights Agreement also could discourage bids for the shares of common stock at a premium and could have a material adverse effect on the market price of our shares.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2004.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company's Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the design and operation of the Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. The Company's Chief Executive Officer and the Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company maintains disclosure controls and procedures that provide reasonable assurance that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-a5(f) under the Exchange Act) that occurred during the quarter ended March 31, 2005 that have materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material developments in the legal proceedings previously reported by the registrant since the filing of its Annual Report on Form 10-K for the year ended December 31, 2004. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contingencies" in Part I - Item 2 of this Report.

Item 6. Exhibits

Exhibit No. Description

3.1	Restated Charter of the Company (incorporated by reference to the Company's Registration Statement on Form S-1, effective June 18, 1986, File No. 33-5348).
3.2	Articles of Amendment to the Restated Charter of the Company, effective September 12, 1988 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1988, File No. 0-14714).
3.3	Articles of Amendment to the Restated Charter of the Company, effective June 8, 1989 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1989, File No. 0-14714).
3.4	Articles of Amendment to the Restated Charter of the Company, effective January 15, 1999 (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, File No. 0-14714).
3.5	Amended and Restated Bylaws of the Company, adopted March 14, 1990 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1989, File No. 0-14714).
4.1	Trust Indenture between City of Mequon and FirstStar Trust Company, as Trustee, dated as of February 1, 1994 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, File No. 0-14714).
4.2	Shareholder Protection Rights Agreement dated December 22, 1995 (incorporated by reference to the Company's Current Report on Form 8-K dated December 22, 1995, File No. 0-14714).
10.1	Amendment to the Astec Industries, Inc. 1998 Non-Employee Directors Stock Incentive Plan (incorporated by reference to the Company's Current Report on Form 8-K dated March 15, 2005, File No. 0-14714).
10.2	Sixth Amendment to the Credit Agreement, dated April 1, 2005, among Astec Industries, Inc., Astec, Inc., Heatec, Inc., CEI Enterprises, Inc., Astec Systems, Inc., Telsmith, Inc., Kolberg-Pioneer, Inc., Johnson Crushers International, Inc., Breaker Technology, Inc., Astec Mobile Screens, Inc., Carlson Paving Products, Inc., Roadtec, Inc., Trencor, Inc., American Augers, Inc., Astec Holdings, Inc., Astec Investments, Inc., and General Electric Capital Corporation.
10.3	Second Amendment to the Credit Agreement, dated October 31, 2003, between Breaker Technology, Ltd., an Ontario corporation and General Electric Capital Canada Inc., a Canada corporation.
10.4	Third Amendment to the Credit Agreement, dated April 1, 2005, between Breaker Technology, Ltd., an Ontario corporation and General Electric Capital Canada Inc., a Canada corporation.
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certification of Chief Executive Officer and Chief Financial Officer of Astec Industries, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

______________________

The Exhibits are numbered in accordance with Item 601 of Regulation S-K. Inapplicable Exhibits are not included in the list.

* In accordance with Release No. 34-47551, this exhibit is hereby furnished to the SEC as an accompanying document and is not to be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ASTEC INDUSTRIES, INC.

(Registrant)

Date 5/10/2005	/s/ J. Don Brock
	J. Don Brock
	Chairman of the Board and President

Date 5/10/2005	/s/ F. McKamy Hall
	F. McKamy Hall
	Vice President, Chief Financial Officer and Treasurer

EXHIBIT INDEX

10.2	Sixth Amendment to the Credit Agreement, dated April 1, 2005, among Astec Industries, Inc., Astec, Inc., Heatec, Inc., CEI Enterprises, Inc., Astec Systems, Inc., Telsmith, Inc., Kolberg-Pioneer, Inc., Johnson Crushers International, Inc., Breaker Technology, Inc., Astec Mobile Screens, Inc., Carlson Paving Products, Inc., Roadtec, Inc., Trencor, Inc., American Augers, Inc., Astec Holdings, Inc., Astec Investments, Inc., and General Electric Capital Corporation.
10.3	Second Amendment to the Credit Agreement, dated October 31, 2003, between Breaker Technology, Ltd., an Ontario corporation and General Electric Capital Canada Inc., a Canada corporation.
10.4	Third Amendment to the Credit Agreement, dated April 1, 2005, between Breaker Technology, Ltd., an Ontario corporation and General Electric Capital Canada Inc., a Canada corporation.
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer of Astec Industries, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-10

EXHIBIT 10.2

SIXTH AMENDMENT
TO
CREDIT AGREEMENT

THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made and entered into as of April 1, 2005 among ASTEC INDUSTRIES, INC., a Tennessee corporation ("Astec Industries"), ASTEC, INC., a Tennessee corporation ("AI"), HEATEC, INC., a Tennessee corporation ("Heatec"), CEI ENTERPRISES, INC., a Tennessee corporation ("CEI"), ASTEC SYSTEMS, INC., a Tennessee corporation ("ASI"), TELSMITH, INC., a Delaware corporation ("Telsmith"), KOLBERG - PIONEER, INC., a Tennessee corporation ("Kolberg"), JOHNSON CRUSHERS INTERNATIONAL, INC., a Tennessee corporation ("Crushers"), BREAKER TECHNOLOGY, INC., a Tennessee corporation ("Breaker"), ASTEC MOBILE SCREENS, INC., a Nevada corporation ("AMSI"), CARLSON PAVING PRODUCTS, INC., a Washington corporation ("Carlson"), ROADTEC, INC., a Tennessee corporation ("Roadtec"), TRENCOR, INC., a Texas corporation ("Trencor"), AMERICAN AUGERS, INC., a Delaware corporation ("Augers"), ASTEC HOLDINGS, INC., a Tennessee corporation ("AHI") and ASTEC INVESTMENTS, INC., a Tennessee corporation ("AII") (Astec Industries, AI, Heatec, CEI, ASI, Telsmith, Kolberg, Crushers, Superior, Breaker, AMSI, Carlson, Roadtec, Trencor, Augers, AIDG, AIEI, AHI and AII are sometimes collectively referred to herein as "Borrowers" and individually as a "Borrower"); the other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its individual capacity, "GE Capital"), for itself, as Lender, and as agent for Lenders (in such capacity, the "Agent"); and the other Lenders signatory hereto.

WHEREAS, Borrowers, Credit Parties, Agent and Lenders are parties to that certain Credit Agreement dated as of May 14, 2003, as amended by that certain First Amendment to Credit Agreement dated as of September 30, 2003, that certain Second Amendment to Credit Agreement dated as of October 29, 2003, that certain Third Amendment to Credit Agreement dated as of March 3, 2004, that certain Fourth Amendment to Credit Agreement dated as of August 11, 2004 and that certain Fifth Amendment to Credit Agreement dated as of December 27, 2004 (as further amended, restated or otherwise modified from time to time, the "Credit Agreement"); and

WHEREAS, Borrowers, Credit Parties, Lenders and Agent desire to amend the Credit Agreement to allow and provide for the foregoing and certain matters, all as hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I
Definitions

Section 1.01 - Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meaning as in the Credit Agreement, as amended hereby.

ARTICLE II
Amendments

Section 2.01 - Amendment to Section 1.3(b)(ii). Effective as of the date hereof, Section 1.3(b)(ii) of the Credit Agreement is hereby amended by deleting the word "and' in the second sentence therein and adding the following at the end of the second sentence therein:

"; and (5) proceeds from the sale of Inventory Notes to third parties for cash consideration; provided, that Borrower has complied with the terms of Sections 6.2 and 6.8 in connection with both the holding of such Inventory Notes and such sale of such Inventory Notes"

Section 2.02 - Amendment to Section 1.5(a). Effective as of the date hereof, Section 1.5(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

"(a) Borrowers shall pay interest to Agent, for the ratable benefit of Lenders in accordance with the various Loans being made by each Lender, in arrears on each applicable Interest Payment Date, at the following rates: (i) with respect to the Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index Margin per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum, based on the aggregate Revolving Credit Advances outstanding from time to time; (ii) with respect to the Term Loan, the Index Rate plus the Applicable Term Loan Index Margin per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable Term Loan LIBOR Margin per annum; and (iii) with respect to the Swing Line Loan, the Index Rate plus the Applicable Revolver Index Margin per annum. Notwithstanding the foregoing, if any Lender shall determine that (i) the agreement to make or the making or con tinuing to fund or maintain any LIBOR Loan is unlawful as determined in accordance with Section 1.16(c), or (ii) the LIBOR Rate is unavailable or is incapable of being determined, then Agent shall convert the Loans from LIBOR Loans to Index Rate Loans and such Index Rate Loans shall bear interest at the Index Rate plus the Applicable Margin per annum. The Applicable Revolver Index Margin, Applicable Term Loan Index Margin, Applicable Revolver LIBOR Margin, Applicable Term Loan LIBOR Margin, Applicable L/C Margin and Applicable Unused Line Fee Margin will be at Level II as reflected in the grid below, respectively, as of the Sixth Amendment Date. The Applicable Margins will be adjusted (up or down) prospectively on a quarterly basis as determined by Borrower's combined financial performance. Adjustments in Applicable Margins will be determined by reference to the following grids:

