-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RhaaLyNUyfaHvvScVV5jIHy7HvH3DC9ae7M+3les9la3ZfeXztHyZyAC3Qdns05/ tJ/QC9AtT0qS3p+HaAK7Kg== 0000950144-99-009993.txt : 19990813 0000950144-99-009993.hdr.sgml : 19990813 ACCESSION NUMBER: 0000950144-99-009993 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASTEC INDUSTRIES INC CENTRAL INDEX KEY: 0000792987 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 620873631 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14714 FILM NUMBER: 99686162 BUSINESS ADDRESS: STREET 1: 4101 JEROME AVE CITY: CHATTANOOGA STATE: TN ZIP: 37407 BUSINESS PHONE: 4238674210 MAIL ADDRESS: STREET 1: PO BOX 72787 STREET 2: 4101 JEROME AVE CITY: CHATTANOOGA STATE: TN ZIP: 37407 10-Q 1 ASTEC INDUSTRIES INC 1 SECURITIES & 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 June 30, 1999. [ ] 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 (I.R.S. Employer Identification No.) incorporation or organization) 4101 Jerome Avenue, Chattanooga, Tennessee 37407 --------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (423) 867-4210 ---------------------------------------------------- (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 X NO ----- ----- Indicate the number of shares outstanding of each of the registrant's classes of stock as of the latest practicable date. Class Outstanding at August 10, 1999 ----- ------------------------------ Common Stock, par value $0.20 19,096,516 2 ASTEC INDUSTRIES, INC. INDEX
Page Number ----------- PART I - Financial Information Item 1. Financial Statements-Unaudited Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998 1 Consolidated Statements of Income for the Three and Six Months Ended June 30, 1999 and 1998 2 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998 3 Notes to Unaudited Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - Other Information Item 1. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Items 14 Item 6. Exhibits and Reports on Form 8-K 14
3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)
ACCOUNT DESCRIPTION JUNE 30, DECEMBER 31, 1999 1998 -------- ------------ ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 5,675 $ 5,353 -------- -------- RECEIVABLES - NET 72,305 52,427 -------- -------- INVENTORIES 82,846 76,729 -------- -------- PREPAID EXPENSES AND OTHER 11,279 10,373 -------- -------- TOTAL CURRENT ASSETS 172,105 144,882 -------- -------- PROPERTY AND EQUIPMENT - NET 95,576 81,142 -------- -------- OTHER ASSETS 28,946 23,140 -------- -------- TOTAL ASSETS $296,627 $249,164 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES NOTES PAYABLE $ 87 $ 146 -------- -------- CURRENT MATURITIES OF LONG-TERM DEBT 500 500 -------- -------- ACCOUNTS PAYABLE - TRADE 32,545 27,418 -------- -------- OTHER ACCRUED LIABILITIES 35,243 34,953 -------- -------- TOTAL CURRENT LIABILITIES 68,375 63,017 -------- -------- LONG-TERM DEBT, LESS CURRENT MATURITIES 65,225 47,220 -------- -------- OTHER LONG-TERM LIABILITIES 9,610 6,269 -------- -------- TOTAL SHAREHOLDERS' EQUITY 153,417 132,658 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $296,627 $249,164 -------- --------
1 4 ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 1999 1998 1999 1998 ----------- ----------- ----------- ----------- NET SALES $ 119,958 $ 108,124 $ 232,436 $ 196,288 ----------- ----------- ----------- ----------- COST OF SALES 86,119 82,298 170,588 148,158 ----------- ----------- ----------- ----------- GROSS PROFIT 33,839 25,826 61,848 48,130 ----------- ----------- ----------- ----------- S,G, & A EXPENSES 15,830 12,841 29,770 25,514 ----------- ----------- ----------- ----------- INCOME FROM OPERATIONS 18,009 12,985 32,078 22,616 ----------- ----------- ----------- ----------- INTEREST EXPENSE 948 852 1,642 1,401 ----------- ----------- ----------- ----------- OTHER INCOME, NET OF EXPENSE 1,219 127 1,862 300 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 18,280 12,260 32,298 21,515 ----------- ----------- ----------- ----------- INCOME TAXES 7,125 4,871 12,576 8,567 ----------- ----------- ----------- ----------- NET INCOME $ 11,155 $ 7,389 $ 19,722 $ 12,948 ----------- ----------- ----------- ----------- EARNINGS PER COMMON SHARE * BASIC $ 0.59 $ 0.39 $ 1.04 $ 0.69 ----------------------------------------------------- DILUTED $ 0.55 $ 0.38 $ 0.99 $ 0.67 ----------------------------------------------------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING * BASIC 19,051,990 18,784,456 19,020,445 18,727,790 ----------------------------------------------------- DILUTED 20,111,740 19,398,682 19,963,481 19,277,662 -----------------------------------------------------
* Restated to retroactively reflect a two-for-one stock split that took effect on January 18, 1999. 2 5 ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
JUNE JUNE 1999 1998 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $ 19,722 $ 12,948 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 5,511 3,855 PROVISION FOR DOUBTFUL ACCOUNTS 274 245 PROVISION FOR INVENTORY RESERVE 340 939 PROVISION FOR WARRANTY RESERVE 1,794 2,682 (GAIN) ON SALE OF FIXED ASSETS (21) (59) PROVISION FOR PENSION RESERVE 121 (GAIN) ON SALE OF LEASE PORTFOLIO (204) (INCREASE) DECREASE IN: TRADE RECEIVABLES (11,124) (10,183) FINANCE RECEIVABLES (16,505) (9,258) INVENTORIES (6,457) 4,579 PREPAID EXPENSES AND OTHER (906) (6,699) OTHER RECEIVABLES 296 (183) OTHER NON-CURRENT ASSETS 1,001 (91) INCREASE (DECREASE) IN: ACCOUNTS PAYABLE 5,127 3,527 ACCRUED PRODUCT WARRANTY (1,242) (1,755) OTHER ACCRUED LIABILITIES (796) 1,736 INCOME TAXES PAYABLE 3,876 8,644 TOTAL ADJUSTMENTS (19,036) (1,900) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 686 11,048 CASH FLOWS FROM INVESTING ACTIVITIES: PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT - NET 53 304 PROCEEDS FROM SALE OF LEASE PORTFOLIO 11,808 12,649 EXPENDITURES FOR PROPERTY AND EQUIPMENT (17,366) (8,037) EXPENDITURES FOR EQUIPMENT ON OPERATING LEASE (13,841) (13,942) -------- -------- NET CASH USED BY INVESTING ACTIVITIES (19,346) (9,026) CASH FLOWS FROM FINANCING ACTIVITIES: NET BORROWINGS (REPAYMENTS) UNDER REVOLVING CREDIT AGREEMENT 17,946 13,111 PROCEEDS FROM ISSUANCE OF COMMON STOCK 1,036 390 NET CASH PROVIDED BY FINANCING ACTIVITIES 18,982 13,501 NET DECREASE IN CASH 322 15,523 CASH AT BEGINNING OF PERIOD 5,353 2,926 -------- -------- CASH AT END OF PERIOD $ 5,675 $ 18,449 -------- --------
3 6 ASTEC INDUSTRIES, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to From 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles 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-month period ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 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, 1998. . NOTE 2. RECEIVABLES Receivables are net of allowance for doubtful accounts of $1,680,000 and $1,459,000 for June 30, 1999 and December 31, 1998, respectively. NOTE 3. INVENTORIES Inventories are stated at the lower of first-in, first-out cost or market and consist of the following: (in thousands)
June 30, December 31, 1999 1998 -------- ------------ Raw Materials $ 21,247 $ 35,275 Work-in-Process 21,987 18,138 Finished Goods 39,611 23,316 -------- ---------- Total $ 82,845 $ 76,729 ======== ==========
NOTE 4. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. Property and equipment is net of accumulated depreciation of $40,702,000 and $36,759,000 for June 30, 1999 and December 31, 1998, respectively. 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. 4 7 Notes to Unaudited Financial Statements - Continued The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended Six Months Ended June 30 June 30 1999 1998 1999 1998 ----------- ----------- ----------- ----------- Numerator: Net income $11,155,000 $ 7,389,000 $19,722,000 $12,948,000 Denominator: Denominator for basic earnings per share 19,051,990 18,784,456 19,020,445 18,727,790 Effect of dilutive securities: Employee stock options 1,059,750 614,226 943,036 549,872 ----------- ----------- ----------- ----------- Denominator for diluted earnings per share 20,111,740 19,398,682 19,963,481 19,277,662 =========== =========== =========== =========== Earnings per common share: Basic $ 0.59 $ 0.39 $ 1.04 $ 0.69 Diluted $ 0.55 $ 0.38 $ 0.99 $ 0.67 =========== =========== =========== ===========
