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 March 31, 2000. [ ] 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 May 5, 2000 Common Stock, par value $0.20 19,208,062 ASTEC INDUSTRIES, INC. INDEX Page Number PART I - Financial Information Item 1. Financial Statements-Unaudited Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 1 Consolidated Statements of Income for the Three Months Ended March 31, 2000 and 1999 2 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 3 Notes to Unaudited Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II - Other Information Item 1. Legal Proceedings 12 Item 5. Other Items 12 Item 6. Exhibits and Reports on Form 8-K 12 PART I - FINANCIAL INFORMATION Item 1. Financial Statements ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) ACCOUNT DESCRIPTION MARCH 31, DECEMBER 31, 2000 1999 UNAUDITED (Note 1) ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 6,478 $ 3,725 RECEIVABLES - NET 102,197 72,948 INVENTORIES 108,845 104,842 PREPAID EXPENSES AND OTHER 10,987 11,734 TOTAL CURRENT ASSETS 228,507 193,249 PROPERTY AND EQUIPMENT - NET 110,412 109,388 GOODWILL 35,496 36,300 OTHER ASSETS 5,761 15,604 TOTAL ASSETS $380,176 $354,541 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES NOTES PAYABLE $85 $85 CURRENT MATURITIES OF LONG-TERM DEBT 511 511 ACCOUNTS PAYABLE - TRADE 43,526 36,430 OTHER ACCRUED LIABILITIES 42,050 41,334 TOTAL CURRENT LIABILITIES 86,172 78,360 LONG-TERM DEBT, LESS CURRENT MATURITIES 111,893 102,685 OTHER LONG-TERM LIABILITIES 6,070 6,763 TOTAL SHAREHOLDERS' EQUITY 176,041 166,733 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $380,176 $354,541 ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT (IN THOUSANDS) (UNAUDITED) THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 2000 MARCH 31, 1999 NET SALES $140,872 $112,478 COST OF SALES 107,114 84,469 GROSS PROFIT 33,758 28,009 S,G, & A EXPENSES 18,255 13,940 INCOME FROM OPERATIONS 15,503 14,069 INTEREST EXPENSE 2,186 694 OTHER INCOME, NET OF EXPENSE 802 643 INCOME BEFORE INCOME TAXES 14,119 14,018 INCOME TAXES 5,492 5,451 NET INCOME $ 8,627 $ 8,567 EARNINGS PER COMMON SHARE BASIC $ 0.45 $ 0.45 DILUTED $ 0.44 $ 0.43 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC 19,140,293 18,988,549 DILUTED 19,828,565 19,814,701 ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, MARCH 31, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $ 8,627 $ 8,567 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 3,445 2,727 PROVISION FOR DOUBTFUL ACCOUNTS 92 506 PROVISION FOR INVENTORY RESERVE 802 698 PROVISION FOR WARRANTY RESERVE 990 1,880 (GAIN) ON SALE OF FIXED ASSETS (3,325) (103) (GAIN) ON SALE OF LEASE PORTFOLIO (465) (80) FOREIGN CURRENCY TRANSACTION (GAIN) (42) (INCREASE) DECREASE IN: TRADE RECEIVABLES (14,138) (13,193) FINANCE RECEIVABLES (4,522) (11,983) INVENTORIES (3,715) (7,370) PREPAID EXPENSES AND OTHER 1,926 (41) OTHER RECEIVABLES (1,361) (83) OTHER NON-CURRENT ASSETS (394) (14) INCREASE (DECREASE) IN: ACCOUNTS PAYABLE 6,918 11,499 ACCRUED PRODUCT WARRANTY (1,280) (1,423) OTHER ACCRUED LIABILITIES (292) 2,711 INCOME TAXES PAYABLE 4,305 3,146 TOTAL ADJUSTMENTS (11,056) (11,123) NET CASH (USED) BY OPERATING ACTIVITIES (2,429) (2,556) CASH FLOWS FROM INVESTING ACTIVITIES PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT - NET 7 3,194 EXPENDITURES FOR - PROPERTY AND EQUIPMENT (4,918) (5,282) NET CASH USED BY INVESTING ACTIVITIES (4,911) (2,088) CASH FLOWS FROM FINANCING ACTIVITIES: NET BORROWINGS UNDER REVOLVING CREDIT AGREEMENT 9,669 5,727 PROCEEDS FROM ISSUANCE OF COMMON STOCK 424 755 NET CASH PROVIDED BY FINANCING ACTIVITIES 10,093 6,482 NET INCREASE IN CASH 2,753 1,838 CASH AT BEGINNING OF PERIOD 3,725 5,353 CASH AT END OF PERIOD $ 6,478 $ 7,191 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 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 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 March 31, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. The balance sheet at December 31, 1999 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, 1999. Note 2. Receivables. Receivables are net of allowance for doubtful accounts of $1,989,000 and $1,966,000 for March 31, 2000 and December 31, 1999, 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) March 31, 2000 December 31, 1999 Raw Materials $ 38,351 $ 45,641 Work-in-Process 25,405 15,884 Finished Goods 45,089 43,317 Total $ 108,845 $ 104,842 Note 4. Property and Equipment Property and equipment is stated at cost. Property and equipment is net of accumulated depreciation of $46,655,000 and $44,503,000 for March 31, 2000 and December 31, 1999, 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. Notes to Unaudited Financial Statements - Continued The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended March 31, 2000 1999 Numerator: Net income $8,627,000 $8,567,000 Denominator: Denominator for basic earnings per share 19,140,293 18,988,549 Effect of dilutive securities: Employee stock options 688,272 826,152 Denominator for diluted earnings per share 19,828,565 19,814,701 Earnings per common share: Basic Diluted $0.45 $0.45 $0.44 $0.43 Note 6. Comprehensive Income Total comprehensive income was $8,627,000 for the three months ended March 31, 2000 and $8,567,000 for the three months ended March 31, 1999. 