If Total Funded Debt Ratio is:	Level of Applicable Margins:
less than 1.0	Level I
equal to or greater than 1.0, but less than 1.5	Level II
equal to or greater than 1.5, but less than 2.0	Level III
equal to or greater than 2.0	Level IV

Applicable Margins

	Level I	Level II	Level III	Level IV
Applicable Revolver Index Margin	0.00%	0.25%	0.50%	0.75%
Applicable Revolver LIBOR Margin	2.00%	2.25%	2.50%	2.75%
Applicable Term Loan Index Margin	0.00%	0.25%	0.50%	0.75%
Applicable Term Loan LIBOR Margin	2.00%	2.25%	2.50%	2.75%
Applicable L/C Margin	2.00%	2.25%	2.50%	2.75%
Applicable Unused Line Fee Margin	0.50%	0.50%	0.50%	0.50%

All adjustments in the Applicable Margins will be implemented quarterly on a prospective basis, for each calendar month commencing at least five (5) days after the date of delivery to Lenders of the quarterly unaudited or annual audited (as applicable) Financial Statements of Borrowers evidencing the need for an adjustment. Concurrently with the delivery of those Financial Statements, Borrower Representative shall deliver to Agent and Lenders a certificate, signed by its chief financial officer, setting forth in reasonable detail the basis for the continuance of, or any change in, the Applicable Margins. Failure to timely deliver such Financial Statements shall, in addition to any other remedy provided for in this Agreement, result in an increase in the Applicable Margins to the highest level set forth in the foregoing grid, until the first day of the first calendar month following the delivery of those Financial Statements demonstrating that such an increase is not required. If a Default or an Event of Default shall have occurred or be continuing at the time any reduction in the Applicable Margins is to be implemented, that reduction shall be deferred until the first day of the first calendar month following the date on which such Default or Event of Default is waived or cured.

Section 2.03 - Amendment to Section 6.2. Effective as of the date hereof, Section 6.2 of the Credit Agreement is hereby amended by deleting the word "and" immediately before clause (g) therein and adding the following clause (h) at the end of such section:

"; and (h) Borrowers may hold Inventory Notes; provided, that, (i) Agent shall have received a copy of each such Inventory Note, together with such other documentation executed in connection therewith as Agent may request, (ii) such Inventory Note shall have been pledged to Agent, on behalf of itself and Lenders, in a manner satisfactory to Agent, as security for the Obligations for so long as such Borrower owns such Inventory Note; provided, however, (A) such Inventory Note will not be required to be delivered to Agent unless Agent shall otherwise request and (B) Agent's security interest, on behalf of itself and Lenders, on any such Inventory Note shall be deemed automatically released upon the sale of such Inventory Note, (iii) no other Default or Event of Default shall have occurred and be continuing either before or after giving effect to such Borrower accepting or selling such Inventory Note, and (iv) Borrowers shall not hold more than $4,000,000 in Invent ory Notes in the aggregate at any one time"

Section 2.04 - Amendment to Section 6.8. Effective as of the date hereof, Section 6.8 of the Credit Agreement is hereby amended by deleting the word "and" immediately before clause (j) therein and adding the following clause (k) immediately after clause (j):

"and (k) the sale of Inventory Notes to third parties for cash consideration."

Section 2.05 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to delete the definition of "Minimum Borrowing Availability Reserve" in its entirety.

Section 2.06 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to delete the phrase "the Minimum Borrowing Availability Reserve," from clause (c) of the definition of "Reserves" and replace it with the phrase "[Intentionally Deleted],".

Section 2.07 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to add the definition of "Inventory Note" thereto as follows:

"Inventory Note" shall mean a promissory note made payable to any Borrower by an unaffiliated third party purchaser of Inventory from such Borrower pursuant to one or a series of transactions that are on an arm's length basis with fair and reasonable terms."

Section 2.08 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to add the definition of "Sixth Amendment Date" thereto as follows:

"Sixth Amendment Date" shall mean April 1, 2005."

Section 2.09 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to add the definition of "Total Funded Debt Ratio" thereto as follows:

"Total Funded Debt Ratio" shall mean the ratio of (x) total Funded Debt (including, without duplication, all letter of credit obligations) of Borrowers and their Subsidiaries, on a consolidated basis, as of the date of measurement to (y) EBITDA, in each case for the most recently completed consecutive four Fiscal Quarters.

Section 2.10 - Amendment to Annex E. Effective as of the date hereof, Annex E to the Credit Agreement is hereby replaced by Exhibit A attached hereto in its entirety.

Section 2.11 - Amendment to Annex F. Effective as of the date hereof, Annex F to the Credit Agreement is hereby replaced by Exhibit B attached hereto in its entirety.

Sectopm 2.12 - Amendment to Annex G. Effective as of the date hereof, Annex G to the Credit Agreement is hereby replaced by Exhibit C attached hereto in its entirety.

ARTICLE III
Conditions Precedent

Section 3.01 - Conditions. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent, unless specifically waived by Agent and Lenders:

1. Agent shall have received all of the following documents, each document (unless otherwise indicated) being dated the date hereof, duly authorized, executed and delivered by the parties thereto, and in form and substance satisfactory to Agent and Lenders:
1. this Amendment; and
2. such additional documents, instruments and information as Agent or Lenders or their legal counsel may request.
2. The representations and warranties contained herein, in the Credit Agreement, as amended hereby, and/or in the other Loan Documents shall be true and correct as of the date hereof as if made on the date hereof;
3. No event shall have occurred and be continuing or would result from the making of the Loans contemplated hereby which constitutes a Default; and
4. All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to Agent, Lenders and their legal counsel.

ARTICLE IV
Limited Waiver and Consent

Subject to the terms set forth herein and in reliance upon the representations and warranties of Borrowers and Credit Parties set forth herein, Agent and Lenders hereby consent to and waive any Event of Default that would otherwise exist or arise under the Credit Agreement solely as a result of Borrowers' failure to comply with the delivery requirements of Annex E to the Credit Agreement for any period prior to the Sixth Amendment Date prior to the required delivery date for such period. Except as specifically provided in this Amendment, nothing contained in this Amendment shall be construed as a waiver by Agent or any Lender of any other covenant or provision of the Credit Agreement, the other Loan Documents, this Amendment, or of any other contract or instrument between Borrowers or any Credit Party and Agent and any Lender, and the failure of Agent or Lenders at any time or times hereafter to require strict performance by Borrowers or any Credit Party of any provis ion thereof shall not waive, affect or diminish any rights of Agent or Lenders to thereafter demand strict compliance therewith. Agent and Lenders hereby reserve all rights granted under the Credit Agreement, the other Loan Documents, this Amendment and any other contract or instrument between Borrowers or any Credit Party and Agent or any Lender.

ARTICLE V
Ratifications, Representations and Warranties

Section 5.01 - Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect.

Section 5.02 - Ratification of Guaranty. Each of the other Credit Parties signatory hereto hereby ratifies and confirms its guaranty to Agent and Lenders (the "Guaranty"). Each Credit Party hereby represents and acknowledges that it has no claims, counterclaims, offsets, credits or defenses to the Loan Documents or the performance of its obligations thereunder. Furthermore, each Credit Party agrees that nothing contained in this Amendment shall adversely affect any right or remedy of Agent or Lenders under the Guaranty. Each Credit Party agrees that all references in such Guaranty to the "Obligations" shall include, without limitation, all of the obligations of Borrowers to Agent and Lenders under the Credit Agreement, as amended hereby. Finally, each Credit Party hereby represents and acknowledges that the execution and delivery of this Amendment and the other Loan Documents executed in connection herewith shall in no way change or modify its obligations as a guaranto r, debtor, pledgor, assignor, obligor and/or grantor under the Guaranty and shall not constitute a waiver by Agent or Lenders of any of their rights against the other Credit Parties signatory thereto.

Section 5.03 - Representations and Warranties. Each Borrower and Credit Party hereby represents and warrants to Agent and Lenders that (i) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of such Borrower and such Credit Party and will not violate the certificate/articles of incorporation of such Borrower or such Credit Party or the bylaws or other charter or organizational documents of such Borrower or such Credit Party, (ii) the representations and warranties contained in the Credit Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof as though made on and as of the date hereof except to the extent such representations and warranties relate solely to an earlier date, (iii) except as disclosed to Agent and Lenders in writing prior to the date hereof, such Borrow er or such Credit Party is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended hereby, and (iv) except as disclosed to Agent and Lenders in writing, such Borrower or such Credit Party has not amended its certificate/articles of incorporation or bylaws since May 14, 2003.

ARTICLE VI
Miscellaneous

Section 6.01 - Survival of Representations and Warranties. All representations and warranties made in the Credit Agreement or any other document or documents relating thereto, including, without limitation, any Loan Document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Agent or any Lender or any closing shall affect the representations and warranties or the right of Agent or Lenders to rely upon them.

Section 6.02 - Reference to Credit Agreement; Obligations. Each of the Loan Documents, including the Credit Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to the Credit Agreement shall mean a reference to the Credit Agreement, as amended hereby. Borrower acknowledges and agrees that its obligations under this Amendment and the Credit Agreement, as amended hereby, constitute "Obligations" as defined in the Credit Agreement and as used in the Loan Documents.