NOTE 6. COMPREHENSIVE INCOME Total comprehensive income was $11,155,000 and $19,722,000 for the three and six months ended June 30, 1999 and $7,389,000 and $12,948,000 for the three and six months ended June 30, 1998. NOTE 7. CONTINGENT MATTERS Certain customers have financed purchases of Astec products through arrangements in which the Company is contingently liable for customer debt aggregating approximately $1,263,000 at June 30, 1999 and $1,271,000 at December 31, 1998. NOTE 8. SEGMENT INFORMATION
Three months ended June 30, 1999 ------------------------------------------------------------ Hot-mix Aggregate Mobile Asphalt Asphalt Processing Construction All Plants Equipment Equipment Others Total -------- ---------- -------------- -------- -------- Revenues from external customers $ 50,450 $ 39,544 $ 23,711 $ 6,253 $119,958 -------- ---------- -------------- -------- -------- Intersegment revenues 3,366 3,294 1 2,572 9,233 -------- ---------- -------------- -------- -------- Segment profit $ 7,725 $ 5,723 $ 4,970 $ (7,335) $ 11,083 -------- ---------- -------------- -------- --------
Three months ended June 30, 1998 ------------------------------------------------------------ Hot-mix Aggregate Mobile Asphalt Asphalt Processing Construction All Plants Equipment Equipment Others Total -------- ---------- -------------- -------- -------- Revenues from external customers $ 46,331 $ 31,893 $ 19,307 $ 10,593 $108,124 -------- ---------- -------------- -------- -------- Intersegment revenues 3,318 1,978 0 (1,719) 3,577 -------- ---------- -------------- -------- -------- Segment profit $ 5,071 $ 4,172 $ 3,659 $ (6,078) $ 6,824 -------- ---------- -------------- -------- --------
5 8 Notes to Unaudited Financial Statements - Continued
Six months ended June 30, 1999 ------------------------------------------------------------ Hot-mix Aggregate Mobile Asphalt Asphalt Processing Construction All Plants Equipment Equipment Others Total -------- ---------- -------------- -------- -------- Revenues from external customers $100,150 $ 77,751 $ 41,214 $ 13,321 $232,436 -------- ---------- -------------- -------- -------- Intersegment revenues 5,780 6,210 1 3,729 15,720 -------- ---------- -------------- -------- -------- Segment profit $ 14,577 $ 11,167 $ 8,150 $(14,064) $ 19,830 -------- ---------- -------------- -------- --------
Six months ended June 30, 1998 ------------------------------------------------------------ Hot-mix Aggregate Mobile Asphalt Asphalt Processing Construction All Plants Equipment Equipment Others Total -------- ---------- -------------- -------- -------- Revenues from external customers $ 91,267 $ 58,816 $ 32,260 $ 13,945 $196,288 -------- ---------- -------------- -------- -------- Intersegment revenues 6,127 3,414 2 2,169 11,712 -------- ---------- -------------- -------- -------- Segment profit $ 11,988 $ 7,146 $ 5,546 $(11,712) $ 12,983 -------- ---------- -------------- -------- --------
Reconciliations of the reportable segment totals for profit or loss to the Company's consolidated totals are as follows:
Three months Six months ended June 30, ended June 30, -------------------- -------------------- 1999 1998 1999 1998 -------- -------- -------- -------- PROFIT: Total profit for reportable segments $ 18,418 $ 12,902 $ 33,894 $ 24,680 -------- -------- -------- -------- Other profit (loss) (7,335) (6,078) (14,064) (11,697) -------- -------- -------- -------- Equity in income of joint venture 9 74 52 96 -------- -------- -------- -------- Elimination of intersegment profit 63 491 (160) (131) -------- -------- -------- -------- Total consolidated net income $ 11,155 $ 7,389 $ 19,722 $ 12,948 -------- -------- -------- --------
NOTE 9. 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" in Part I - Item 2 "Contingencies" of this Report. NOTE 10. SEASONALITY Due to varied product lines, the Company's business has become less seasonal during the past few years. Currently, approximately 50% to 55% of the Company's business volume occurs during the first six months of the year. 6 9 Item 2. Management's Discussion and Analysis Of Financial Condition And Results Of Operations When used in this report, press releases and elsewhere by management or the Company from time to time, the words, "believes," "anticipates," and "expects" and similar expressions are intended to identify forward-looking statements that involve certain risks and uncertainties. A variety of factors could cause actual results to differ materially from those anticipated in the Company's forward-looking statements, some of which include market conditions in the road building and related construction equipment industry, competition in the Company's markets from existing and new competitors and the products or services they provide, the ability to expand in existing markets and penetrate new markets, federal and state legislation affecting infrastructure, and other risk factors that are discussed from time to time in the Company's SEC reports. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date such statements are made. The Company undertakes no obligations to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date such statements are made or to reflect the occurrence of unanticipated events. RESULTS OF OPERATIONS For the three months ended June 30, 1999, net sales increased to $119,958,000 from $108,124,000 for the three-months ended June 30, 1998, representing a 10.9% increase. The acquisition of Johnson Crushers International, Inc. during October 1998, accounted for approximately $8,051,000 of the increase in sales for the second quarter of 1999 compared to the second quarter of 1998. The remainder of the increase in net sales for the second quarter of 1999 compared to the second quarter of 1998 related mainly to sales of mobile asphalt construction equipment. International sales for the second quarter of 1999 decreased to $14,117,000, from $16,000,000 for the same period of 1998. Net sales for the six months ended June 30, 1999 increased approximately 18.4% to $232,436,000 from $196,288,000 for the same period of 1998. For the six months ended June 30, 1999, approximately 46% of the increase in net sales are attributable to Johnson Crushers International, Inc. The remainder of the increase in net sales for the six months ended June 30, 1999 is primarily attributable to increased sales of mobile asphalt construction equipment, secondly to both asphalt mixing plants and related components and aggregate crushing equipment. Gross profit for the quarter ended June 30, 1999 increased to $33,839,000, from $25,826,000 for the quarter ended June 30, 1998, while the gross profit percentage for the three months ended June 30, 1999 increased to 28.2% from 23.9% at June 30, 1998. Gross profit for the six months ended June 30, 1999 was $61,848,000 compared to gross profit of $48,130,000 for the same period of 1998. The gross profit percentage for the six months ended June 30, 1999 was 26.6% compared to 24.5% for the six months ended June 30, 1998. The increase in the gross profit margin for the three and six months ended June 30, 1999 relates primarily to the Company's initiation of several cost-reduction strategies to increase profit margins on several product lines. Selling, general, and administrative expenses for the second quarter of 1999 were $15,830,000 or 13.2% of net sales, compared to $12,841,000 or 11.9% of net sales for the same period of 1998. Approximately 25% of the increase in selling, general and administrative expenses