The balance sheet at December 31, 2001 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.

Certain reclassifications were made to the prior year presentation to conform to the current year presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Astec Industries, Inc. and subsidiaries annual report on Form 10-K for the year ended December 31, 2001.

Receivables are net of allowance for doubtful accounts of $2,734,000 and $1,806,000 for September 30, 2002 and December 31, 2001, respectively.

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

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

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

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

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

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.

Approximately 75% - 80% of the Company's business volume typically occurs during the first nine months of the year. During the usual seasonal trend, the first two quarters of the year are the Company's strongest quarters for business volume, with the second quarter slightly stronger than the first quarter. The third quarter is normally weaker than the first two quarters with the fourth quarter consistently being the weakest quarter.

Effective January 1, 2001, the Company adopted SFAS No. 133, which requires the Company to recognize derivative instruments on the balance sheet at fair value. The statement also establishes new accounting rules for hedging instruments, which depend on the nature of the hedge relationship. The Company has a cash flow hedge, which requires that the effective portion of the change in the fair value of the derivative instrument be recognized in Other Comprehensive Income (OCI), a component of Shareholders' Equity, and reclassified into earnings in the same period, or periods during which the hedged transaction affects earnings. The ineffective portion of the hedge, if any, is recognized in current operating earnings during the period of change in fair value.

The Company's captive finance subsidiary, Astec Financial Services, Inc. ("AFS"), entered into an interest rate swap agreement on April 6, 2000, to fix interest rates on variable rate debt. The swap agreement is effective for five years with a notional amount of $7,500,000. The objective of the hedge is to offset the variability of cash flows relating to the interest payments on the variable rate debt outstanding under the Company's revolving credit facility. The sole source of the variability in the hedged cash flows results from changes in the benchmark market interest rate, which is three-month U.S. Dollar LIBOR. Changes in the cash flows of the interest rate swap are expected to be highly effective at offsetting the changes in overall cash flows (i.e., changes in interest rate payments) attributable to fluctuations in the benchmark market interest rate on the variable rate debt being hedged.

During the three-month period ended September 30, 2002, there was no material ineffectiveness related to the Company's derivative holdings and there was no component of the derivative instruments' gains or losses excluded from the assessment of hedge effectiveness.

The Company adopted SFAS 142 effective January 1, 2002. Application of the non-amortization provision of SFAS 142 is expected to result in an increase in net income of approximately $2,154,000, or $0.11 per share in the current year. The Company tested goodwill for impairment using the two-step process prescribed in SFAS 142. The first step is a screen for potential impairment, while the second step measures impairment, if any. The Company completed the required impairment tests of goodwill during the first quarter of 2002 and noted no impairment of goodwill. For the three-month and nine-month periods ended September 30, 2001, goodwill amortization expense was $539,000 and $1,618,000, respectively.

On September 10, 2001, the Company and Astec Financial Services entered into a $125,000,000 revolving credit facility with a syndicate of banks that expires on September 10, 2004. Under this agreement, interest payments on all borrowing shall be payable (a) in arrears on the first day of each March, June, September and December, (b) on any date the borrowings are prepaid due to acceleration and (c) on maturity. Advances to Astec Financial Services under this line of credit are limited to a certain percentage of "Eligible Equipment Receivables" of Astec Financial Services as defined in the credit agreement that governs the credit facility.

Under terms of the credit agreement, the Company must maintain certain financial ratio levels and abide by certain covenants. Principal covenants under the loan agreement include the maintenance of minimum levels of net worth, leverage and fixed charge coverage ratios, a limitation of capital expenditures and rental expense, a prohibition against payment of dividends and a prohibition on large acquisitions except with the consent of the lenders.

On March 12, 2002, the Company executed the first amendment to the credit facility, which decreased the maximum amount available from $125,000,000 to $100,000,000, relaxed certain financial ratio covenants for 2002, provided security for the lenders in certain situations, and added a .375% interest rate surcharge, and waived the violations of financial ratios under the original agreement. A second amendment to the credit agreement, dated May 13, 2002, waived non-compliance of the financial covenants for the quarter ended March 31, 2002 and amended the leverage ratio sliding scale on which interest and various fee rates are determined. Borrowings under the credit facility as amended by the second amendment to the credit agreement bear interest at a rate equal to the London Interbank Offering Rate ("LIBOR") plus from 1.0% to 3.25%, depending on the leverage ratio as defined by the credit agreement and applied to the sliding scale. On August 7, 2002, the Company entered into a third amendment to the credit agreement. The third amendment waived non-compliance with the leverage and fixed charge coverage ratio covenants.