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 $11,039,000 at March 31, 2000 and $11,776,000 at December 31, 1999. Note 8. Segment Information (in thousands) Three months ended March 31, 2000 Hot-mix Aggregate Mobile Asphalt Pipeline and Asphalt Processing Construction Underground Plants Equipment Equipment Construction All Group Others Total Revenues from external customers $43,189 $53,752 $18,193 $17,692 $8,046 $140,872 Intersegment revenues 6,524 4,559 0 505 210 11,798 Segment profit $ 5,072 $ 6,898 $ 3,361 $ 1,033 ($7,362) $ 9,002 Three months ended March 31, 1999 Hot-mix Aggregate Mobile Asphalt Pipeline and Asphalt Processing Construction Underground Plants Equipment Equipment Utility Construction All Group Others Total Revenues from external customers $49,700 $38,207 $17,503 $6,759 $308 $112,477 Intersegment revenues 2,414 2,916 0 6 1,151 6,487 Segment profit $6,852 $5,444 $3,180 $329 ($7,058) $8,747 Notes to Unaudited Financial Statements - Continued In prior periods the Pipeline and Underground Utility Construction Group did not meet the requirements for disclosure as a separate reportable segment. American Augers, Inc., which the Company acquired in October 1999 and Trencor, Inc. comprise the Pipeline and Underground Utility Construction segment. Reconciliations of the reportable segment totals for profit or loss to the Company's consolidated totals are as follows: (in thousands) Three months ended March 31, 2000 1999 Profit: Total profit for reportable segments $16,364 $15,805 Other profit (loss) (7,362) (7,058) Equity in (loss)/income of joint venture (32) 43 Elimination of intersegment profit (343) (223) Total consolidated net income $8,627 $8,567 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 - Contingencies" in Part I - Item 2 of this Report. Note 10. Seasonality Due to varied product lines, the Company's business is becoming less seasonal. Approximately 25% of the Company's business volume typically occurs during the first three months of the year. 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 (within the meaning of the Private Securities Litigation Reform Act of 1995) 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, which include the risk factors discussed in this report, and other risk factors that are discussed from time to time in the Company's reports filed with the SEC. 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 March 31, 2000, net sales increased to $140,872,000 from $112,478,000 for the three months ended March 31, 1999, representing a 25.2% increase. The acquisition of Breaker Technology, Inc. in August 1999, American Augers, Inc. in October 1999, and Superior Industries of Morris, Inc. in November 1999 accounted for 94% of the increase in net sales during the first quarter of 2000 over the first quarter of 1999. International sales for the first quarter of 2000 increased to $12,258,000 from $10,236,000 for the same period of 1999. Gross profit for the three months ended March 31, 2000 increased to $33,758,000 from $28,009,000 for the three months ended March 31, 1999, while the gross profit percentage for the three months ended March 31, 2000 decreased slightly to 24.0% from 24.9% for the three months ended March 31, 1999. The decrease in gross profit percentage relates primarily to production inefficiencies relating to the implementation of improvements to the manufacturing process at the Astec, Inc. subsidiary and a combination of less than expected sales volume and under utilization of plant capacity due to product mix at Telsmith, Inc. Sales at Telsmith during the first quarter included individual machine sales but did not include the normal aggregate "system" sales. Selling, general and administrative expenses for the three months ended March 31, 2000 were $18,255,000 or 13.0% of net sales, compared to $13,940,000 or 12.4% of net sales for the three months ended March 31, 1999. Approximately $2,898,000, or 67.2% of the increase in selling, general and administrative expenses for the three months ended March 31, 2000 compared to the same quarter in 1999, relates to the acquisitions of Breaker Technology, Inc., American Augers, Inc., and Superior Industries of Morris, Inc. The remaining increase was primarily attributed to increased salaries and related benefit expense for additional personnel in various departments. Interest expense increased to $2,186,000 for the three months ended March 