for the quarter ended June 30, 1999 compared to the same quarter in 1998, relates to the acquisition of Johnson Crushers International, Inc. in October 1998. Selling, general and administrative expenses for the six months ended June 30, 1999 increased to $29,770,000, from $25,514,000 for the six months ended June 30, 1998, an increase of $4,256,000, or 16.7%. Approximately 31% of the increase in selling, general and administrative expenses for the six months ended June 30, 1999 compared to the same period of 1998 related to Johnson Crushers 7 10 International, Inc. The remaining increase in selling, general and administrative expenses for the three and six months ended June 30, 1999, compared to the same prior year periods, relates primarily to increased sales department expenses at the road paving and aggregate crushing equipment companies and increased engineering department expenses at the asphalt mixing plant subsidiary. Interest expense increased to $948,000 for the quarter ended June 30, 1999 from $852,000 for the quarter ended June 30, 1998. Interest expense as a percentage of net sales remained consistent at .8% for the quarters ended June 30, 1999 and June 30, 1998. Interest expense for the six months ended June 30, 1999 compared to the six months ended June 30, 1998 increased to $1,642,000 from $1,401,000, respectively. The increase in interest expense for the three and six months ended June 30, 1999 compared to the three and six months ended June 30, 1998, is due mainly to increased borrowing under of the Company's revolving credit facility primarily by the Company's captive finance company. Other income, net of other expense, was $1,219,000, or 1.0% of net sales for the quarter ended June 30, 1999, compared to other income, net of other expense, of $127,000, or 0.1% of net sales for the quarter ended June 30, 1998. Other income, net of other expense for the six months ended June 30, 1999 was $1,862,000 compared to other income, net of other expense for the six months ended June 30, 1998 of $300,000, an increase of $1,562,000. The increase in Other income, net of other expense for the three and six months ended June 30, 1999 relates mainly to gains from lease portfolio sales and income from selling an interest swap to First Chicago Bank, along with other financing service related fee income. Income tax expense for the second quarter of 1999 increased to $7,125,000 from $4,871,000 at June 30, 1998, an increase of $2,254,000 or 46.3%. Tax expense is 5.9% and 4.5% of net sales for the quarters ended June 30, 1999 and 1998, respectively. The effective tax rate for the second quarter of 1999 and 1998, respectively, was 39%. Backlog of orders at June 30, 1999 was $82,816,000 compared to $69,895,000 at June 30, 1998. For comparison, the June 30, 1998 backlog of Johnson Crushers International, Inc. was included in the June 30, 1998 backlog. The majority of the increase in the backlog at June 30, 1999 compared to that of June 30, 1998 related to a significant increase in domestic orders for asphalt mixing plants and related components and aggregate processing equipment. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1999, the Company had working capital of $103,730,000 compared to $89,786,000 at June 30, 1998. Total short-term borrowings, including current maturities of long-term debt, were $587,000 at June 30, 1999 compared to $500,000 at June 30, 1998. The current portion of outstanding Industrial Development Revenue Bonds account for $500,000 of the current maturities of long-term debt at June 30, 1999. Long-term debt, less current maturities was $65,225,000 at June 30, 1999 and $48,341,000 at June 30, 1998. The increase in outstanding debt at June 30, 1999 compared to the same period of 1998 is due to utilization of the revolving line of credit. The captive finance company's long-term debt for lease financing and capital expenditures increased by approximately $10,200,000 from the same time in the prior year. In addition, the aggregate processing subsidiary located in Eugene, Oregon purchased a larger manufacturing facility to provide adequate facilities in which to expand operations. Capital expenditures in 1999 for plant expansion and for further modernization of the Company's manufacturing processes are expected to approach $26,000,000. The Company expects to finance these expenditures using both the revolving credit facility and internally generated funds. Capital expenditures for the six months ended June 30, 1999 were $17,366,000. 8 11 During the second quarter of 1999 the Company increased its available unsecured revolving credit with First Chicago NBD from $70,000,000 to $90,000,000, retaining the original expiration date of November 22, 2002. At June 30, 1999, the Company was utilizing $45,025,000 of the available credit. Principal covenants under the First Chicago credit agreement include (i) the maintenance of certain levels of net worth and compliance with certain net worth, leverage and interest coverage ratios, (ii) a limitation on capital expenditures and rental expense, (iii) a prohibition against dividends, and (iv) a prohibition on large acquisitions except upon the consent of the lenders. As part of the Company's $90,000,000 revolving credit facility, Astec Financial Services, Inc. has a segregated portion of $40,000,000. At June 30, 1999, Astec Financial Services, Inc. had utilized $32,025,000 of this line, which is included in the above stated utilization. Advances under this line of credit are limited to "Eligible Receivables" of Astec Financial Services, Inc. as defined in the credit agreement. The Company and Astec Financial Services were in compliance with all financial covenants related to the line of credit at June 30, 1999. YEAR 2000 The Company recognizes the need to ensure its operations will not be adversely impacted by Year 2000 software failures. The term "Year 2000" is a general term used to describe the various problems that may result from the improper processing of dates and date-sensitive calculations by computers and other machinery as the year 2000 is approached and reached. Many computer systems process dates using two digits rather than four to define a specific year. Absent corrective actions, a program may recognize a date using "00" as the year 1900 rather than the year 2000. Such an occurrence could result in system failures or miscalculations causing disruptions to various activities. Software failures due to processing errors potentially arising from calculations using the Year 2000 date are a known risk. Management presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 issue will be mitigated. However, in the unlikely event such modifications and replacements are not made, or are not completed timely, the Year 2000 issue could have a material impact on the operations of the Company. The Company's plan to resolve the Year 2000 issue involves four phases: assessment, remediation, testing and implementation. The Company has completed its assessment of all systems that could be significantly affected by the Year 2000. A limited amount of operating equipment, mainly used in manufacturing, is date sensitive. Manufacturers of the affected equipment were contacted and the Company has either already installed update modifications or has the appropriate modification on order to install and test prior to September 30, 1999. The remediation phase of updating the operating equipment is more than 95% complete, and the testing and implementation phases of modifying the operating equipment is approximately 80% complete. The Company manufactures products that use either internally or externally developed software that is susceptible to Year 2000. Various measures were taken to notify and assist customers to become Year 2000 compliant. Although customer response determines the readiness for Year 2000 of the Company's products already in the hands of customers, the Company is 100% complete in the remediation, testing and implementation phases of modifying product systems for Year 2000. The Company queried its significant suppliers and other external agents (no external agents share information systems with the Company) as to their readiness for the Year 2000. The assessment phase of querying significant third party associations is 100% complete. The Company is more than 90% complete in remediation, testing and implementation of various processes with significant suppliers and external agents. 