At September 30, 2002 the Company and Astec Financial Services were not in compliance with the leverage and fixed charge coverage ratio covenants of the amended revolving credit facility. As a result of the breaches, the Company was in default under its credit facility. At September 30, 2002, Astec Financial Services was utilizing $10,900,000 of the amount available under the revolving credit facility for borrowing related to customer financing and the Company was utilizing an additional $20,639,000 to support outstanding letters of credit (primarily for industrial revenue bonds).

On October 24, 2002, the Company and Astec Financial Services entered into a forbearance agreement with its lenders under the credit agreement and Bank One, NA, as agent under the credit agreement. Under the forbearance agreement, (i) the lenders agreed, subject to certain conditions, not to exercise through November 14, 2002 any of the remedies available to them as a result of the breaches of the covenants, (ii) the total commitment available to the Company and Astec Financial Services under the credit agreement was reduced from $100,000,000 to $75,000,000, (iii) the Company was prohibited from making any acquisitions, other than specified acquisitions pursuant to agreements to which the Company had already entered, and (iv) the Company agreed to pay any proceeds generated from the sale of property in Grapevine, Texas and from the sale of loans from Astec Financial Services to the lenders to reduce the outstanding loans or to be deposited as cash collateral to secure the Company's obligat ions with respect to outstanding letters of credit.

On November 14, 2002, the Company entered into the fourth amendment to the credit facility, which waived the violations of financial ratios for the quarter ended September 30, 2002; decreased the maximum commitment available from $75,000,000 to $58,200,000; relaxed through June 30, 2003 the two financial ratio covenants that were breached as of September 30, 2002; added a minimum earnings before interest expense, income tax expense, depreciation, and amortization covenant for the fourth quarter of 2002; provided additional security to the lenders in the form of real estate mortgages on certain of the Company's property; limited the amount of additional funds available for working capital purposes to $5,000,000 above the approximately $53,200,000 that was outstanding under the credit facility as of November 13, 2002; allowed the lenders to receive $19.2 million from the sale of the Trencor facility to pay off the $8 million letter of credit that will be used to retire the industrial revenue bonds on the Trencor facility and to repay $11.2 million of debt that was advanced by the lenders to purchase the John Deere facility; required proceeds from sales of lease portfolio assets to be used to repay the outstanding amounts under the credit facility; and reduces the aggregate commitment under the credit facility going forward by the amount of proceeds received by the Company for sales of assets.

No assurances can be provided that financial ratio covenant violations or other covenant violations of the credit facility will not occur in the future or, if such violations occur, that the members of the Company's banking syndicate will not elect to pursue their contractual remedies under the credit facility, including requiring the immediate repayment in full of all amounts outstanding. There can also be no assurance that the Company can secure adequate or timely replacement financing to repay its banking syndicate in the event of an unanticipated repayment demand.

On September 10, 2001, the Company and Astec Financial Services entered into a note purchase agreement for $80,000,000 of senior notes, placed with private institutions, due September 11, 2011 at a fixed interest rate of 7.56%. On September 10, 2005 and on each September 10 thereafter through the due date, the Company is required to make a principal payment of $10,714,286. Interest is due and payable semiannually on each March 10 and September 10. As part of this agreement, the Company must maintain certain net worth and fixed charge coverage ratios.

On March 12, 2002, the Company executed the first amendment to the note purchase agreement to relax certain financial ratio covenants for 2002 and to provide additional security for the note holders in certain situations. The first amendment to the note purchase agreement also added a 0.375% interest rate surcharge and waived the violations of financial ratios under the original agreement. The second amendment to the note purchase agreement, executed May 13, 2002 and effective April 1, 2002, waived the financial covenant violations as of March 31, 2002. It also included a .375% to 1.375% interest rate surcharge applied on a sliding scale based on the covenant calculation each quarter if the original covenant ratios are not met. At June 30, 2002, the Company was not in compliance with the leverage and fixed charge coverage covenants of the senior note agreement. These covenant violations were waived by a majority of the note holders as part of the third amendment to the note purchase agreement dated August 14, 2002. The rate at which the senior subordinated note indebtedness accrue interest did not change from that stated in the second amendment.

On November 14, 2002, the Company entered into the fourth amendment to the note purchase agreement, which relaxed through June 30, 2002 the two financial ratio covenants that were breached as of September 30, 2002; added a minimum earnings before interest expense, income tax expense, depreciation, and amortization covenant for the fourth quarter of 2002; provided additional security to the lenders in the form of real estate mortgages on certain of the Company's property; and waived the violations of financial ratios for the quarter ended September 30, 2002.