Section 6.03 - Expenses. As provided in the Credit Agreement, Borrowers agree to pay on demand all reasonable costs and expenses incurred by Agent in connection with the preparation, negotiation and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable and actual costs and fees of Agent's legal counsel, and all reasonable costs and expenses incurred by Agent in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby, or any other Loan Document.

Section 6.04 - Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. Furthermore, in lieu of each such invalid or unenforceable provision there shall be added automatically as a part of this Amendment a valid and enforceable provision that comes closest to expressing the intention of such invalid unenforceable provision.

Section 6.05 - APPLICABLE LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AMENDMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

Section 6.06 - Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of Agent, Lenders, Borrowers, the other Credit Parties signatory hereto and their respective successors and assigns, except that no Borrower may assign or transfer any of its rights or obligations hereunder without the prior written consent of Agent and the Required Lenders.

Section 6.07 - Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.

Section 6.08 - Effect of Waiver. No consent or waiver, express or implied, by Agent or any Lender to or for any breach of or deviation from any covenant or condition of the Credit Agreement shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty.

Section 6.09 - Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

Section 6.10 - Release. EACH BORROWER AND THE OTHER CREDIT PARTIES SIGNATORY HERETO HEREBY ACKNOWLEDGE THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM AGENT OR LENDERS. EACH BORROWER AND THE OTHER CREDIT PARTIES SIGNATORY HERETO HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE AGENT AND EACH LENDER, THEIR RESPECTIVE PREDECESSORS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH ANY BORROW ER OR THE OTHER CREDIT PARTIES SIGNATORY HERETO MAY NOW HAVE AGAINST AGENT AND ANY LENDER, THEIR PREDECESSORS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY LOANS, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE CREDIT AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.

Section 6.11 - NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, this Amendment has been executed on the date first written above, to be effective upon satisfaction of the conditions set forth herein.

BORROWERS:

ASTEC INDUSTRIES, INC.,

a Tennessee corporation,

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ASTEC, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

HEATEC, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

CEI ENTERPRISES, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ASTEC SYSTEMS, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

TELSMITH, INC.,

a Delaware corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

KOLBERG - PIONEER, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

JOHNSON CRUSHERS INTERNATIONAL, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

BREAKER TECHNOLOGY, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ASTEC MOBILE SCREENS, INC.,

a Nevada corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

CARLSON PAVING PRODUCTS, INC.,

a Washington corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ROADTEC, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

TRENCOR, INC.,

a Texas corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

AMERICAN AUGERS, INC.,

a Delaware corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ASTEC HOLDINGS, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ASTEC INVESTMENTS, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

CREDIT PARTY:

ASTEC FINANCIAL SERVICES, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

AGENT:

GENERAL ELECTRIC CAPITALCORPORATION

By: /s/ C. Mark Smith

Name: C. Mark Smith

Title: Duly Authorized Signatory

LENDERS:

GENERAL ELECTRIC CAPITAL CORPORATION

By: /s/ C. Mark Smith

Name: C. Mark Smith

Title: Duly Authorized Signatory

PNC BANK, NATIONAL ASSOCIATION

By: /s/ Albert E. Partridge

Name: Albert E. Partridge III

Title: Vice President

ING CAPITAL LLC

By: /s/ William C. Beddingfield

Name: William C. Beddingfield

Title: Managing Director

FLEET CAPITAL CORPORATION

By: /s/ Elizabeth L. Waller

Name: Elizabeth L. Waller

Title: SVP

ORIX FINANCIAL SERVICES, INC.

By: /s/ Christopher L. Smith

Name: Christopher L. Smith

Title: Authorized Representative

EXHIBIT A

ANNEX E (Section 4.1(a))

to

CREDIT AGREEMENT

FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING

Borrowers shall deliver or cause to be delivered to Agent or to Agent and Lenders, as indicated, the following:

(a) Monthly Financials. To Agent and Lenders, within thirty (30) days after the end of each Fiscal Month (other than (i) each Fiscal Month that is also the last Fiscal Month of a Fiscal Quarter (but not a Fiscal Year), which shall be delivered together with the quarterly financial statements delivered for such Fiscal Quarter pursuant to subsection (b) below or (ii) each Fiscal Month that is also the last Fiscal Month of a Fiscal Year, which shall be delivered together with the annual audited financial statements delivered for such Fiscal Year pursuant to subsection (d) below), financial information regarding Borrowers and their Subsidiaries, certified by the Chief Financial Officer of Borrower Representative, consisting of consolidated and consolidating (i) unaudited balance sheets as of the close of such Fiscal Month and the related statements of income and cash flow for that portion of the Fiscal Year ending as of the close of such Fiscal Month, setting forth in comparative for m the figures for the corresponding period in the prior year and the figures contained in the Projections for such Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end adjustments); (ii) unaudited statements of income and cash flows for such Fiscal Month, setting forth in comparative form the figures for the corresponding period in the prior year and the figures contained in the Projections for such Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end adjustments); and (iii) a summary of the outstanding balance of all Intercompany Notes as of the last day of that Fiscal Month. Such financial information shall be accompanied by the certification of the Chief Financial Officer of Borrower Representative that (i) such financial information presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position and results of operations of Borrowers and their Subsidiaries, on a consolidated and consolidating basis, in each case as at the end of such month and for the period then ended and (ii) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default. In addition, Borrowers shall deliver to Agent and Lenders, simultaneously with the delivery of the financial information as required by this paragraph (a) above, a management discussion and analysis which includes a comparison to budget and the corresponding period in the prior year;

(b) Quarterly Financials. To Agent and Lenders, within sixty (60) days after the end of each Fiscal Quarter (other than each Fiscal Quarter that is also the last Fiscal Quarter of a Fiscal Year, which shall be delivered together with the annual audited financial statements delivered for such Fiscal Year pursuant to subsection (d) below), consolidated and consolidating financial information regarding Borrowers and their Subsidiaries, certified by the Chief Financial Officer of Borrower, including (i) unaudited balance sheets as of the close of such Fiscal Quarter and the related statements of income and cash flow for that portion of the Fiscal Year ending as of the close of such Fiscal Quarter, (ii) unaudited statements of income and cash flows for such Fiscal Quarter, in each case setting forth in comparative form the figures for the corresponding period in the prior year and the figures contained in the Projections for such Fiscal Year, all prepared in accordance with GAAP (subj ect to normal year-end adjustments), and (c) a copy of Borrower's Form 10-Q with respect to such Fiscal Quarter filed with the Securities and Exchange Commission. Such financial information shall be accompanied by (A) a statement in reasonable detail (each, a "Compliance Certificate" showing the calculations used in determining compliance with each of the financial covenants set forth on Annex G which is tested on a quarterly basis and (B) the certification of the Chief Financial Officer of Borrower Representative that (i) such financial information presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position, results of operations and statements of cash flows of Borrowers and their Subsidiaries, on both a consolidated and consolidating basis, as at the end of such Fiscal Quarter and for the period then ended, (ii) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default. In addition, Borrowers shall deliver to Agent and Lenders, within forty-five (45) days after the end of each Fiscal Quarter, a management discussion and analysis which includes a comparison of performance for that Fiscal Quarter to the corresponding period in the prior year; provided that the Borrowers Forms 10-Q and 10-K filed with the Securities and Exchange Commission shall satisfy this requirement;

(c) Operating Plan. To Agent and Lenders, as soon as available, but not later than fifteen (15) days after the end of each Fiscal Year, an operating plan for Borrower and its Subsidiaries, approved by the Board of Directors of Borrowers, for the following one-year period, which will include a statement of all of the material assumptions on which such plan is based, will include monthly balance sheets and a monthly budget for such period included in such plan and will integrate sales, gross profits, operating expenses, operating profit, cash flow projections and Borrowing Availability projections all prepared on the same basis and in similar detail as that on which operating results are reported (and in the case of cash flow projections, representing management's good faith estimates of future financial performance based on historical performance), and including plans for personnel, Capital Expenditures and facilities;

(d) Annual Audited Financials. To Agent and Lenders, within one hundred five (105) days after the end of each Fiscal Year, audited Financial Statements for Borrowers and their Subsidiaries on a consolidated and (unaudited) consolidating basis, consisting of balance sheets and statements of income and retained earnings and cash flows, setting forth in comparative form in each case the figures for the previous Fiscal Year, which Financial Statements shall be prepared in accordance with GAAP, certified without qualification, by Ernst & Young LLP or such other an independent certified public accounting firm of national standing or otherwise acceptable to Agent, together with a copy of Borrower's Form 10-K with respect to such Fiscal Year filed with the Securities and Exchange Commission. Such Financial Statements shall be accompanied by (i) a statement prepared in reasonable detail showing the calculations used in determining compliance with each of the financial covenants set fo rth on Annex G, (ii) a report from such accounting firm to the effect that, in connection with their audit examination, nothing has come to their attention to cause them to believe that a Default or Event of Default has occurred (or specifying those Defaults and Events of Default that they became aware of), it being understood that such audit examination extended only to accounting matters and that no special investigation was made with respect to the existence of Defaults or Events of Default, (iii) the annual letters to such accountants in connection with their audit examination detailing contingent liabilities and material litigation matters, and (iv) the certification of the Chief Executive Officer or Chief Financial Officer of Borrowers that all such Financial Statements present fairly in accordance with GAAP the financial position, results of operations and statements of cash flows of Borrowers and their Subsidiaries on a consolidated and consolidating basis, as at the end of such Fiscal Year an d for the period then ended, and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default;