9 12 The total cost of the Year 2000 project is estimated to be approximately $3,000,000 and is being funded through operating cash flows. During 1998, the Company incurred approximately $2,200,000, related to all phases of the Year 2000 project. The originally budgeted capitalized expenditures for 1999 were estimated at $620,000. Currently, with additional information, and considering additional software and hardware requirements, the Company expects 1999 capital expenditures related to the Year 2000 project to reach $1,000,000. The related project costs expected to be expensed have decreased from approximately $180,000 to $170,000. Management of the Company believes it has an effective program in place to timely resolve the Year 2000 issue. In the event that the company does not complete any additional phases, the Company could lose revenues due to inability to manufacture its product to specified quality or deliver equipment as scheduled. Year 2000 issues could also hinder the Company's ability to provide customer technical support or to provide customer parts orders as quickly as necessary, among other potential risks. In addition, the Company could be subject to litigation for computer systems product failure or for failure to properly date business records. Also, for applications using software and systems dependent on outside technical support, depending upon demand, technical support may not be available with sufficient time to prevent adverse effects on operations. In the unlikely event any of the situations described above occur, the amount of potential liability and lost revenues cannot be reasonably estimated at this time. The Company does not have a fully documented contingency plan in place in the event it does not complete all phases of the Year 2000 project, but it has begun to document prudent preventive measures that can be undertaken to secure operational capabilities in case of system failure. These measures include identifying secondary sources for raw materials, goods and services; identifying alternate manufacturing routing methods; stocking additional critical raw materials; printing of paper documents and reports as reference tools; and performing disaster recovery testing for potential power interruptions or machine failures. The Company plans to evaluate the status of completion of the Year 2000 project during August and September 1999 and continue to set contingency plans mainly for external factors beyond the Company's immediate control which could impact operations. These external factors could include interruptions related to energy, raw materials or transportation. The Company designates each of the statements made by it in this section entitled Year 2000 as a Year 2000 Readiness Disclosure. Such statements are made pursuant to the Year 2000 Information and Readiness Disclosure Act. 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 general liability insurance covering product liability and other similar tort claims providing the Company coverage of $8,000,000 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. 10 13 RISK FACTORS Acquisition Strategy; Integration of Acquired Businesses. As part of its growth strategy, the Company intends to evaluate the acquisitions of other companies, assets or product lines that would complement or expand its existing businesses or broaden its customer relationships. Although the Company conducts due diligence reviews of potential acquisition candidates, the Company may not be able to identify all material liabilities or risks related to potential acquisition candidates. There can be no assurance that the Company will be able to locate and acquire any business, retain key personnel and customers of an acquired business or integrate any acquired business successfully, including its recent acquisitions. Competition. The Company faces strong competition in price, service and product performance in each of its product lines. While the Company does not compete with any one manufacturer in all of its product lines, it does compete as to certain products with both large publicly held companies with resources significantly greater than the Company and various smaller manufacturers. Furthermore, demand for the Company's products is generally affected by economic conditions in the United States. A weak domestic economy could result in increased competition and reduced margins on sales of the Company's products. Imports do not constitute significant competition for most of the Company's products marketed in the United States. In connection with its international sales, however, the Company generally competes with foreign manufacturers, which may have a local or regional presence in the market, that the Company is attempting to penetrate. The competition of foreign manufacturers and weak foreign economies could have a material impact on the Company's international sales and results of operations. Regulation. The Company does not operate within a highly regulated industry. However, air pollution equipment manufactured by the Company principally for hot mix asphalt plants must comply with certain performance standards promulgated by the Environmental Protection Agency under the Clean Air Act applicable to "new sources" or new plants. While the Company's products are designed to meet or exceed current regulatory requirements and applicable state pollution standards and environmental protection laws, there can be no assurance that any future changes to such requirements will not adversely affect the Company. In addition, due to the size and weight of certain component equipment, which the Company manufacturers, the Company and its customers sometimes confront, conflicting state regulations on maximum weights transportable on highways and roads. Also, some states have regulations governing the operation of the Company's component equipment, including asphalt mixing plants and soil remediation equipment, and most states have regulations relating to the accuracy of weights and measures which affect some of the control systems manufactured by the Company. Year 2000 Compliance. Many existing computer systems and applications, and other control devices use only two digits to identify a year in the date field, without considering the impact of the upcoming change in the century. As a result, such systems and applications could fail or create erroneous results unless corrected so that they can process data related to the year 2000. The Company relies on its computer systems, applications and devices in operating and monitoring all major aspects of its business. The Company has for some time been pursuing a Year 2000 compliance program. The Company believes that with modifications or replacements of existing software and certain hardware, the Year 2000 issue will be mitigated. However, if the Company is unable to make the required modifications and replacements, or are if they are not made on a timely basis, the Year 2000 issue could have a material impact on the operations of the Company. Product Liability. The Company is engaged in a business that could expose it to possible liability claims for personal injury or property damage due to alleged design or manufacturing defects in the Company's products. The Company believes that it meets existing professional specification standards 11 