31, 2000 from $694,000 for the three months ended March 31, 1999. Interest expense as a percentage of net sales increased to approximately 1.7% for the three months ended March 31, 2000 from .6% for the quarter ended March 31, 1999. The increase in interest expense relates mainly to debt incurred in connection with the acquisitions of Breaker Technology, Inc., American Augers, Inc., and Superior Industries of Morris, Inc. during the third and fourth quarters of 1999. Other income, net of other expense, was $802,000, or .6% of net sales for the quarter ended March 31, 2000, compared to other income, net of expense of $643,000, or .6% of net sales for the quarter ended March 31, 1999. Income tax expense for the first quarter of 2000 increased to $5,492,000 from $5,451,000 at March 31, 1999, an increase of $41,000 or .8%. Tax expense is 3.9% and 4.8% of net sales for the three months ended March 31, 2000 and 1999, respectively. The effective tax rate for the three months ended March 31, 2000 and 1999, was 38.9%. Backlog of orders at March 31, 2000 was $116,299,000 compared to $114,520,000 at March 31, 1999, restated for acquisitions. Liquidity and Capital Resources As of March 31, 2000, the Company had working capital of $142,335,000 compared to $114,889,000 at December 31, 1999. Total short-term borrowings, including current maturities of long-term debt, were $596,000 at March 31, 2000 and December 31, 1999. The current portion of outstanding Industrial Development Revenue Bonds accounted for $500,000 of the current maturities of long-term debt at March 31, 2000 and December 31, 1999. Long-term debt, less current maturities, increased to $111,893,000 at March 31, 2000 from $102,685,000 at December 31, 1999, an increase of $9,208,000. At March 31, 2000 debt of approximately $92,120,000 was outstanding under the revolving credit facility and $19,700,000 was the aggregate principal amount of Industrial Revenue Bonds was outstanding. The increase in debt from December 31, 2000 relates to the funding of working capital needs using the revolving credit facility. Capital expenditures in 2000 for plant expansion and for further modernization of the Company's manufacturing processes are expected to be approximately $19,100,000. The Company expects to finance these expenditures using the revolving credit facility. Capital expenditures for the three months ended March 31, 2000 were $5,627,000. Effective April 7, 2000, the Company renegotiated its revolving credit facility and increased the amount of available credit from $90,000,000 to $150,000,000. As part of the revolving credit facility, Astec Industries, Inc. may borrow up to $130,000,000, while Astec Financial Services, Inc. has a segregated portion of up to $50,000,000. The Company had two term loans outstanding at December 31, 1999 totaling $35,000,000, which were rolled into the revolving credit facility. At March 31, 2000, Astec Financial Services, Inc. had utilized $23,244,000 of facility. Advances under this line of credit are limited to "Eligible Receivables" of Astec Financial Services, Inc. as defined in the credit agreement that governs the credit facility. The Company was in compliance with all financial covenants related to the line of credit at March 31, 2000. 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. Risk Factors A decrease in government funding of highway construction and maintenance may adversely affect our operating results Many of our customers depend substantially on government funding of highway construction and maintenance and other infrastructure projects. Federal government funding of infrastructure projects is usually accomplished through bills, which establish funding over a multi-year period. The most recent spending bill was signed into law in June 1998 and covers federal spending through 2003. We cannot assure you that this legislation will not be revised in future congressional sessions, that recent increases in federal funding of infrastructure will continue or that federal funding will not decrease 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. Any decrease or delay in government funding of highway construction and maintenance and other infrastructure projects could reduce our revenues and profits. Downturns in the general economy or the commercial construction industry may adversely affect 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 state of the U.S., foreign and regional economies in general, and in particular, changes in commercial construction spending and government infrastructure spending. We could face a downturn in the commercial construction industry based upon a number of factors, including: - -- the level of interest rates; - -- availability of funds for construction; - -- labor disputes in the construction industry causing work stoppages; - -- energy or building materials