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 September 30, 1998. [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. For the Transition period from _______________ to _______________. Commission File Number 0-14714 Astec Industries, Inc. (Exact Name of Registrant as Specified in its Charter) Tennessee 62-0873631 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 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 September 30, 1998 Common Stock, par value $0.20 9,429,580 ASTEC INDUSTRIES, INC. INDEX Page Number PART I - Financial Information Item 1. Financial Statements-Unaudited Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 1998 and 1997 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1998 and 1997 Notes to Unaudited Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II - Other Information Item 1. Legal Proceedings Item 5. Other Items Item 6. Exhibits and Reports on Form 8-K ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS UNAUDITED (IN THOUSANDS) SEPTEMBER SEPTEMBER 1998 1997 ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS 1,213 818 RECEIVABLES - NET 60,218 41,569 INVENTORIES 64,677 54,581 PREPAID EXPENSES AND OTHER 18,671 13,294 TOTAL CURRENT ASSETS 144,779 110,262 PROPERTY AND EQUIPMENT - NET 71,420 62,890 OTHER ASSETS 21,108 9,283 TOTAL ASSETS 237,307 182,435 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES CURRENT MATURITIES OF LONG-TERM DEBT 500 602 ACCOUNTS PAYABLE - TRADE 24,118 18,308 OTHER ACCRUED LIABILITIES 41,649 26,721 TOTAL CURRENT LIABILITIES 66,267 45,631 LONG-TERM DEBT, LESS CURRENT MATURITIES 38,975 29,910 OTHER LONG-TERM LIABILITIES 6,944 4,257 TOTAL SHAREHOLDERS' EQUITY 125,121 102,637 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 237,307 182,435 ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS) (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 1998 1997 1998 1997 NET SALES $88,797 $65,040 $285,085 $201,179 COST OF SALES 66,622 50,407 214,780 152,906 GROSS PROFIT 22,175 14,633 70,305 48,273 S,G, & A EXPENSES 11,822 9,439 37,336 28,569 INCOME FROM OPERATIONS 10,353 5,194 32,969 19,704 INTEREST EXPENSE 660 512 2,061 1,690 OTHER INCOME, NET OF EXPENSE (59) (2) 241 194 INCOME BEFORE INCOME TAXES 9,634 4,680 31,149 18,208 INCOME TAXES 3,855 1,859 12,422 7,237 NET INCOME 5,779 2,821 18,727 10,971 EARNINGS PER COMMON SHARE BASIC $0.61 $0.30 $2.00 $1.14 DILUTED $0.59 $0.30 $1.94 $1.12 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC 9,417,189 9,317,580 9,381,855 9,635,563 DILUTED 9,745,784 9,526,525 9,674,677 9,784,567 ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) SEPTEMBER SEPTEMBER 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $18,727 $10,971 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 5,764 4,587 PROVISION FOR DOUBTFUL ACCOUNTS 344 280 PROVISION FOR INVENTORY RESERVE 1,431 1,189 PROVISION FOR WARRANTY RESERVE 3,436 2,371 (GAIN) LOSS ON SALE OF FIXED ASSETS (48) 462 PROVISION FOR PENSION RESERVE 121 (INCREASE) DECREASE IN: TRADE RECEIVABLES (16,304) (5,362) FINANCE RECEIVABLES (14,603) (1,745) INVENTORIES (568) (6,331) PREPAID EXPENSES AND OTHER (11,142) (5,786) OTHER RECEIVABLES (126) (423) OTHER NON-CURRENT ASSETS (167) (99) INCREASE (DECREASE) IN: ACCOUNTS PAYABLE 2,696 3,694 ACCRUED PRODUCT WARRANTY (2,629) (1,216) OTHER ACCRUED LIABILITIES 5,705 623 INCOME TAXES PAYABLE 12,480 9,973 TOTAL ADJUSTMENTS (13,610) 2,217 NET CASH PROVIDED BY OPERATING ACTIVITIES 5,117 13,188 CASH FLOWS FROM INVESTING ACTIVITIES: PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT - NET 318 338 EXPENDITURES FOR PROPERTY AND EQUIPMENT (11,675) (6,327) NET CASH USED BY INVESTING ACTIVITIES (11,357) (5,989) CASH FLOWS FROM FINANCING ACTIVITIES: NET BORROWINGS (REPAYMENTS) UNDER REVOLVING CREDIT AGREEMENT (4,173) 2,080 TENDER OFFER STOCK REPURCHASE (7,760) BORROWINGS (REPAYMENTS) UNDER LOAN AND NOTE AGREEMENTS 7,919 (4,116) PROCEEDS FROM ISSUANCE OF COMMON STOCK 781 33 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 4,527 (9,763) NET DECREASE IN CASH (1,713) (2,564) CASH AT BEGINNING OF PERIOD 2,926 3,382 CASH AT END OF PERIOD $1,213 $ 818 ASTEC INDUSTRIES, INC NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. The information contained in the unaudited consolidated balance sheets, the unaudited consolidated statements of income, and the unaudited consolidated statements of cash flows reflect all adjustments consisting of normal recurring accruals which are, in the opinion of management, necessary to present a fair statement of the results for the periods covered. 2. Receivables are net of allowance for doubtful accounts of $1,380,000 and $1,342,000 for September 30, 1998 and December 31, 1997, respectively. 3. Inventories are stated at the lower of first-in, first- out, cost or market and consist of the following: (in thousands) September 30, December 31, 1998 1997 Raw Materials $27,204 $27,987 Work-in-Process 17,976 15,920 Finished Goods 19,497 25,488 Total $64,677 $ 69,395 4. Property and equipment is stated at cost. Property and equipment is net of accumulated depreciation of $35,835,000 and $31,747,000 for September 30, 1998 and December 31, 1997, respectively. 5. Earnings per share are computed in accordance with SFAS No. 128. 6. Certain customers have financed purchases of Astec products through arrangements in which the Company is contingently liable for customer debt aggregating approximately $1,372,000 at September 30, 1998, and $1,793,000 at December 31, 1997. 