No assurances can be provided that financial ratio covenant violations or other covenant violations of the note purchase agreement will not occur in the future or, if such violations occur, that the note holders will not elect to pursue their contractual remedies under the note purchase agreement, including requiring the immediate repayment in full of all amounts outstanding. There can also be no assurance that the Company can secure adequate or timely replacement financing to repay its note holders in the event of an unanticipated repayment demand.

The Company entered into a security agreement dated May 13, 2002 in order to comply with the terms of the credit agreement and the note purchase agreement. The Trigger Date, as defined in the credit agreement and the note purchase agreement, occurred on March 31, 2002, requiring the Company to secure its credit facility and the senior notes with its inventory, machinery and equipment, and trade receivables.

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. Statements in this Form 10-Q that are forward looking include, without limitation, statements regarding the Company's expected increase in net income in the current year, the impact on domestic sales by the general economic slowdown and continued delays in capital expenditures, expected sales during 2003, the Company's expected effective tax rates for the fourth quarter of 2002, the Company's expected capital expenditures in 2002, the expected benefit of financing arrangements, and the ability of the Company to meet its working capital and capital expenditure requirements through September 30, 2003. A variety of factors could caus e actual results to differ materially from those anticipated in the Company's forward-looking statements, which include the risk factors that are discussed from time to time herein and in the Company's reports filed with the SEC, most recently in the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2002. 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 update the forward-looking statements.

For the three months ended September 30, 2002, net sales increased $22,976,000, or 22.3%, to $126,100,000 from $103,124,000 for the three months ended September 30, 2001. Sales are generated primarily from equipment purchases made by customers for use in construction for privately funded infrastructure development and public sector spending on infrastructure development.

For the nine months ended September 30, 2002, net sales increased $2,490,000 to $375,211,000 from $372,721,000 for the nine months ended September 30, 2001. Although sales revenue for the three-month and nine-month periods ended September 30, 2002 increased over the same prior year periods, the Company believes that domestic sales negatively impacted during 2001 by the general economic slowdown and continued delays in capital expenditures by its customers, are still being negatively impacted during 2002. The Company believes that both the strength of the dollar abroad, and the foreign economies experiencing a similar downturn, have negatively impacted the Company's international sales volume. The Company does not expect the current quarter and year-to-date increase in sales to continue as a trend. As a result of discussions with many of the Company's customers, the Company expects continued slow sales through at least 2003.

International sales for the third quarter of 2002 decreased $6,943,000, or 27.8%, to $18,055,000, compared to $24,998,000 during the third quarter of 2001. For the three months ended September 30, 2002 compared to the same period in 2001, international sales to Central America decreased over $4,000,000 while sales to Africa and various Asian countries decreased over $2,000,000. For the three months ended September 30, 2002 and 2001, international sales accounted for approximately 14.3% and 24.2% of net sales, respectively.

International sales for the nine months ended September 30, 2002 decreased approximately $14,707,000, or 19.6%, to $60,375,000, compared to $75,082,000 for the first nine months of 2001. For the nine months ended September 30, 2002, international sales volumes in Central America and Africa accounted for the current year sales decline compared to the same period in 2001. For the nine months ended September 30, 2002 and 2001, international sales accounted for approximately 16.1% and 20.1% of net sales, respectively. For the three months and nine months ended September 30, 2002 compared to the same periods of 2001, the decrease in sales volume to Central America related primarily to a large turnkey aggregate processing and soil purification system installed during 2001. Decreased sales volume in Africa for the three months and nine months ended September 30, 2002, compared to the same periods of 2001 related primarily to decreased sales volume of the Company's South African subsidiary and to a lesser extent to the currency exchange rate during 2002 compared to that of 2001.

Gross profit for the three months ended September 30, 2002 increased $3,570,000, or 20.8%, to $20,762,000 from $17,192,000 for the three months ended September 30, 2001, while the gross profit percentage for the three months ended September 30, 2002 decreased to 16.5% from 16.7% for the same period of 2001. While the increase in gross margin dollars for the third quarter of 2002 related somewhat to the increase in sales volume, the increase in gross margin dollars also related to a larger than normal volume of operating lease sales by Astec Financial Services, the Company's captive finance company. The larger volume portfolio sale during the third quarter of 2002 resulted from a lower than normal lease portfolio sale during the second quarter of 2002. Although all operating segments continue to experience significant pricing pressure and limited market opportunities, the gross margin as a percentage of sales for the quarter ended September 30, 2002 remained comparable to that of the same p rior year quarter.