(e) Management Letters. To Agent and Lenders, within five (5) Business Days after receipt thereof by any Credit Party, copies of all management letters, exception reports or similar letters or reports received by such Credit Party from its independent certified public accountants;

(f) Default Notices. To Agent and Lenders, as soon as practicable, and in any event within five (5) Business Days after an executive officer of any Borrower has actual knowledge of the existence of any Default, Event of Default or other event which has had a Material Adverse Effect, telephonic or telecopied notice thereof specifying the nature of such Default or Event of Default or other event, including the anticipated effect thereof, which notice, if given telephonically, shall be promptly confirmed in writing on the next Business Day;

(g) Notices of Certain Business Actions and Changes of Control. To Agent in writing, as soon as practicable, and in any event not less than sixty (60) prior the occurrence thereof, notice of (i) any sale, dissolution, discontinuance or material reduction of operations of Borrower or any of its Subsidiaries, and (ii) any Change of Control; provided, however, that neither this subparagraph (g) nor any notice provided hereunder shall be construed to constitute Agent's or any Lender's consent to any transaction, occurrence or circumstance referred to herein which is not permitted by other provisions of this Agreement.

(h) SEC Filings and Press Releases. To Agent and Lenders, promptly upon their becoming available, copies of: (i) all Financial Statements, reports, notices and proxy statements made publicly available by any Credit Party to its security holders; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Credit Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by any Credit Party to the public concerning material changes or developments in the business of any such Person;

(i) Equity Notices. To Agent, as soon as practicable, copies of all material written notices given or received by any Credit Party with respect to any Stock of such Person;

(j) Supplemental Schedules. To Agent, supplemental disclosures, if any, required by Section 5.6 of the Agreement;

(j) Litigation. To Agent in writing, promptly upon learning thereof, notice of any Litigation commenced or threatened against any Credit Party that (i) seeks damages in excess of $1,000,000, (ii) seeks injunctive relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its assets or against any Credit Party or ERISA Affiliate in connection with any Plan, (iv) alleges criminal misconduct by any Credit Party, (v) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Liabilities or (vi) involves any product recall;

(k) Insurance Notices. To Agent, disclosure of losses or casualties required by Section 5.4 of the Agreement;

(l) Lease Default Notices. To Agent, copies of (i) any and all default notices received under or with respect to any leased location or public warehouse where Collateral is located, and (ii) such other notices or documents as Agent may request in its reasonable discretion;

(m) Lease Amendments. To Agent, copies of all material amendments to real estate leases; and

(n) Other Documents. To Agent and Lenders, such other financial and other information respecting any Credit Party's business or financial condition as Agent or any Lender shall, from time to time, request.

EXHIBIT B

ANNEX F (Section 4.1(b))

to

CREDIT AGREEMENT

COLLATERAL REPORTS

Borrowers shall deliver or cause to be delivered the following:

(a) To Agent, upon its request, and in no event less frequently than on the twentieth (20^th) day after the end of each Fiscal Month (together, upon Agent's request, with a copy of all or any part of such delivery requested by any Lender in writing after the Closing Date), each of the following:

(i) a Borrowing Base Certificate with respect to each Borrower and the components thereof (including Eligible Accounts and Eligible Inventory by type) of each Borrower, in each case in such detail and accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion;

(ii) a summary of Inventory by location and type, in each case in such detail and accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion;

(iii) a summary monthly trial balance showing Accounts (including receivables and payables) outstanding aged from invoice due date as follows: 1 to 30 days, 31 to 60 days, 61 to 90 days, 91 to 120 days and 121 days or more, for each Borrower in such detail and accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion; and

(iv) a summary monthly roll-forward of Accounts consisting of an opening balance, plus gross sales, plus other gross additions, minus cash collections, minus write-offs, and minus other non-cash credits (dilutive and non-dilutive) and an ending balance, for each Borrower in such detail and accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion.

(b) To Agent, at the time of delivery of each of the quarterly Financial Statements delivered pursuant to Annex E, (i) a listing of government contracts of each Borrower subject to the Federal Assignment of Claims Act of 1940; and (ii) a list of any applications for the registration of any Patent, Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency which any Credit Party thereof has filed in the prior Fiscal Quarter;

(c) Each Borrower, at its own expense, shall deliver to Agent (i) upon Agent's request, and in no event less frequently than once annually, appraisals of Inventory (including Inventory comprised of machinery or equipment which is held by or on behalf of any Borrower for sale or lease) (such annual appraisal to be delivered at Agent's option); provided, however, such annual appraisal shall not be required if (A) no Default or Event of Default is existing or has occurred and is continuing, and (B) the average Borrowing Availability plus cash proceeds held by the Borrowers in accordance with Annex C or invested pursuant to Section 6.2(c) during the period of ninety (90) consecutive days immediately preceding the date of determination shall not have been below $20,000,000, (ii) once a year (or more frequently if (A) a Default or Event of Default is existing or has occurred and is continuing, or (B) for the period of ninety (90) consecutive days immediately preceding the date of determination the sum of (i) average Borrowing Availability for such period of the Borrowers, plus (ii) cash proceeds held by the Borrowers in accordance with Annex C or invested pursuant to Section 6.2(c) during such period was less than $20,000,000) at Agent's request, an audit of each Borrower's Accounts and Inventory, each such audit to be conducted by an audit firm selected by Agent or by internal resources of Agent and the results of which shall be satisfactory to Agent, (iii) upon Agent's request, an appraisal of its machinery and equipment; provided, however, such appraisal shall not be required if (A) no Default or Event of Default is existing or has occurred and is continuing, and (B) the average Borrowing Availability plus cash proceeds held by the Borrowers in accordance with Annex C or invested pursuant to Section 6.2(c) during the period of ninety (90) consecutive days immediately preceding the date of determination shall not have been below $20,000,000, and (iv) upon request by Agent, such other appraisals of its assets as Agent may request, including, but not limited to, appraisals of Real Estate (except that if no Default or Event of Default shall have occurred and be continuing, then appraisals of Real Estate will be required no more frequently than once annually; provided, however, such appraisals shall not be required if the average Borrowing Availability plus cash proceeds held by the Borrowers in accordance with Annex C or invested pursuant to Section 6.2(c) during the period of ninety (90) consecutive days immediately preceding the date of determination shall not have been below $20,000,000), all such appraisals to be conducted by an appraiser, and in form and substance, satisfactory to Agent; and

(d) Such other reports, statements and reconciliations with respect to the Borrowing Base, or the Collateral or Obligations of any or all Credit Parties as Agent shall from time to time request in its reasonable discretion.

EXHIBIT C

ANNEX G (Section 6.10)

to

CREDIT AGREEMENT

FINANCIAL COVENANTS

Borrower shall not breach or fail to comply with any of the following financial covenants, each of which shall be calculated in accordance with GAAP consistently applied:

(a) Maximum Capital Expenditures. Borrower and its Subsidiaries on a consolidated basis shall not make any Capital Expenditures that would cause Capital Expenditures during the following periods to exceed, in the aggregate, the amounts set forth opposite such period:

Period	Maximum Capital Expenditures for Period
Fiscal Year ending December 31, 2005	$17,000,000
Fiscal Year ending December 31, 2006	$20,000,000
Fiscal Year ending December 31, 2007	$20,000,000

provided, that up to 20% of the amount of any Capital Expenditures permitted hereunder (without giving effect to this proviso) but not made during any Fiscal Year may be carried over into the next Fiscal Year and shall increase the amount of Capital Expenditures permitted hereunder for such Fiscal Year (but only such Fiscal Year).

(b) Minimum Fixed Charge Coverage Ratio. Borrower and its Subsidiaries shall have on a consolidated basis at the end of each Fiscal Quarter, a Fixed Charge Coverage Ratio for the 12-month period then ended of not less than 1.25 to 1.00; provided, however, if at the end of such Fiscal Quarter (a) the sum of (i) the average Borrowing Availability for such Fiscal Quarter, plus (ii) cash proceeds held by the Borrowers in accordance with Annex C or invested pursuant to Section 6.2(c) during such Fiscal Quarter is greater than $20,000,000 and (b) the sum of (i) the average Borrowing Availability for the immediately preceding thirty (30) days, plus (ii) cash proceeds held by the Borrowers in accordance with Annex C or invested pursuant to Section 6.2(c) during the immediately preceding thirty (30) days is greater than $20,000,000, then the Fixed Charge Coverage Ratio shall not be tested for such Fiscal Quarter.