7. 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. 8. Approximately 80% to 85% of the Company's business volume normally occurs during the first nine months of each 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 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. On November 2, 1998, the Company announced it acquired substantially all of the assets of Johnson Crushers International, Inc. ("JCI") located in Eugene, Oregon for approximately $7,000,000 cash, with a potential three year earn-out of approximately $5,500,000. The final purchase price is subject to adjustment based upon due diligence work to be performed in December 1998. The acquired business designs, manufactures and markets aggregate processing equipment, including the JCI line of portable and stationary cone crushers and horizontal screens. The new business will continue to be operated under the name Johnson Crushers International, Inc. as a wholly owned subsidiary of Astec Industries, Inc. and will remain headquartered in Eugene, Oregon. Results of Operations For the three months ended September 30, 1998, net sales increased to $88,797,000 from $65,040,000 for the three-months ended September 30, 1997, representing an increase of $23,757,000 or approximately 36.5%. The acquisition of Kolberg-Pioneer, Inc. during December 1997, accounted for approximately $12,750,000 of the increase in sales for the third quarter of 1998 compared to the third quarter of 1997. The remainder of the increase in net sales for the third quarter of 1998 related primarily to increased sales of asphalt mixing plants and related components and sales of paving equipment. International sales for the third quarter of 1998 increased to $22,770,000 from $16,022,000 for the same period of 1997, an increase of approximately $6,748,000 or 42.1%. Net sales for the nine months ended September 30, 1998 increased approximately 41.7% to $285,085,000 from $201,179,000 for the same period of 1997. For the nine months ended September 30, 1998 compared to the same period of 1997, approximately $39,642,000 or 47.2% of the increase in net sales is attributable to net sales of Kolberg- Pioneer, Inc. The remainder of the increase in net sales for the nine months ended September 30, 1998 is attributable to increased sales of asphalt mixing plants and related components, increased sales of aggregate crushing equipment and increased international sales volume. International sales for the nine months ended September 30, 1998 increased to $49,552,000 from $38,616,000 for the nine months ended September 30, 1997. Gross profit for the quarter ended September 30, 1998 increased to $22,175,000 from $14,633,000 for the quarter ended September 30, 1997, while the gross profit percentage for the three months ended September 30, 1998 increased to 25.0% from 22.5% at September 30, 1997. The increase in the gross profit percentage for the quarter ended September 30, 1998 compared to the same quarter in 1997 relates primarily to increased international sales volume and improved customer pricing on customization. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED Gross profit for the nine months ended September 30, 1998 was $70,305,000 compared to gross profit of $48,273,000 for the same period of 1997. The gross profit percentage for the nine months ended September 30, 1998 was 24.7% compared to 24.0% for the nine months ended September 30, 1997. Selling, general, and administrative expenses for the quarter ended September 30, 1998 were $11,822,000 or 13.3% of net sales, compared to $9,439,000 or 14.5% of net sales for the same period of 1997. The increase in selling, general and administrative expenses for the quarter ended September 30, 1998 compared to the same quarter in 1997, was due mainly to increased sales department expenses for increased sales personnel and their related selling expenses. Approximately $795,000 of the increase in selling, general and administrative expenses for the quarter ended September 30, 1998 compared to the same period of 1997, related to selling, general and administrative expenses of Kolberg-Pioneer, Inc., acquired in December, 1997. Selling, general and administrative expenses for the nine months ended September 30, 1998 increased to $37,336,000, from $28,569,000 for the nine months ended September 30, 1997, an increase of $8,767,000 or 30.7%. Approximately 47.4% of the increase in selling, general and administrative expenses for the nine months ended September 30, 1998, compared to the same period of 1997, related to Kolberg-Pioneer, Inc. The remaining increase in selling, general and administrative expenses was due mainly to increased selling expense. Interest expense increased to $660,000 for the third quarter of 1998 from $512,000 for the third quarter of 1997. Interest expense as a percentage of net sales decreased to .7% for the quarter ended September 30, 1998 from .8% for the same period of 1997. Interest expense for the nine months ended September 30, 1998 increased $371,000 to $2,061,000 from $1,690,000 for the same period of 1997. The increase in interest expense for the three and nine months ended September 30, 1998 compared to the three and nine months ended September 30, 1997, is due mainly to increased borrowing under of the Company's revolving credit facility. The outstanding debt under the revolving credit