Accounting rules require that revenues and related profits on equipment sales that are financed using operating leases through a captive finance company be deferred until those leases are sold to an unrelated financial institution. In the normal transaction flow, the deferral of revenues and profits of manufactured equipment financed as operating leases, netted against the recognition of previously deferred revenues and profits, is immaterial to the quarterly financial results. As a modification to the Company's strategy to minimize its debt level, the Company intends to discontinue the financing activities of Astec Financial Services during the fourth quarter of 2002. As a result, the Company plans to sell the majority of its remaining financing portfolio during the fourth quarter and in the first quarter of 2003 to absorb the remaining assets of the captive finance company into Astec Industries, Inc. In the future, the Company will assist customers as necessary by fac ilitating equipment financing using unaffiliated third party arrangements.

Gross profit for the nine months ended September 30, 2002 decreased $2,674,000, or 3.4%, to $75,263,000 from $77,937,000 for the same period of 2001. Price pressure and changes in product mix sold during the first nine months of the year negatively impacted the margins for the nine months ended September 30, 2002 compared to the same period of 2001. Gross margins during 2002 were positively impacted as the Company continues to experience significantly reduced levels of under-absorbed overhead primarily due to decreased manufacturing expenses for the three months and nine months ended September 30, 2002 compared to the same periods of 2001.

Selling, general, administrative and engineering expenses for the three months ended September 30, 2002 were $21,145,000, compared to $17,606,000 for the three months ended September 30, 2001, an increase of $3,539,000 or 20.1%. The increase in selling, general, administrative and engineering expenses for the third quarter of 2002, compared to the same period of 2001, related primarily to increased selling expense of approximately $1,200,000 to provide for additional sales personnel, expense of approximately $953,000 for settlements of lawsuits in the normal course of business and expense of approximately $511,000 related to the ConExpo trade show held once every three years in Las Vegas, Nevada.

For the nine months ended September 30, 2002, selling, general, administrative and engineering expenses increased $2,879,000, or 5.0%, to $61,080,000 from $58,201,000 for the nine months ended September 30, 2001. For the nine months ended September 30, 2002, the Company expensed approximately $911,000 related to the ConExpo trade show in Las Vegas. Settlements of lawsuits in the normal course of business for the nine months ended September 30, 2002 were $1,240,000, compared to $314,000 for the same period of 2001. The Company continues to benefit in 2002 from the overall cost reduction measures initiated during 2001 and continuing through the current year.

Interest expense increased $567,000, or 26.9%, to $2,672,000 for the quarter ended September 30, 2002 from $2,105,000 for the quarter ended September 30, 2001. Interest expense as a percentage of net sales was approximately 2.1% and 2.0% for the three months ended September 30, 2002 and 2001, respectively.

Interest expense increased $1,166,000, or 17.5%, to $7,834,000 for the nine months ended September 30, 2002, from $6,668,000 for the same period of 2001. Interest expense as a percentage of sales was approximately 2.1% and 1.8% for the nine months ended September 30, 2002 and 2001, respectively. The increase in interest expense for the third quarter and first nine months of 2002, compared to the same periods of 2001, related primarily to the note purchase agreement which was entered into on September 10, 2001 at interest rates higher than those paid in 2001, but provides fixed rate, long-term financing which the Company believes should prove beneficial in future years, after the Company again complies with the financial covenants. Also, the increase in interest rates and interest rate surcharges pursuant to the Company's credit facility and outstanding notes resulted from the Company's failure to meet minimum financial covenant ratios in the current and certain prior quarters.

Other income, net of other expense, was $932,000 for the quarter ended September 30, 2002, compared to $131,000 for the quarter ended September 30, 2001. For the third quarter of 2002, in accordance with SFAS 142, goodwill was not amortized, while for the third quarter of 2001, other income, net of expense included amortization expense of $539,000. The increase in other income for the quarter ended September 30, 2002 compared to the quarter ended September 30, 2001 related not only to lower goodwill amortization during 2002, but to a larger volume lease portfolio sale during the current quarter compared to the same prior year quarter.

For the nine months ended September 30, 2002 other income, net of expense was $2,059,000, compared to $1,239,000 for the same period of 2001. Again, in accordance with SFAS 142, goodwill was not amortized during 2002 while for the nine months ended September 30, 2001 the Company recorded goodwill amortization expense of $1,618,000. The increase in other income, net of expense for the nine months ended September 30, 2002 compared to the same period of 2001 related primarily to lack of goodwill amortization expense during 2002.