Unless otherwise specifically provided herein, any accounting term used in the Agreement shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. If any "Accounting Changes" (as defined below) occur and such changes result in a change in the calculation of the financial covenants, standards or terms used in the Agreement or any other Loan Document, then Borrowers, Agent and Lenders agree to enter into negotiations in order to amend such provisions of the Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating Borrowers' and their Subsidiaries' financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made; provided, however, that the agreement of Requisite Lenders to any required amendments of such provisions shall be sufficient to bind all Lenders. "Accounting Changes" shall mean (a) changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions), (b) changes in accounting principles concurred in by any Borrower's certified public accountants; (c) purchase accounting adjustments under A.P.B. 16 and/or 17 and EITF 88-16, and the application of the accounting principles set forth in FASB 109, including the establishment of reserves pursuant thereto and any subsequent reversal (in whole or in part) of such reserves; and (d) the reversal of any reserves established as a result of purchase accounting adjustments. All such adjustments resulting from expenditures made subsequent to the Closing Date (in cluding capitalization of costs and expenses or payment of pre-Closing Date liabilities) shall be treated as expenses in the period the expenditures are made and deducted as part of the calculation of EBITDA in such period. If Agent, Borrowers and Requisite Lenders agree upon the required amendments, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained in the Agreement or in any other Loan Document shall, only to the extent of such Accounting Change, refer to GAAP, consistently applied after giving effect to the implementation of such Accounting Change. If Agent, Borrowers and Requisite Lenders cannot agree upon the required amendments within thirty (30) days following the date of implementation of any Accounting Change, then all Financial Statements delivered and all calculations of financial covenants and other standards and terms in accordance with the Agreement and the other Loan Documents shal l be prepared, delivered and made without regard to the underlying Accounting Change. For purposes of Section 8.1, a breach of a Financial Covenant contained in this Annex G shall be deemed to have occurred as of any date of determination by Agent or as of the last day of any specified measurement period, regardless of when the Financial Statements reflecting such breach are delivered to Agent.

EX-10

EXHIBIT 10.3

SECOND AMENDMENT
TO
CREDIT AGREEMENT

THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made and entered into as of April 30, 2004 among BREAKER TECHNOLOGY, LTD., an Ontario corporation ("Borrower"); the Guarantors signatory hereto; and GENERAL ELECTRIC CAPITAL CANADA INC., a Canada corporation ("Lender").

WHEREAS, Borrower and Lender are parties to that certain Credit Agreement dated as of May 14, 2003 (as amended from time to time, the "Credit Agreement"); and

WHEREAS, Borrower and Lender desire to amend the Credit Agreement to allow and provide for the foregoing and certain matters, all as hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I
Definitions

Section 1.01 - Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meaning as in the Credit Agreement, as amended hereby.

ARTICLE II
Amendments

Section 2.01 - Amendment to Annex B. Effective as of the date hereof, subsection (a) of Annex G to the Credit Agreement is hereby amended and restated in its entirety to read as follows:

"(a) Issuance. Subject to the terms and conditions of the Agreement, Lender agrees to incur, from time to time prior to the Commitment Termination Date, upon the request of Borrower for Borrower's account, Letter of Credit Obligations by causing Letters of Credit to be issued by a bank or other legally authorized Person selected by or acceptable to Lender in its sole discretion (each, an "L/C Issuer") for Borrower's account in Canadian Dollars or US Dollars and guaranteed by Lender. The aggregate amount of all such Letter of Credit Obligations shall not at any time exceed the least of (i) ONE MILLION FIVE HUNDRED THOUSAND CANADIAN DOLLARS (Cdn. $1,500,000), or the Equivalent Amount thereof in US Dollars, at any date of determination (the "L/C Sublimit"), and (ii) the Maximum Amount less the aggregate outstanding principal balance of the Revolving Credit Advances, and (iii) the Borrowing Base less the aggregate outstanding principal balance of the Revol ving Credit Advances. No such Letter of Credit shall have an expiry date which is more than one year following the date of issuance thereof, and Lender shall not be under any obligation to incur Letter of Credit Obligations in respect of any Letter of Credit having an expiry date which is later than the Commitment Termination Date."

ARTICLE III
Conditions Precedent

Section 3.01 - Conditions. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent, unless specifically waived by Lender:

1. Lender shall have received all of the following documents, each document (unless otherwise indicated) being dated the date hereof, duly authorized, executed and delivered by the parties thereto, and in form and substance satisfactory to Lender:
1. this Amendment; and
2. such additional documents, instruments and information as Lender or its legal counsel may request.
2. The representations and warranties contained herein, in the Credit Agreement, as amended hereby, and/or in the other Loan Documents shall be true and correct as of the date hereof as if made on the date hereof;
3. No event shall have occurred and be continuing or would result from the making of the Loans contemplated hereby which constitutes a Default; and
4. All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to Lender and its legal counsel.

ARTICLE IV
Limited Waiver and Consent

Except as specifically provided in this Amendment, nothing contained in this Amendment shall be construed as a waiver by Lender of any covenant or provision of the Credit Agreement, the other Loan Documents, this Amendment, or of any other contract or instrument between Borrower or any Guarantor and Lender, and the failure of Lender at any time or times hereafter to require strict performance by Borrower or any Guarantor of any provision thereof shall not waive, affect or diminish any rights of Lender to thereafter demand strict compliance therewith. Lender hereby reserves all rights granted under the Credit Agreement, the other Loan Documents, this Amendment and any other contract or instrument between Borrower or any Guarantor and Lender.

ARTICLE V
Ratifications, Representations and Warranties

Section 5.01 - Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect.

Section 5.02 - Ratification of Guaranty. Each of the Guarantors signatory hereto hereby ratifies and confirms its guaranty to Lender (the "Guaranty"). Each Guarantor hereby represents and acknowledges that it has no claims, counterclaims, offsets, credits or defenses to the Loan Documents or the performance of its obligations thereunder. Furthermore, each Guarantor agrees that nothing contained in this Amendment shall adversely affect any right or remedy of Lender under the Guarantees. Each Guarantor agrees that all references in such Guarantees to the "Obligations" shall include, without limitation, all of the obligations of Borrower to Lender under the Credit Agreement, as amended hereby. Finally, each Guarantor hereby represents and acknowledges that the execution and delivery of this Amendment and the other Loan Documents executed in connection herewith shall in no way change or modify its obligations as a guarantor, debtor, pledgor, assignor, obligor and/or granto r under the Guarantees and shall not constitute a waiver by Lender of any of its rights against the other Guarantors signatory thereto.

Section 5.03 - Representations and Warranties. Borrower and each of the Guarantors hereby represents and warrants to Lender that (i) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of Borrower and such Guarantors and will not violate the certificate/articles of incorporation of Borrower or any Guarantor or the bylaws or other charter or organizational documents of Borrower or any Guarantor, (ii) the representations and warranties contained in the Credit Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof as though made on and as of the date hereof except to the extent such representations and warranties relate solely to an earlier date, (iii) except as disclosed to Lender in writing prior to the date hereof, each of Borrower and the Guarantors is in full compli ance with all covenants and agreements contained in the Credit Agreement, as amended hereby, and (iv) Borrower has not amended its certificate/articles of incorporation or bylaws since May 14, 2003.

ARTICLE VI
Miscellaneous

Section 6.01 - Survival of Representations and Warranties. All representations and warranties made in the Credit Agreement or any other document or documents relating thereto, including, without limitation, any Loan Document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Lender or any closing shall affect the representations and warranties or the right of Lender to rely upon them.

Section 6.02 - Reference to Credit Agreement; Obligations. Each of the Loan Documents, including the Credit Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to the Credit Agreement shall mean a reference to the Credit Agreement, as amended hereby. Borrower acknowledges and agrees that its obligations under this Amendment and the Credit Agreement, as amended hereby, constitute "Obligations" as defined in the Credit Agreement and as used in the Loan Documents.

Section 6.03 - Expenses. As provided in the Credit Agreement, Borrower agrees to pay on demand all reasonable costs and expenses incurred by Lender in connection with the preparation, negotiation and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable and actual costs and fees of Lender's legal counsel, and all reasonable costs and expenses incurred by Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby, or any other Loan Document.

Section 6.04 - Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. Furthermore, in lieu of each such invalid or unenforceable provision there shall be added automatically as a part of this Amendment a valid and enforceable provision that comes closest to expressing the intention of such invalid unenforceable provision.

Section 6.05 - APPLICABLE LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AMENDMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE PROVINCE OF ONTARIO, CANADA, APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT PROVINCE, AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.

Section 6.06 - Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of Lender, Borrower, the Guarantors signatory hereto and their respective successors and assigns, except that Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of Lender.

Section 6.07 - Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.

Section 6.08 - Effect of Waiver. No consent or waiver, express or implied, by Lender to or for any breach of or deviation from any covenant or condition of the Credit Agreement shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty.

Section 6.09 - Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

Section 6.10 - Release. EACH OF BORROWER AND THE GUARANTORS SIGNATORY HERETO HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER. BORROWER AND THE GUARANTORS SIGNATORY HERETO HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH BORROWER OR THE GUARANTORS SIGNATORY HERETO MAY NOW HAVE AGAINST LEND ER, ITS PREDECESSORS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY LOANS, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE CREDIT AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.

Section 6.11 - NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.

IN WITNESS WHEREOF, this Amendment has been executed on the date first written above, to be effective upon satisfaction of the conditions set forth herein.