14 recognized or required in the industries in which it operates. Although the Company currently maintains product liability coverage which it believes is adequate for the continued operation of its business, such insurance may prove inadequate or become difficult to obtain or unobtainable in the future on terms acceptable to the Company. Cyclicality in Operating Results. The Company's business is somewhat cyclical with operating results typically affected by general economic conditions and other factors affecting the construction industry as a whole. Historically, during periods of a weak domestic economy, economic pressures have adversely affected the construction industry and have resulted in increased competition and reduced margins on sales of the Company's products. International Exposure. For the first six months of 1999, international sales represented approximately 10.5% of the Company's total revenues. The Company anticipates that international operations will continue to account for a portion of its business for the foreseeable future. As a result, the Company may be subject to certain risks, including difficulty in managing distributors and dealers, adverse tax consequences, political and economic instability of governments, and difficulty in accounts receivable collection. The Company is subject to the risks associated with the imposition of protective legislation and regulations, including those relating to import or export or otherwise resulting from trade or foreign policy, in the nations in which it now or in the future will conduct business. The Company cannot predict whether quotas, duties, taxes or other charges or restrictions will be implemented by the U.S. or any other country upon the import or export of the Company's products. There can be no assurance that any of these factors, or the adoption of restrictive policies, will not have a material adverse effect on the Company's business, financial condition and results of operations. Intellectual Property Matters. The Company holds numerous patents covering technology and applications related to various products, equipment and systems, and numerous trademarks and trade names registered with the U.S. Patent and Trademark Office and in various foreign countries. There can be no assurance as to the breadth or degree of protection that existing or future patents or trademarks may afford the Company, or that any pending patent or trademark applications will result in issued patents or trademarks, or that the Company's patents, registered trademarks or patent applications, if any, will be upheld if challenged, or that competitors will not develop similar or superior methods or products outside the protection of any patents issued, licensed or sublicensed to the Company. Although the Company believes that none of its patents, technologies, products or trademarks infringe upon the patents, technologies, products or trademarks of others, it is possible that its existing patent, trademark or other rights may not be valid or that infringement of existing or future patents, trademarks or proprietary rights may occur. In the event that the Company's products are deemed to infringe upon the patent or proprietary rights of others, the Company could be required to modify the design of its products, change the name of its products or obtain a license for the use of certain technologies incorporated into its products. There can be no assurance that the Company would be able 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 have a material adverse effect on the Company. Dependence on Key Personnel. The success of the Company's business will continue to depend substantially upon the efforts, abilities and services of its executive officers and certain other key employees. The loss of one or more key employees could adversely affect the Company's operations. The Company's ability to attract and retain qualified engineers and other professionals, either through direct hiring, or acquisition of other businesses employing such professionals, will also be an important factor in determining the Company's future success. Anti-takeover Provisions. The Company's charter and its bylaws contain various provisions that may have the affect, either alone or in combination with each other, of making more difficult or 12 15 discouraging a business combination or an attempt to obtain control of the Company that is deemed undesirable by the Board of Directors. These provisions include (i) the right of the Board of Directors to issue shares of Preferred Stock and one or more series and designate the number of shares of each such series and the relative rights and preferences of such series, including voting rights, terms of redemption, redemption prices and conversion rights without further shareholder approval; (ii) a classified Board of Directors elected in three year staggered terms; (iii) prohibitions on the right of shareholders to remove directors other than for cause, and any such removal requiring at least two-thirds of the total number of shares issued and outstanding; (iv) requirements for advanced notice of actions proposed by shareholders for consideration at meetings of the shareholders; (v) limitations on the right of shareholders to call a special meeting of the shareholders or from acting by written consent in lieu of a meeting unless all shareholders entitled to vote on such action consent to taking such action without a meeting; and (vi) an election to be governed by the Tennessee Control Share Acquisition Act. The Company's charter and bylaws also limit the liability of directors in certain cases and provide for the Company to indemnify its directors and officers to the fullest extent permitted by applicable law. In addition, as a Tennessee Corporation, the Company is subject to the Tennessee Business Combination Act, which may have the affect of discouraging a non-negotiated bid or proposal to acquire the Company. 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, 1998. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contingencies" in Part I - Item 2 of this Report. Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders of the Company held on April 22, 1999, the following matters were brought before and voted upon by the stockholders: 1. The proposal to elect the following individuals to serve as Class I Directors until the annual meeting of shareholders in 2002, or in the case of each director until his successor is duly elected and qualified:
Authority Granted Authority Withheld ----------------- ------------------ William D. Gehl 14,957,304 475,084 Ronald W. Dunmire 14,957,304 475,084 Robert Dressler 14,957,304 475,084
Item 5. Other Items Shareholder Proposals The proxy statement solicited by the Board of Directors of the Company with respect to the 2000 Annual Meeting of Shareholders will confer discretionary authority on the proxies named therein to vote on any shareholder proposals intended to be presented for consideration at such Annual Meeting that are submitted to the Company after November 22, 1999. 13 16 Item 6. Exhibits and Reports on Form 8-K (a) 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. 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 Firstar 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 Indenture of Trust, dated April 1, 1994, by and between Grapevine Industrial Development Corporation and Bank One, Texas, NA, as Trustee (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, File No. 0-14714). 4.3 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 Second Amendment to Second Amended and Restated Credit Agreement dated as of June 3, 1999 by and among Astec Industries, Inc., Astec Financial Services, Inc., the financial institutions parties thereto in their capacities as lenders and The First National Bank of Chicago, as agent. 27 Financial Data Schedule (EDGAR Filing Only).