facility increased during 1998 compared to 1997 due to usage by the Company's captive finance company for lease financing and by Astec Industries, Inc. for financing the purchase of Kolberg-Pioneer in December, 1997. Other income, net of other expense, was a net expense of $59,000 and $2,000 for the quarters ended September 30, 1998 and 1997, respectively. Other income, net of other expense for the nine months ended September 30, 1998 was $241,000 compared to other income, net of other expense for the nine months ended September 30, 1997 of $194,000, an increase in income of $47,000. Income tax expense for the third quarter of 1998 increased to $3,855,000 from $1,859,000 at September 30, 1997, an increase of $1,996,000 or 107.4%. Tax expense is 4.3% and 2.9% of net sales for the quarters ended September 30, 1998 and 1997, respectively. The effective tax rate for the third quarter of 1998 and 1997 was 40.0% and 39.7%, respectively. Backlog of orders at September 30, 1998 was $64,771,000 compared to $46,763,000 at September 30, 1997. For comparison, the September 30, 1997 backlog of Kolberg- Pioneer was included in the September 30, 1997 backlog amount. The majority of the increase in the backlog at September 30, 1998 compared to that of September 30, 1997 related to a significant increase in domestic orders for asphalt mixing plants and related components and an increase in international orders for trenching and aggregate crushing equipment. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED Liquidity and Capital Resources As of September 30, 1998, the Company had working capital of $78,512,000 compared to $71,459,000 at December 31, 1997. Total short-term borrowings, including current maturities of long-term debt, were $500,000 at September 30, 1998 and December 31, 1997. The total current maturities of long-term debt at September 30, 1998 and December 31, 1997, represent current maturities of outstanding Industrial Revenue Bonds. Long-term debt, less current maturities was $38,975,000 at September 30, 1998 and $35,230,000 at December 31, 1997. The increase in outstanding debt at September 30, 1998 compared to December 31, 1997, is due mainly to financing the purchase of Kolberg-Pioneer, Inc. on December 2, 1997. During August, 1998, the City of Yankton, South Dakota issued $9,700,000 of Variable Fixed Rate Demand Industrial Development Revenue Bonds, Series 1998, with which the Company converted approximately $7,900,000 of the outstanding revolving credit facility related to the acquisition of Kolberg-Pioneer, Inc. to industrial revenue bonds at more favorable interest rates. Capital expenditures in 1998 for plant expansion and for further modernization of the Company's manufacturing processes, are expected to approach $15,000,000. The Company expects to finance these expenditures using internally generated funds. Capital expenditures for the nine months ended September 30, 1998 were $11,675,000. The Company has an unsecured revolving credit loan agreement with First Chicago NBD. The line of credit is $70,000,000. This credit facility expires November 22, 2002. At September 30, 1998, $19,556,000 of the line of credit was utilized. 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 $70,000,000 revolving credit facility, Astec Financial Services, Inc. has a segregated portion of up to a $30,000,000 line of credit. At September 30, 1998, Astec Financial Services, Inc. had utilized $17,241,000 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 September 30, 1998, with the exception of the limitation on capital expenditures. First Chicago NBD has issued a waiver for this covenant for the third quarter of 1998. In addition, First Chicago NBD modified the revolving credit agreement to limit capital expenditures to a percentage of sales volume. 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. Software failures due to processing errors potentially arising from calculations using the Year 2000 date are a known risk. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED During the first quarter of 1998, the Company commenced a comprehensive Year 2000 project to address all necessary code changes, testing and implementation. The Company is utilizing both internal and external resources to identify, correct or reprogram, and test its systems for Year 2000 compliance. To date, substantial progress has been made toward completion of the project. Since the Company updated the majority of its personal computing equipment and related software in recent years, most personal computer equipment is compliant will need only a replacement chip or a software update to become Year 2000 compliant. The Company is scheduled to complete all updates or replacements and related testing by June 1999. The Company has some mainframe systems which will require either significant reprogramming or replacement. The mainframe systems being replaced were planned before the Year 2000 project, but the assessments and implementations were accelerated due to Year 2000 issues. The Year 2000 budget includes the costs related to replacement of mainframe systems, which are capitalized on the Company's books. The Company 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 the following four phases: assessment, remediation, testing, and implementation. The following chart summarizes the percentage of completion for each of the four phases of the Year 2000 project and the expected completion dates for the phases not completed as of September 30, 1998. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - CONTINUED Resolution Phases* Assessment Remediation Testing Implementation Information 90% 70% 40% 40 % Complete Technology Complete Complete Complete Expected Expected Expected completion completion completion date, 6/30/99 date, date, 12/31/98 6/30/99 E x p o s u Operating r Equipment 90% 80 % 60% 60% Complete e with Complete Complete Complete Embedded T Chips Expected y or Expected Expected completion p Software completion completion date, e date, date, 6/30/99 3/31/99 6/30/99 Products 100% 95% 95% 95% Complete Complete Complete Complete 3rd Party 70% 60% 60% 60% Complete Complete Complete Complete Expected completion date for surveying all third parties, 12/31/98 * All percentage of completion amounts are approximations. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED The Company is utilizing both internal and external resources to reprogram or replace, test, and implement the software and operating equipment for Year 2000 modifications. The total cost of the Year 2000 project is estimated to be $3,000,000 and is being funded through operating cash flows. To date, the Company has incurred approximately $2,100,000, related to all phases of the Year 2000 project. Of the total remaining project costs, approximately $600,000 is attributable to the purchase of new software and operating equipment, which will be capitalized. The remaining $300,000 is related to repair of hardware and software and will be expensed as incurred. The Company manufactures products that use either internally or externally developed software that is susceptible to Year 2000. For customers with products which contain externally developed software, the Company is notifying them by mail that the Company does not own the source code to these specific software products and cannot provide a Year 2000 update. The Company does offer to provide the customer, for a fee, a version of internally generated software to replace that provided with the original equipment. Some internally developed equipment software was designed to be Year 2000 compliant. For customers with products that contain internally developed software that is not Year 2000 compliant, and the products were purchased within the last five years, the Company is sending out disks to update the software for Year 2000 compliance. If the equipment was purchased more that five years earlier, the Company provides the software update for a fee. In addition, some of the Company's equipment, such as asphalt plants, contain personal computers. The PC equipment should be tested for year 2000 compliance. The Company is mailing to its applicable customers instructions to test their PC's for Year 2000 compliance. If the PC's are not compliant, the customers are instructed to contact the Company. Due to the nature of the Company's products, updates and information provided following the initial information letters is based upon individual inquiry Furthermore, the Company is in the process of querying its significant suppliers and any other external agents (no external agents share information systems with the Company). The progress of this process is shown in the above chart. To date, the Company is not aware of any external agents with a Year 2000 issue that would materially impact the Company's results of operations, liquidity, or capital resources. However, the Company has no means of ensuring that external agents will be Year 2000 ready and the effect of any non-compliance by external agents is not determinable. Management of the Company believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. In the event that the Company does not complete any additional phases, the Company could lose revenues due to inability to manufacture its product, missed delivery dates of equipment, and inability to provide customer technical support to equipment in the field, among other potential risks. In addition, the Company could be subject to litigation for computer systems product failure. The amount of potential liability and lost revenues cannot be reasonably estimated at this time. The Company currently has no contingency plans in place in the event it does not complete all phases of the Year 2000 project. The Company plans to evaluate the status of completion in March 1999 and determine whether such a plan is necessary. 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. 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, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I - Item 2 "Contingencies" of this Report. Item 5. Other Items Shareholder Proposals The proxy statement solicited by the Board of Directors of the Company with respect to the 1999 Annual Meeting of Shareholders will confer discretionary authority on the Company to vote on any shareholder proposals intended to be presented for consideration at such Annual Meeting that are submitted to the Company after February 8, 1999. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Index to Exhibits: (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 September 30, 1998. 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) 11/13/98 /s/ J. Don Brock Date J. Don Brock Chairman of the Board and President 11/13/98 /s/ Richard W. Bethea, Jr. Date Richard W. Bethea Vice President, Corporate Counsel and Secretary