BORROWER:

BREAKER TECHNOLOGY, LTD.,

an Ontario corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

GUARANTORS:

ASTEC INDUSTRIES, INC.,

a Tennessee corporation,

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

ASTEC, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

HEATEC, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

CEI ENTERPRISES, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

ASTEC SYSTEMS, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

TELSMITH, INC.,

a Delaware corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

KOLBERG - PIONEER, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

JOHNSON CRUSHERS INTERNATIONAL, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

SUPERIOR INDUSTRIES OF MORRIS, INC.,

a Minnesota corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

BREAKER TECHNOLOGY, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

PRODUCTION ENGINEERED PRODUCTS, INC.,

a Nevada corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

CARLSON PAVING PRODUCTS, INC.,

a Washington corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

ROADTEC, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

TRENCOR, INC.,

a Texas corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

AMERICAN AUGERS, INC.,

a Delaware corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

AI DEVELOPMENT GROUP, INC.,

a Minnesota corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

AI ENTERPRISES, INC.,

a Minnesota corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

ASTEC HOLDINGS, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

ASTEC INVESTMENTS, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

ASTEC TRANSPORTATION, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

RI PROPERTIES, INC.,

a Minnesota corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

TI SERVICES, INC.,

a Minnesota corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

ASTEC FINANCIAL SERVICES, INC.,

a Tennessee corporation

By: /s/ Albert E. Guth

Name: Albert E. Guth

Title: Secretary

LENDER:

GENERAL ELECTRIC CAPITAL
CANADA INC.

By: /s/ Stephen B. Smith

Name: Stephen B. Smith

Title: Senior Vice President

EX-10

EXHIBIT 10.4

THIRD AMENDMENT
TO
CREDIT AGREEMENT

THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made and entered into as of April 1, 2005 among BREAKER TECHNOLOGY, LTD., an Ontario corporation ("Borrower"); the Guarantors signatory hereto; and GENERAL ELECTRIC CAPITAL CANADA INC., a Canada corporation ("Lender").

WHEREAS, Borrower and Lender are parties to that certain Credit Agreement dated as of May 14, 2003 (as amended from time to time, the "Credit Agreement"); and

WHEREAS, Borrower and Lender desire to amend the Credit Agreement to allow and provide for the foregoing and certain matters, all as hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I
Definitions

Section 1.01 - Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meaning as in the Credit Agreement, as amended hereby.

ARTICLE II
Amendments

Section 2.01 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to amend and restate the definition of "Applicable Revolver Margin" in its entirety to read as follows:

"'Applicable Revolver Margin' shall mean the rate per annum reflected in the grid below, payable in addition to the LIBOR Rate applicable to the Revolving Loans. The Applicable Revolver Margin will be at Level II as reflected in the grid below as of the Third Amendment Date. The Applicable Revolver Margin will be adjusted (up or down) prospectively on a quarterly basis as determined by Astec's and its Subsidiaries' combined financial performance. Adjustments in the Revolver Applicable Margin will be determined by reference to the following grids:

If Total Funded Debt Ratio is:	Level of Applicable Margins:
less than 1.0	Level I
equal to or greater than 1.0, but less than 1.5	Level II
equal to or greater than 1.5, but less than 2.0	Level III
equal to or greater than 2.	Level IV

Applicable Margins

	Level I	Level II	Level III	Level IV
Applicable Revolver Margin	2.00%	2.25%	2.50%	2.75%

All adjustments in the Applicable Margins will be implemented quarterly on a prospective basis, for each calendar month commencing at least five (5) days after the date of delivery to General Electric Capital Corporation of the quarterly unaudited or annual audited (as applicable) Financial Statements of Astec and its Subsidiaries pursuant to the US Facility Agreement evidencing the need for an adjustment. Concurrently with the delivery of those Financial Statements, Borrower shall deliver to Lender a certificate, signed by its chief financial officer, setting forth in reasonable detail the basis for the continuance of, or any change in, the Applicable Revolver Margin. Failure to timely deliver such Financial Statements shall result in an increase in the Applicable Revolver Margin to the highest level set forth in the foregoing grid, until the first day of the first calendar month following the delivery of those Financial Statements demonstrating that such an increase is not required. If a Default or an Event of Default shall have occurred or be continuing at the time any reduction in the Applicable Revolver Margin is to be implemented, that reduction shall be deferred until the first day of the first calendar month following the date on which such Default or Event of Default is waived or cured.

Section 2.02 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to amend and restate the definition of "Applicable Revolver Margin" in its entirety to read as follows:

"'Applicable L/C Margin' shall mean a rate per annum equal to the Applicable Revolver Margin, payable with respect to outstanding Letter of Credit Obligations."

Section 2.03 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to delete the definition of "Minimum Borrowing Availability Reserve" in its entirety.

Section 2.04 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to delete the phrase "the Minimum Borrowing Availability Reserve," from clause (c) of the definition of "Reserves" and replace it with the phrase "[Intentionally Deleted],".

Section 20.05 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to add the definition of "Third Amendment Date" thereto as follows:

"'Third Amendment Date' shall mean April 1, 2005."

Section 2.06 - Amendment to Annex A. Effective as of the date hereof, Annex A to the Credit Agreement is hereby amended to add the definition of "Total Funded Debt Ratio" thereto as follows:

"'Total Funded Debt Ratio' shall mean the ratio of (x) total Funded Debt (including, without duplication, all letter of credit obligations) of Astec and its Subsidiaries, on a consolidated basis, as of the date of measurement to (y) EBITDA, in each case for the most recently completed consecutive four Fiscal Quarters."

Section 2.07 - Amendment to Annex E. Effective as of the date hereof, Annex E to the Credit Agreement is hereby replaced by Exhibit A attached hereto in its entirety.

Section 2.08 - Amendment to Annex F. Effective as of the date hereof, Annex F to the Credit Agreement is hereby replaced by Exhibit B attached hereto in its entirety.

Section 2.09 - Amendment to Annex G. Effective as of the date hereof, Annex G to the Credit Agreement is hereby replaced by Exhibit C attached hereto in its entirety.

ARTICLE III
Conditions Precedent

Section 3.01 - Conditions. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent, unless specifically waived by Lender:

(a) Lender shall have received all of the following documents, each document (unless otherwise indicated) being dated the date hereof, duly authorized, executed and delivered by the parties thereto, and in form and substance satisfactory to Lender:

1. this Amendment; and
2. such additional documents, instruments and information as Lender or its legal counsel may request.

(b) The representations and warranties contained herein, in the Credit Agreement, as amended hereby, and/or in the other Loan Documents shall be true and correct as of the date hereof as if made on the date hereof;

(c) No event shall have occurred and be continuing or would result from the making of the Loans contemplated hereby which constitutes a Default; and

(d) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to Lender and its legal counsel.

ARTICLE IV
Limited Waiver and Consent

Subject to the terms set forth herein and in reliance upon the representations and warranties of Borrower and each Guarantor set forth herein, Lender hereby consents to and waives any Event of Default that would otherwise exist or arise under the Credit Agreement solely as a result of Borrower's failure to comply with the delivery requirements of Annex E to the Credit Agreement for any period prior to the Third Amendment Date prior to the required delivery date for such period. Except as specifically provided in this Amendment, nothing contained in this Amendment shall be construed as a waiver by Lender of any covenant or provision of the Credit Agreement, the other Loan Documents, this Amendment, or of any other contract or instrument between Borrower or any Guarantor and Lender, and the failure of Lender at any time or times hereafter to require strict performance by Borrower or any Guarantor of any provision thereof shall not waive, affect or diminish any rights of Lender to thereafter demand strict compliance therewith. Lender hereby reserves all rights granted under the Credit Agreement, the other Loan Documents, this Amendment and any other contract or instrument between Borrower or any Guarantor and Lender.

ARTICLE V
Ratifications, Representations and Warranties

Section 5.01 - Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect.

Section 5.02 - Ratification of Guaranty. Each of the Guarantors signatory hereto hereby ratifies and confirms its guaranty to Lender (the "Guaranty"). Each Guarantor hereby represents and acknowledges that it has no claims, counterclaims, offsets, credits or defenses to the Loan Documents or the performance of its obligations thereunder. Furthermore, each Guarantor agrees that nothing contained in this Amendment shall adversely affect any right or remedy of Lender under the Guarantees. Each Guarantor agrees that all references in such Guarantees to the "Obligations" shall include, without limitation, all of the obligations of Borrower to Lender under the Credit Agreement, as amended hereby. Finally, each Guarantor hereby represents and acknowledges that the execution and delivery of this Amendment and the other Loan Documents executed in connection herewith shall in no way change or modify its obligations as a guarantor, debtor, pledgor, assignor, obligor and/or granto r under the Guarantees and shall not constitute a waiver by Lender of any of its rights against the other Guarantors signatory thereto.

Section 5.03 - Representations and Warranties. Borrower and each of the Guarantors hereby represents and warrants to Lender that (i) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of Borrower and such Guarantors and will not violate the certificate/articles of incorporation of Borrower or any Guarantor or the bylaws or other charter or organizational documents of Borrower or any Guarantor, (ii) the representations and warranties contained in the Credit Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof as though made on and as of the date hereof except to the extent such representations and warranties relate solely to an earlier date, (iii) except as disclosed to Lender in writing prior to the date hereof, each of Borrower and the Guarantors is in full compli ance with all covenants and agreements contained in the Credit Agreement, as amended hereby, and (iv) Borrower has not amended its certificate/articles of incorporation or bylaws since May 14, 2003.