For the three months ended September 30, 2002, the Company recorded an income tax benefit of $706,000, compared to an income tax benefit of $1,070,000 for the three months ended September 30, 2001. The tax benefit as a percent of sales was 0.5% and 1.0% for the three months ended September 30, 2002 and 2001, respectively. The consolidated effective tax rate includes foreign tax expense for South Africa at an effective tax rate of approximately 33%.

Tax expense for the nine months ended September 30, 2002 and 2001 was $2,745,000 and $5,308,000, respectively. The effective tax rates for the nine-month periods ended September 30, 2002 and 2001 were 32.6% and 37.1%, respectively. The decrease in the effective tax rate for the first nine months of 2002, compared to the same period of 2001 relate to tax credits received during the first quarter of 2002. The Company expects the effective tax rate for the fourth quarter of 2002 to be comparable to historical effective rates.

Net loss for the three months ended September 30, 2002 increased to $1,438,000 from a net loss of $1,346,000 for the three months ended September 30, 2001. Diluted loss per share for the three months ended September 30, 2002 and for the three months ended September 30, 2001 was $0.07 per share, based on 19.7 million and 19.5 million weighted average shares outstanding, respectively.

Net income for the nine months ended September 30, 2002 decreased $3,306,000 to $5,604,000 from $8,910,000 for the nine months ended September 30, 2001. Diluted earnings per share for the nine months ended September 30, 2002 was $0.28 per share compared to $0.45 per share for the nine months ended September 30, 2001, based on 20.0 million and 19.7 million weighted average shares outstanding, respectively.

Backlog of orders at September 30, 2002 was $55,196,000, compared to $45,793,000 at September 30, 2001, an increase of 20.5%. The increase in the backlog of orders at September 30, 2002 compared to September 30, 2001 relates primarily to increased domestic backlog for equipment of the Company's Aggregate and Mining Group. The increase in the backlog can be primarily attributed to several large system or turnkey installations currently underway consisting primarily of conveying and crushing equipment. The Company is unable to determine whether this backlog effect was experienced by the industry as a whole.

On September 10, 2001, the Company and Astec Financial Services entered into a $125,000,000 revolving credit facility with a syndicate of banks that expires on September 10, 2004. Under this agreement, interest payments on all borrowing shall be payable (a) in arrears on the first day of each March, June, September and December, (b) on any date the borrowings are prepaid due to acceleration and (c) on maturity. Advances to Astec Financial Services under this line of credit are limited to a certain percentage of "Eligible Equipment Receivables" of Astec Financial Services as defined in the credit agreement that governs the credit facility.

Under terms of the credit agreement, the Company must maintain certain financial ratio levels and abide by certain covenants. Principal covenants under the loan agreement include the maintenance of minimum levels of net worth, leverage and fixed charge coverage ratios, a limitation of capital expenditures and rental expense, a prohibition against payment of dividends and a prohibition on large acquisitions except with the consent of the lenders.

On March 12, 2002, the Company executed the first amendment to the credit facility, which decreased the maximum amount available from $125,000,000 to $100,000,000, relaxed certain financial ratio covenants for 2002, provided security for the lenders in certain situations, and added a .375% interest rate surcharge, and waived the violations of financial ratios under the original agreement. A second amendment to the credit agreement, dated May 13, 2002, waived non-compliance of the financial covenants for the quarter ended March 31, 2002 and amended the leverage ratio sliding scale on which interest and various fee rates are determined. Borrowings under the credit facility as amended by the second amendment to the credit agreement bear interest at a rate equal to the London Interbank Offering Rate ("LIBOR") plus from 1.0% to 3.25%, depending on the leverage ratio as defined by the credit agreement and applied to the sliding scale. On August 7, 2002, the Company entered into a third amendment to the credit agreement. The third amendment waived non-compliance with the leverage and fixed charge coverage ratio covenants.

At September 30, 2002 the Company and Astec Financial Services were not in compliance with the leverage and fixed charge coverage ratio covenants of the amended revolving credit facility. As a result of the breaches, the Company was in default under its credit facility. At September 30, 2002, Astec Financial Services was utilizing $10,900,000 of the amount available under the revolving credit facility for borrowing related to customer financing and the Company was utilizing an additional $20,639,000 to support outstanding letters of credit (primarily for industrial revenue bonds).