(b) Reports on Form 8-K: No reports on Form 8-K have been filed during the quarter ended June 30, 1998. 14 17 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) 8/12/99 /s/ J. Don Brock -------------- ----------------------------------- Date J. Don Brock Chairman of the Board and President 8/12/99 /s/ F. McKamy Hall -------------- ----------------------------------- Date F. McKamy Hall Vice President and Chief Financial Officer 15 18 EXHIBIT INDEX
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. 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 Firstar 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 Indenture of Trust, dated April 1, 1994, by and between Grapevine Industrial Development Corporation and Bank One, Texas, NA, as Trustee (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, File No. 0-14714). 4.3 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 Second Amendment to Second Amended and Restated Credit Agreement dated as of June 3, 1999 by and among Astec Industries, Inc., Astec Financial Services, Inc., the financial institutions parties thereto in their capacities as lenders and The First National Bank of Chicago, as agent. 27 Financial Data Schedule (EDGAR Filing Only).
16 EX-3.4 2 ARTICLES OF AMENDMENT TO RESTATED CHARTER 1 Exhibit 3.4 ARTICLES OF AMENDMENT TO THE AMENDED AND RESTATED CHARTER OF ASTEC INDUSTRIES, INC. Pursuant to the applicable provisions of the Tennessee Business Corporation Act, the undersigned adopts the following Articles of Amendment (the "Articles") to the Amended and Restated Charter of Astec Industries, Inc. (the "Corporation"). 1. The name of the Corporation is ASTEC INDUSTRIES, INC. 2. The amendment adopted is: The first sentence of paragraph 6 of the Amended and Restated Charter is deleted and the following is inserted in its place: "6. The maximum number of shares that the corporation is authorized to issue is Forty-two Million (42,000,000) shares, which shares shall consist of no more than Forty Million (40,000,000) shares of common stock having a par value of twenty cents ($.20) per share and no more than Two Million shares of preferred stock, having a par value of One Dollar ($1.00) per share." 3. The manner in which each issued and unissued authorized share of the Corporation's Common Stock, $.20 par value, shall be changed into the greater number of whole shares provided for in the amendment to Paragraph 6 is set forth as follows: Upon the effective date of the amendment to Paragraph 6 of the Amended and Restated Charter, the holders of the Corporation's common stock, $.20 par value, shall be entitled to receive one (1) share of the newly authorized twenty cent ($.20) par value common stock for each one (1) share of the twenty cent ($.20) par value common stock that they owned as of the effective date. 4. Pursuant to the provisions of Section 48-20-102(4) of the Tennessee Business Corporation Act, shareholder approval of the amendment was not required. The amendment to the Amended and Restated Charter set forth herein was duly adopted by the Board of Directors of the Corporation on December 10, 1998. 5. The Amendment is to be effective as of the close of business on January 15, 1999. 2 IN WITNESS WHEREOF, the undersigned has caused these Articles of Amendment to be duly executed this 12th day of January, 1999. ASTEC INDUSTRIES, INC. By: /s/ Richard W. Bethea, Jr. ------------------------------------------- Name: Richard W. Bethea, Jr. ------------------------------------------- Title: Secretary ------------------------------------------- -2- EX-10.1 3 SECOND AMEND TO 2ND AMENDED/RESTATED CREDIT AGRMT 1 Exhibit 10.1 SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") dated as of June 3, 1999 is by and among Astec Industries, Inc., a Tennessee corporation ("Astec"), Astec Financial Services, Inc., a Tennessee corporation ("AFS"; Astec and AFS are sometimes referred to herein individually as a "Borrower" and collectively as the "Borrowers"), the financial institutions parties hereto in their capacities as lenders (individually, a "Lender" and collectively, the "Lenders") and The First National Bank of Chicago, as agent (the "Agent"). RECITALS WHEREAS, the Borrowers, the Lenders and the Agent have entered into a certain Second Amended and Restated Credit Agreement dated as of November 24, 1997 and amended by a First Amendment and Waiver dated as of October 30, 1998 (as so amended, the "Credit Agreement"; all capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Credit Agreement), pursuant to which the Lenders have provided certain revolving credit, letter of credit and swing line facilities to the Borrowers, which facilities are guaranteed by certain guarantors defined therein; WHEREAS, the Borrowers have requested an increase (the "Commitment Increase") in the Aggregate Commitment in the amount of $20,000,000, and the Lenders are willing, on the terms and conditions set forth herein, to grant the Commitment Increase; and WHEREAS, the Borrowers, the Lenders and the Agent wish to amend certain other provisions of the Credit Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the terms and conditions set forth herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agent hereby agree as follows: Section 1. Amendments. 1.1. Article I of the Credit Agreement is hereby amended as follows: (a) By substituting the dollar amount "$90,000,000" for the dollar amount "$70,000,000" in the definition of the term "Aggregate Commitment" contained therein. (b) By substituting the dollar amount "$70,000,000" for the dollar amount "$50,000,000" in the definition of the term "Aggregate Tranche A Sublimit" contained therein. 2 (c) By substituting the dollar amount "$40,000,000" for the dollar amount "$30,000,000" in the definition of the term "Aggregate Tranche B Sublimit" contained therein. (d) By restating in its entirety the definition of the term "Guarantor" contained therein to read as follows: "`Guarantor' means Heatec, Inc., a Tennessee corporation, Roadtec, Inc., a Tennessee corporation, Trencor, Inc., a Texas corporation (formerly known as Trencor Jetco, Inc.), Telsmith, Inc., a Delaware corporation, Astec Transportation, Inc., a Tennessee corporation, Production Engineered Products, Inc., a Nevada corporation, Astec, Inc., a Tennessee corporation, CEI Enterprises, Inc., a Tennessee corporation, AFS, Astec Investments, Inc., a Tennessee corporation, Kolberg-Pioneer, Inc., a Tennessee corporation, Astec Holdings, Inc., a Tennessee corporation, Johnson Crushers International, Inc., a Tennessee corporation, each other Person that becomes a party to the Guaranty pursuant to the terms hereof and their respective successors and assigns." (e) By inserting the following definition after the definition of the term "Percentage" and before the definition of the term "Permitted Recourse Lease Sales": "`Permitted Acquisition' means an Acquisition of the capital stock or other equity interests in a Person or the assets of a Person engaged in the production of aggregate processing and mining equipment, hot mix asphalt production equipment, thermal heating and storage equipment, mobile road construction equipment, trenching equipment or pavement analyzing equipment, that has been approved or consented to by the board of directors or equivalent governing body of such Person." 