ARTICLE VI
Miscellaneous

Section 6.01 - Survival of Representations and Warranties. All representations and warranties made in the Credit Agreement or any other document or documents relating thereto, including, without limitation, any Loan Document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Lender or any closing shall affect the representations and warranties or the right of Lender to rely upon them.

Section 6.02 - Reference to Credit Agreement; Obligations. Each of the Loan Documents, including the Credit Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to the Credit Agreement shall mean a reference to the Credit Agreement, as amended hereby. Borrower acknowledges and agrees that its obligations under this Amendment and the Credit Agreement, as amended hereby, constitute "Obligations" as defined in the Credit Agreement and as used in the Loan Documents.

Section 6.03 - Expenses. As provided in the Credit Agreement, Borrower agrees to pay on demand all reasonable costs and expenses incurred by Lender in connection with the preparation, negotiation and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable and actual costs and fees of Lender's legal counsel, and all reasonable costs and expenses incurred by Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby, or any other Loan Document.

Section 6.04 - Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. Furthermore, in lieu of each such invalid or unenforceable provision there shall be added automatically as a part of this Amendment a valid and enforceable provision that comes closest to expressing the intention of such invalid unenforceable provision.

Section 6.05 - APPLICABLE LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AMENDMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE PROVINCE OF ONTARIO, CANADA, APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT PROVINCE, AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.

Section 6.06 - Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of Lender, Borrower, the Guarantors signatory hereto and their respective successors and assigns, except that Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of Lender.

Section 6.07 - Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.

Section 6.08 - Effect of Waiver. No consent or waiver, express or implied, by Lender to or for any breach of or deviation from any covenant or condition of the Credit Agreement shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty.

Section 6.09 - Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

Section 6.10 - Release. EACH OF BORROWER AND THE GUARANTORS SIGNATORY HERETO HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER. BORROWER AND THE GUARANTORS SIGNATORY HERETO HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH BORROWER OR THE GUARANTORS SIGNATORY HERETO MAY NOW HAVE AGAINST LEND ER, ITS PREDECESSORS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY LOANS, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE CREDIT AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.

Section 6.11 - NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.

IN WITNESS WHEREOF, this Amendment has been executed on the date first written above, to be effective upon satisfaction of the conditions set forth herein.

BORROWER:

BREAKER TECHNOLOGY, LTD.,

an Ontario corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

GUARANTORS:

ASTEC INDUSTRIES, INC.,

a Tennessee corporation,

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ASTEC, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

HEATEC, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

CEI ENTERPRISES, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ASTEC SYSTEMS, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

TELSMITH, INC.,

a Delaware corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

KOLBERG - PIONEER, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

JOHNSON CRUSHERS INTERNATIONAL, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

BREAKER TECHNOLOGY, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ASTEC MOBILE SCREENS, INC.,

a Nevada corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

CARLSON PAVING PRODUCTS, INC.,

a Washington corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ROADTEC, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

TRENCOR, INC.,

a Texas corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

AMERICAN AUGERS, INC.,

a Delaware corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ASTEC HOLDINGS, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

ASTEC INVESTMENTS, INC.,

a Tennessee corporation

By: /s/ F. McKamy Hall

Name: F. McKamy Hall

Title: V.P. & Treasurer

LENDER:

GENERAL ELECTRIC CAPITAL
CANADA INC.

By: /s/ Stephen B. Smith

Name: Stephen B. Smith

Title: Senior Vice President

EXHIBIT A

ANNEX E (Section 4.1(a))

to

CREDIT AGREEMENT

FINANCIAL STATEMENTS -- REPORTING

Borrower shall deliver or cause to be delivered to Lender the following:

(a) Monthly Financials. Within thirty (30) days after end of each Fiscal Month (other than (i) each Fiscal Month that is also the last Fiscal Month of a Fiscal Quarter (but not a Fiscal Year), which shall be delivered together with the quarterly financial statements delivered for such Fiscal Quarter pursuant to subsection (b) below or (ii) each Fiscal Month that is also the last Fiscal Month of a Fiscal Year, which shall be delivered together with the annual audited financial statements delivered for such Fiscal Year pursuant to subsection (c) below), financial information regarding Borrower and its Subsidiaries, certified by the Chief Financial Officer of Astec, consisting of consolidated (i) unaudited balance sheets as of the close of such Fiscal Month and the related statements of income and cash flow for that portion of the Fiscal Year ending as of the close of such Fiscal Month, setting forth in comparative form the figures for the corresponding period in the prior year prep ared in accordance with GAAP (subject to normal year-end adjustments); and (ii) unaudited statements of income and cash flows for such Fiscal Month, setting forth in comparative form the figures for the corresponding period in the prior year prepared in accordance with GAAP (subject to normal year-end adjustments). Such financial information shall be accompanied by the certification of the Chief Financial Officer of Astec that (i) such financial information presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position and results of operations of Borrower and its Subsidiaries, on a consolidated basis, in each case, as at the end of such month and for the period then ended and (ii) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default. In addition, Borrower shall deliver to Lender, simultaneously with the delivery of the financial statements required by this paragraph (a), a management discussion and analysis; which includes a comparison to the corresponding period in the prior year

(b) Quarterly Financials. Within sixty (60) days after the end of each Fiscal Quarter (other than each Fiscal Quarter that is also the last Fiscal Quarter of a Fiscal Year, which shall be delivered together with the annual audited financial statements delivered for such Fiscal Year pursuant to subsection (c) below), consolidated and consolidating financial information regarding Astec and its Subsidiaries, certified by the Chief Financial Officer of Astec, including (i) unaudited balance sheets as of the close of such Fiscal Quarter and the related statements of income and cash flow for that portion of the Fiscal Year ending as of the close of such Fiscal Quarter, (ii) unaudited statements of income and cash flows for such Fiscal Quarter, prepared in accordance with GAAP (subject to normal year-end adjustments), and (c) a copy of Astec's Form 10-Q with respect to such Fiscal Quarter filed with the Securities and Exchange Commission. Such financial information shall be accompanied by (A) a statement in reasonable detail (each, a "Compliance Certificate" showing the calculations used in determining compliance with each of the financial covenants set forth on Annex G which is tested on a quarterly basis and (B) the certification of the Chief Financial Officer of Astec that (i) such financial information presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position, results of operations and statements of cash flows of Astec and its Subsidiaries, on both a consolidated and consolidating basis, as at the end of such Fiscal Quarter and for the period then ended, (ii) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default. In addition, Borrower shall deliver to L ender, within forty-five (45) days after the end of each Fiscal Quarter, a management discussion and analysis;

(c) Annual Audited Financials. Within one hundred five (105) days after the end of each Fiscal Year, audited Financial Statements for Astec and its Subsidiaries, including, without limitation, Borrower, on a consolidated and (unaudited) consolidating basis, consisting of balance sheets and statements of income and retained earnings and cash flows, setting forth in comparative form in each case the figures for the previous Fiscal Year, which Financial Statements shall be prepared in accordance with GAAP, certified without qualification, by Ernst & Young LLP or such other an independent certified or chartered public accounting firm of national standing or otherwise acceptable to Lender, together with a copy of Astec's Form 10-K with respect to such Fiscal Year filed with the Securities and Exchange Commission. Such Financial Statements shall be accompanied by (i) a statement prepared in reasonable detail showing the calculations used in determining compliance with each of the f inancial covenants set forth on Annex G, (ii) a report from such accounting firm to the effect that, in connection with their audit examination, nothing has come to their attention to cause them to believe that a Default or Event of Default has occurred (or specifying those Defaults and Events of Default that they became aware of), it being understood that such audit examination extended only to accounting matters and that no special investigation was made with respect to the existence of Defaults or Events of Default, (iii) the annual letters to such accountants in connection with their audit examination detailing contingent liabilities and material litigation matters, and (iv) the certification of the Chief Executive Officer or Chief Financial Officer of Astec and Borrower that all such Financial Statements present fairly in accordance with GAAP the financial position, results of operations and statements of cash flows of Astec and its Subsidiaries, including, without limitation, Borrower, on a cons olidated and consolidating basis, as at the end of such Fiscal Year and for the period then ended, and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default;

(d) Default Notices. As soon as practicable, and in any event within five (5) Business Days after an executive officer of any Credit Party has actual knowledge of the existence of any Default, Event of Default or other event which has had a Material Adverse Effect, telephonic or telecopied notice thereof specifying the nature of such Default or Event of Default or other event, including the anticipated effect thereof, which notice, if given telephonically, shall be promptly confirmed in writing on the next Business Day;

(e) Notices of Certain Business Actions and Changes of Control. As soon as practicable, and in any event not less than sixty (60) prior the occurrence thereof, notice of (i) any sale, dissolution, discontinuance or material reduction of operations of Borrower, Astec or any of its Subsidiaries, and (ii) any Change of Control; provided, however, that neither this subparagraph (g) nor any notice provided hereunder shall be construed to constitute Lender's consent to any transaction, occurrence or circumstance referred to herein which is not permitted by other provisions of this Agreement.