shortages; and - -- inclement weather. General economic downturns, including any downturns in the commercial construction industry, could result in a material decrease in our revenues and operating results. Acquisitions that we have made in the past and future acquisitions involve risks that could adversely affect our future financial results We have completed eight acquisitions since 1994 and plan to acquire additional businesses in the future. We cannot guarantee that we will achieve the benefits expected to be realized from our acquisitions. Our future success may be limited 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 than we are or has lower profit margins than we do - -- 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 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 our current competitors lower their prices for competing products, we may be required to lower the prices we charge for our products. We may also lose sales and be required to lower our prices as our competitors further develop and enhance their product lines. This may reduce revenue from our products and services. We may face product liability claims or other liabilities due to the nature of our business 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. We may be adversely affected by governmental regulations Our hot-mix asphalt plants contain air pollution control equipment that must comply with performance standards promulgated by the Environmental Protection Agency. We cannot assure you that these performance standards will not be increased 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 cannot assure you that we will not incur material costs or liabilities in connection with the regulatory requirements applicable to our business. An increase in the price of oil or decrease in the availability of oil could reduce demand for our products. 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. A material rise in the price of oil or a material 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 could have a material adverse effect on our revenues and results of operations. We rely on proprietary technologies that we may be unable to protect from infringement or which may infringe technology owned by others 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. There can be no assurance that the breadth or degree of protection of our existing or future patents or trademarks will adequately protect us against infringements, or that any pending patent or trademark applications will result in issued patents or trademarks. There can also be no assurance that our 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 our patents. This could reduce demand for our products and materially decrease our revenues. It is possible that our existing patents, trademarks or other rights may not be valid or that we may infringe existing or future patents, trademarks or proprietary rights of our competitors. In the event that 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. There can be no assurance that we 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 an adverse effect on our business and results of operations. 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. We face risks of managing and expanding in international markets For the first quarter of 2000, international sales represented approximately 8.6% of our total 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. 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 are not necessarily meaningful and, as a result, should not be relied on as indications of future performance. Our Articles of Incorporation, Bylaws, Rights Agreement and Tennessee law may inhibit a takeover Our charter, bylaws and Tennessee law contain provisions that may delay, deter or inhibit a future acquisition, or an attempt to obtain control, of Astec. 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: - -- 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 - -- 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. 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 your shares of common stock at a premium and could have a material adverse effect on the market price of your shares. 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, 1999. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contingencies" in Part I - Item 2 of this Report. Item 5. Other Items 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 23, 2000. 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 (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 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). 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 March 31, 2000. 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) /s/ J. Don Brock Date J. Don Brock Chairman of the Board and President /s/ F. McKamy Hall Date F. McKamy Hall Vice President and Chief Financial Officer