1.2. Section 6.16 of the Credit Agreement is hereby amended by restating in its entirety paragraph (i) thereof to read as follows:: "(i) Permitted Acquisitions by Astec or by Wholly-Owned Subsidiaries of Astec formed for the purpose of making such Acquisitions; provided, however, that (i) the aggregate purchase price (including any portion thereof that is deferred) of such Acquisitions, including consideration in the form of cash, cash equivalents and common stock and assumed Indebtedness and Indebtedness paid at the time of the consummation thereof, does not exceed $60,000,000 during any one fiscal year, (ii) the aggregate purchase price (including any portion thereof that is deferred) of such Acquisitions, including consideration in the form of cash and cash equivalents only and assumed Indebtedness and Indebtedness paid at the time of the consummation thereof, does not exceed $25,000,000 during any one fiscal year, (iii) no Unmatured Default or Default has occurred and is continuing or will result therefrom and Astec submits a certificate to the Agent at the time of the consummation of each such Acquisition to such effect and certifying that the Credit Parties are and will be in -2- 3 compliance on a pro forma basis with the financial and other covenants hereunder after giving effect to such Acquisition, (iv) 100% of the outstanding capital stock or other equity interests in any acquired Person must be and, except as permitted by Section 6.13, shall remain directly owned by Astec or by a Wholly-Owned Subsidiary of Astec formed for the purpose of making such Acquisition, and (v) each Subsidiary acquired or formed in connection with each such Acquisition becomes a party to the Guaranty by executing and delivering to the Agent a joinder agreement in form and substance satisfactory to the Agent, and delivers to the Agent such evidence of requisite corporate action and opinions of counsel as the Agent may reasonably request;" 1.3. Section 6.13 of the Credit Agreement is hereby amended by restating in its entirety the last sentence thereof to read as follows: "Each of the Subsidiaries of Astec shall at all times be a Wholly-Owned Subsidiary of Astec." 1.4. Section 6.22.3 of the Credit Agreement is hereby restated in its entirety to read as follows: "6.22.3. Rentals. The Borrowers will not, nor will they permit any Credit Party to, create, incur or suffer to exist obligations for Rentals in excess of $6,000,000 during any one fiscal year on a non-cumulative basis in the aggregate for the Credit Parties." 1.5. Section 6.23 of the Credit Agreement is hereby restated in its entirety to read as follows: "6.23. Fixed Asset Expenditures. The Borrowers will not, nor will they permit any Credit Party to, expend, or be committed to expend, in the acquisition of fixed assets, in excess of eight percent (8%) of Consolidated Net Revenue during any one fiscal year on a non-cumulative basis in the aggregate for the Credit Parties." 1.6. Schedule I to the Credit Agreement is hereby restated in its entirety to read in the form of Schedule I hereto. 2. Reference to and Effect on the Credit Agreement. 2.1. Except as specifically amended hereby, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed. 2.2. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Lenders or the Agent under the Credit Agreement or any of the other Loan Documents, or constitute a waiver of any provision of the Credit Agreement or any of the other Loan Documents. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof" -3- 4 or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby. 2.3. Each Guarantor joins in this Amendment solely for the purpose of consenting to the terms hereof, and each Guarantor hereby unconditionally consents to the terms of this Amendment and fully ratifies and affirms the Guaranty, after giving effect to this Amendment, and Astec Holdings, Inc. ("Astec Holdings") and Kolberg-Pioneer, Inc. ("KPI") join in this Amendment, in addition, for the purpose of confirming that the Obligations under the Credit Agreement, as amended by this Amendment, and KPI's guaranty thereof pursuant to the Guaranty constitute "Senior Debt" as defined in the Subordination Agreement dated as of December 2, 1997 (the "Subordination Agreement") between Astec Holdings and the Agent, and fully ratify and affirm the Subordination Agreement, after giving effect to this Amendment. 3. Representations and Warranties. To induce the Lenders and the Agent to execute this Agreement, the Borrowers represent and warrant to the Lenders and the Agent as follows: 3.1. The Borrowers have all requisite power and authority to execute, deliver and perform this Amendment. 3.2. The execution, delivery and performance of this Amendment (i) have been duly authorized by all necessary corporate action of the Borrowers and (ii) will not (A) violate (1) any provision of law, statute, rule or regulation or the articles/certificate of incorporation or other constitutive documents or the by-laws or regulations of the Borrowers, (2) any order of any court, or any rule, regulation or order of any other agency of government binding upon the Borrowers, or (3) any provisions of any material indenture, agreement or other instrument to which the Borrowers are a party, or by which the Borrowers or any of their properties or assets is or may be bound, or (B) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (ii)(A)(3) above. 3.3. This Amendment constitutes the legal, valid and binding obligation of Borrowers enforceable in accordance with its terms. 3.4. The representations and warranties in the Loan Documents are true and correct in all material respects with the same effect as though made on and as of the date hereof. 3.5. The Borrowers are in compliance with all of the terms and provisions set forth in the Credit Agreement and the other Loan Documents and no Default or Unmatured Default has occurred and is continuing. 4. Conditions. This Amendment shall become effective as of the date (the "Amendment Effective Date") upon which the following conditions shall have been satisfied: 4.1. The Agent shall have executed a counterpart of this Amendment and received the following, all of which shall be in form and substance satisfactory to the Agent and its counsel: -4- 5 (a) counterparts of this Amendment executed by the Borrowers, the Guarantors and the Lenders; (b) a Tranche A Note and Tranche B Note payable to the order of each Lender duly executed by Astec in the amount of such Lender's Tranche A Commitment and Tranche B Commitment, respectively (after giving effect to the Commitment Increase); (c) a certificate of the Secretary or Assistant Secretary of each Credit Party with respect to attached resolutions of its Board of Directors authorizing the execution and delivery of this Amendment, which certificate shall also be to the effect that the articles or certificate of incorporation and by-laws of such Credit Party delivered to the Agent at the time of the initial Credit Extension continue to be in full force and effect and have not been amended (or if any such Credit Party did not deliver to the Agent copies of its articles or certificate of incorporation and by-laws at such time, copies thereof, certified by its Secretary or Assistant Secretary); (d) a certificate of good standing or existence for each Credit Party, certified by the appropriate governmental officer in such Credit Party's jurisdiction of incorporation; (e) an incumbency certificate, executed by the Secretary or Assistant Secretary of each Guarantor that has not theretofore delivered such a certificate to the Agent, which shall identify by name and title and bear the signature of the officers of such Guarantor authorized to execute this Amendment and the Loan Documents, upon which certificate the Lenders and the Agent shall be entitled to rely until informed of any change in writing by Astec; (f) a written opinion of counsel for each Credit Party, addressed to the Agent and the Lenders; and (g) such other documents as any Lender or its counsel may have reasonably requested. 