(f) SEC Filings and Press Releases. Promptly upon their becoming available, copies of: (i) all Financial Statements, reports, notices and proxy statements made publicly available by Astec or any of its Subsidiaries to its shareholders; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by such Person with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by such Person to the public concerning material changes or developments in the business of any such Person;

(g) Equity Notices. As soon as practicable, copies of all material written notices given or received by Astec or any of its Subsidiaries with respect to any Stock of such Person;

(h) Supplemental Schedules. Supplemental disclosures, if any, required by Section 5.6 of the Agreement;

(i) Litigation. Promptly upon learning thereof, notice of any Litigation commenced or threatened against Borrower or any of its Subsidiaries that (i) seeks damages in excess of Cdn. $250,000 or the Equivalent Amount thereof, (ii) seeks injunctive relief, (iii) alleges criminal misconduct by any Credit Party, (iv) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Liabilities or (v) involves any product recall;

(j) Insurance Notices. Disclosure of losses or casualties required by Section 5.4 of the Agreement;

(k) Lease Default Notices. Copies of (i) any and all default notices received under or with respect to any leased location or public warehouse where Collateral is located, and (ii) such other notices or documents as Lender may request in its reasonable discretion;

(l) Lease Amendments. Copies of all material amendments to real estate leases; and

(m) Other Documents. Such other financial and other information respecting Astec or any of its Subsidiaries' business or financial condition as Lender shall, from time to time, request.

EXHIBIT B

ANNEX F (Section 4.1(b))

to

CREDIT AGREEMENT

COLLATERAL REPORTS

Borrower shall deliver or cause to be delivered the following:

(a) To Lender, upon its request, and in no event less frequently than on the twentieth (20^th) day after the end of each Fiscal Month, each of the following:

(i) a Borrowing Base Certificate with respect to Borrower and the components thereof (including Eligible Accounts and Eligible Inventory by type) of Borrower, in each case, in such detail and accompanied by such supporting detail and documentation as shall be requested by Lender in its reasonable discretion;

(ii) with respect to Borrower, a summary of Inventory by location and type, in each case, in such detail and accompanied by such supporting detail and documentation as shall be requested by Lender in its reasonable discretion; and

(iii) with respect to Borrower, a monthly trial balance showing Accounts (including receivables and payables) outstanding aged from invoice due date as follows: 1 to 30 days, 31 to 60 days, 61 to 90 days and 91 to 120 days and 121 days or more, in such detail and accompanied by such supporting detail and documentation as shall be requested by Lender in its reasonable discretion; and

(iv) with respect to Borrower, a monthly roll forward of Accounts consisting of an opening balance, plus gross sales, plus other gross additions, minus cash collections, minus write offs, and minus other non-cash credits (dilutive and non-dilutive) and an ending balance, in each case in such detail accompanied by such supporting detail and documentation as shall be requested by Lender.

(b) To Lender, at the time of delivery of each of the quarterly Financial Statements delivered pursuant to Annex E, (i) a listing of government contracts of Borrower subject to the Financial Administrations Act (Canada) or any applicable provincial or foreign ordinance of similar purpose and effect; and (ii) a list of any applications for the registration of any Patent, Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency which any Credit Party thereof has filed in the prior Fiscal Quarter;

(c) Borrower, at its own expense, shall deliver to Lender (i) upon Lender's request, and in no event less frequently than once annually, appraisals of Inventory (including Inventory comprised of machinery or equipment which is held by or on behalf of Borrower for sale or lease) (such annual appraisal to be delivered at Agent's option); provided, however, such annual appraisal shall not be required if (A) no Default or Event of Default is existing or has occurred and is continuing, and (B) such appraisal would not be required under the US Facility Agreement, (ii) once a year (or more frequently if (A) a Default or Event of Default is existing or has occurred and is continuing, or (B) such audit would be required more frequently than once per loan year under the US Facility Agreement) at Lender's request, an audit of Borrower's Accounts and Inventory, each such audit to be conducted by an audit firm selected by Lender or by internal resources of Lender and the results of whi ch shall be satisfactory to Lender, and (iii) upon Lender's request, an appraisal of its machinery and equipment; provided, however, such appraisal shall not be required if (A) no Default or Event of Default is existing or has occurred and is continuing, and (B) such appraisal would not be required under the US Facility Agreement, and (iv) upon request by Lender, such other appraisals of its assets as Lender may request, including, but not limited to, appraisals of Real Estate (except that if no Default or Event of Default shall have occurred and be continuing, then appraisals of Real Estate will be required no more frequently than once annually; provided, however, such appraisals shall not be required if (A) no Default or Event of Default is existing or has occurred and is continuing, and (B) such appraisal would not be required under the US Facility Agreement, all such appraisals to be conducted by an appraiser, and in form and substance, satisfactory to Lender; and

(d) Such other reports, statements and reconciliations with respect to the Borrowing Base, or the Collateral or Obligations of any or all Credit Parties as Lender shall from time to time request in its reasonable discretion.

EXHIBIT C

ANNEX G (Section 6.10)

to

CREDIT AGREEMENT

FINANCIAL COVENANTS

Borrower shall not breach or fail to comply with the following financial covenant, which shall be calculated in accordance with GAAP consistently applied:

Minimum Consolidated Fixed Charge Coverage Ratio. Astec and its Subsidiaries shall have on a consolidated basis at the end of each Fiscal Quarter, a Fixed Charge Coverage Ratio for the 12-month period then ended of not less than 1.25 to 1.00; provided, however, if at the end of such Fiscal Quarter (a) the sum of (i) the average Borrowing Availability (as defined in the US Facility Agreement) of Astec and its Subsidiaries for such Fiscal Quarter, plus (ii) cash proceeds held by or invested by Astec and its Subsidiaries in accordance with the US Facility Agreement during such Fiscal Quarter is greater than $20,000,000 and (b) the sum of (i) the average Borrowing Availability (as defined in the US Facility Agreement) of Astec and its Subsidiaries for the immediately preceding thirty (30) days, plus (ii) cash proceeds held by or invested by Astec and its Subsidiaries in accordance with the US Facility Agreement during the immediately preceding thirty (30) days is greater t han $20,000,000, then the Fixed Charge Coverage Ratio shall not be tested for such Fiscal Quarter.

Unless otherwise specifically provided herein, any accounting term used in the Agreement shall have the meaning customarily given such term in accordance with GAAP (as defined in the US Facility Agreement), and all financial computations hereunder shall be computed in accordance with GAAP (as defined in the US Facility Agreement) consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing.

If any "Accounting Changes" (as defined below) occur and such changes result in a change in the calculation of the financial covenants, standards or terms used in the Agreement or any other Loan Document, then Borrower, and Lender agree to enter into negotiations in order to amend such provisions of the Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating Borrower's and its Subsidiaries' financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. "Accounting Changes" shall mean (a) changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions), (b) changes in accounting principles concurred in by any Borrower's certified or chartered public accountants; (c ) purchase accounting adjustments under A.P.B. 16 and/or 17 and EITF 88-16, and the application of the accounting principles set forth in FASB 109, including the establishment of reserves pursuant thereto and any subsequent reversal (in whole or in part) of such reserves; and (d) the reversal of any reserves established as a result of purchase accounting adjustments. All such adjustments resulting from expenditures made subsequent to the Closing Date (including capitalization of costs and expenses or payment of pre-Closing Date liabilities) shall be treated as expenses in the period the expenditures are made and deducted as part of the calculation of EBITDA in such period. If Lender and Borrower agree upon the required amendments, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained in the Agreement or in any other Loan Document shall, only to the extent of such Accounting Change, refer to GAAP, co nsistently applied after giving effect to the implementation of such Accounting Change. If Lender and Borrower cannot agree upon the required amendments within thirty (30) days following the date of implementation of any Accounting Change, then all Financial Statements delivered and all calculations of financial covenants and other standards and terms in accordance with the Agreement and the other Loan Documents shall be prepared, delivered and made without regard to the underlying Accounting Change. For purposes of Section 8.1, a breach of a Financial Covenant contained in this Annex G shall be deemed to have occurred as of any date of determination by Lender or as of the last day of any specified measurement period, regardless of when the Financial Statements reflecting such breach are delivered to Lender.

EX-31

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) / 15d-14(a)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dr. J. Don Brock, CEO, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Astec Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
3. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
4. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 10, 2005	/s/ J. Don Brock
	J. Don Brock
	Chairman of the Board, CEO and President

EX-31

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) / 15d-14(a)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, F. McKamy Hall, CFO, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Astec Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
3. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
4. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 10, 2005	/s/ F. McKamy Hall
	F. McKamy Hall
	CFO, Vice President and Treasurer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Astec Industries, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, J. Don Brock, Chief Executive Officer of the Company, and F. McKamy Hall, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ J. Don Brock

J. Don Brock

Chairman of the Board, Chief Executive Officer and President

May 10, 2005

/s/ F. McKamy Hall

F. McKamy Hall

Chief Financial Officer, Vice President and Treasurer

May 10, 2005