4.2. Astec shall have paid the following fees: (a) an up-front fee in the amount set forth in the Abbreviated Term Sheet for the Amendment and Increase dated May 5, 1999 (the "Term Sheet"), payable to the Agent, for the ratable benefit of the Lenders based their respective shares of the Commitment Increase, (b) an arrangement fee to Banc One Capital Markets, Inc. in accordance with the Fee Letter dated May 5, 1999 among First Chicago, Banc One Capital Markets, Inc. and Astec, (c) amendment fees to Amsouth Bank and First American National Bank in the respective amounts set forth in the Term Sheet, and -5- 6 (d) all fees, costs and expenses required to be paid by it pursuant to Section 6.3 hereof and for which an invoice has been submitted to it. 4.3. The Borrowers shall have paid to the Agent for the account of each Lender in accordance with its Percentage (before giving effect to this Amendment) the Commitment Fee accrued to and including the Amendment Effective Date. 4.4. The Borrowers shall have repaid all Tranche A Revolving Loans and Tranche B Revolving Loans and reborrowed Tranche A Revolving Loans and Tranche B Revolving Loans from each of the Lenders in the amounts necessary to cause the aggregate outstanding principal amount of Revolving Loans of each Lender to equal the product of the aggregate outstanding principal amount of Revolving Loans, multiplied by such Lender's Percentage (after giving effect to this Amendment). 4.5. The Borrowers shall have paid the Lenders all amounts required to be paid pursuant to Section 3.5 of the Credit Agreement in connection with the repayment of Revolving Loans on the Amendment Effective Date. Promptly following the Amendment Effective Date, the Lenders shall return to Astec the Tranche A Notes and Tranche B Notes delivered by Astec at the time of the initial Credit Extension. 5. Reallocation of Percentages. Effective as of the Amendment Effective Date, the Percentage of each Lender shall be the percentage set forth opposite its name on Schedule 1 hereto, and on the Amendment Effective Date, the participations in the Facility Letters of Credit deemed to have been purchased by the Lenders pursuant to Section 2.11.5(a) of the Credit Agreement shall be reallocated so that the Lenders shall be deemed to have purchased participations in the Facility Letters of Credit in the amount of their respective Percentages thereof (after giving effect to this Amendment). 6. Miscellaneous. 6.1. This Amendment, including all schedules attached hereto, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all other understandings, oral or written, with respect to the subject matter hereof. 6.2. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original, but all such counterparts shall constitute one and the same instrument. 6.3. In accordance with Section 9.7 of the Credit Agreement, the Borrowers agree, jointly and severally, to promptly pay all reasonable fees, costs and expenses incurred by the Agent in connection with the preparation, execution and delivery of this Amendment. 6.4. The Borrowers acknowledge and agree that as of the date hereof they have no offsets or claims against the Lenders or the Agent under the Loan Documents or under other agreements between the Borrowers and the Lenders, or any defenses to the Lenders' or the Agent's enforcement of their rights and remedies under the Loan Documents. -6- 7 6.5. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 6.6. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 6.7. This Amendment shall be binding upon each of the parties hereto and their respective successors and assigns, except that the Borrowers may not assign their rights or obligations hereunder without the written consent of the Lenders and the Agent. [SIGNATURE PAGES TO FOLLOW] -7- 8 IN WITNESS WHEREOF, the Borrowers, the Lenders, the Guarantors and the Agent have executed this Amendment as of the date first above written. ASTEC INDUSTRIES, INC. ASTEC FINANCIAL SERVICES, INC. By:_____________________________ By:______________________________ Print Name:_____________________ Print Name:______________________ Title:__________________________ Title: __________________________ Address: 4101 Jerome Avenue Address: 6400 Lee Highway, Suite 107 Chattanooga, Tennessee 37407 Chattanooga, Tennessee 37421 Telecopy: (423) 867-4127 Telecopy: (423) 899-4456 Telephone: (423) 867-4210 Telephone: (423) 899-5898 Attention: F. McKamy Hall Attention: Albert E. Guth
-8- 9 IN WITNESS WHEREOF, the Borrowers, the Lenders, the Guarantors and the Agent have executed this Amendment as of the date first above written. HEATEC, INC. TELSMITH, INC. By:_______________________________ By:________________________________ Its:______________________________ Its:_______________________________ ROADTEC, INC. ASTEC TRANSPORTATION, INC. By:_______________________________ By:________________________________ Its:______________________________ Its:_______________________________ TRENCOR, INC. PRODUCTION ENGINEERED PRODUCTS, INC. By:_______________________________ By:________________________________ Its:______________________________ Its:_______________________________ ASTEC, INC. CEI ENTERPRISES, INC. By:_______________________________ By:________________________________ Its:______________________________ Its:_______________________________ KOLBERG-PIONEER, INC. ASTEC HOLDINGS, INC. By:_______________________________ By:________________________________ Its:______________________________ Its:_______________________________ ASTEC INVESTMENTS, INC. JOHNSON CRUSHERS INTERNATIONAL, INC. By: By: Its: Its: -9- 10 IN WITNESS WHEREOF, the Borrowers, the Lenders, the Guarantors and the Agent have executed this Amendment as of the date first above written. THE FIRST NATIONAL BANK OF CHICAGO, INDIVIDUALLY AND AS AGENT By:____________________________________ Print Name:____________________________ Title:_________________________________ Address: One First National Plaza Chicago, Illinois 60670 Telecopy: (312) 732-5296 Telephone: (312) 732-5730 Attention: David T. McNeela -10- 11 IN WITNESS WHEREOF, the Borrowers, the Lenders, the Guarantors and the Agent have executed this Amendment as of the date first above written. FIRST AMERICAN NATIONAL BANK By:_____________________________________ Print Name:_____________________________ Title:__________________________________ Address: One Union Square, Suite 100 Chattanooga, Tennessee 37402 Telecopy: (423) 755-6014 Telephone: (423) 755-6022 Attention: Michael Metcalf -11- 12 IN WITNESS WHEREOF, the Borrowers, the Lenders, the Guarantors and the Agent have executed this Amendment as of the date first above written. AMSOUTH BANK By: __________________________________ Print Name: __________________________ Title: _______________________________ Address: 601 Market Center Chattanooga, Tennessee 37402 Telecopy: (423) 752-1558 Telephone: (423) 752-1623 Attention: Steven Anderson -12- EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ASTEC INDUSTRIES FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1999 JUN-30-1999 5,675 0 72,305 1,680 82,846 172,105 136,278 40,702 296,627 68,375 0 0 0 2,076 151,341 296,627 232,436 232,436 170,588 170,588 61,848 274 1,642 32,298 12,576 19,722 0 0 0 19,722 1.04 0.99
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