On October 24, 2002, the Company and Astec Financial Services entered into a forbearance agreement with its lenders under the credit agreement and Bank One, NA, as agent under the credit agreement. Under the forbearance agreement, (i) the lenders agreed, subject to certain conditions, not to exercise through November 14, 2002 any of the remedies available to them as a result of the breaches of the covenants, (ii) the total commitment available to the Company and Astec Financial Services under the credit agreement was reduced from $100,000,000 to $75,000,000, (iii) the Company was prohibited from making any acquisitions, other than specified acquisitions pursuant to agreements to which the Company had already entered, and (iv) the Company agreed to pay any proceeds generated from the sale of property in Grapevine, Texas and from the sale of loans from Astec Financial Services to the lenders to reduce the outstanding loans or to be deposited as cash collateral to secure the Company's obligat ions with respect to outstanding letters of credit.

On November 14, 2002, the Company entered into the fourth amendment to the credit facility, which waived the violations of financial ratios for the quarter ended September 30, 2002; decreased the maximum commitment available from $75,000,000 to $58,200,000; relaxed through June 30, 2002 the two financial ratio covenants that were breached as of September 30, 2002; added a minimum earnings before interest expense, income tax expense, depreciation, and amortization covenant for the fourth quarter of 2002; provided additional security to the lenders in the form of real estate mortgages on certain of the Company's property; limited the amount of additional funds available for working capital purposes to $5,000,000 above the approximately $53,200,000 that was outstanding under the credit facility as of November 13, 2002; allowed the lenders to receive $19.2 million from the sale of the Trencor facility to pay off the $8 million letter of credit that will be used to retire the industrial revenue bonds on the Trencor facility and to repay $11.2 million of debt that was advanced by the lenders to purchase the John Deere facility; required proceeds from sales of lease portfolio assets to be used to repay the outstanding amounts under the credit facility; and reduces the aggregate commitment under the credit facility going forward by the amount of proceeds received by the Company for sales of assets.

No assurances can be provided that financial ratio covenant violations or other covenant violations of the credit facility will not occur in the future or, if such violations occur, that the members of the Company's banking syndicate will not elect to pursue their contractual remedies under the credit facility, including requiring the immediate repayment in full of all amounts outstanding. There can also be no assurance that the Company can secure adequate or timely replacement financing to repay its banking syndicate in the event of an unanticipated repayment demand.

The Company's South African subsidiary, Osborn Engineered Products SA (Pty) Ltd., has available a credit facility of approximately $1,250,000 to finance short-term working capital needs and an additional $1,250,000 available to cover the short-term establishment of letter of credit performance guarantees. As of September 30, 2002, Osborn Engineered Products had no outstanding cash balance due under the credit facility, but had approximately $1,127,000 in performance and retention bonds guaranteed under the facility. The Company's Canadian subsidiary, Breaker Technology Ltd., has available a revolving line of credit of approximately $1,000,000 to finance short-term working capital needs using their local currency. As of September 30, 2002, Breaker Technology Ltd. had no outstanding amount under the credit facility.

On September 10, 2001, the Company and Astec Financial Services entered into a note purchase agreement for $80,000,000 of senior notes, placed with private institutions, due September 11, 2011 at a fixed interest rate of 7.56%. On September 10, 2005 and on each September 10 thereafter through the due date, the Company is required to make a principal payment of $10,714,286. Interest is due and payable semiannually on each March 10 and September 10. As part of this agreement, the Company must maintain certain net worth and fixed charge coverage ratios.

On March 12, 2002, the Company executed the first amendment to the note purchase agreement to relax certain financial ratio covenants for 2002 and to provide additional security for the note holders in certain situations. The first amendment to the note purchase agreement also added a 0.375% interest rate surcharge and waived the violations of financial ratios under the original agreement. The second amendment to the note purchase agreement, executed May 13, 2002 and effective April 1, 2002, waived the financial covenant violations as of March 31, 2002. It also included a .375% to 1.375% interest rate surcharge applied on a sliding scale based on the covenant calculation each quarter if the original covenant ratios are not met. At June 30, 2002, the Company was not in compliance with the leverage and fixed charge coverage covenants of the senior note agreement. These covenant violations were waived by a majority of the note holders as part of the third amendment to the note purchase agreement dated August 14, 2002. The rate at which the senior subordinated note indebtedness accrue interest did not change from that stated in the second amendment.

On November 14, 2002, the Company entered into the fourth amendment to the note purchase agreement, which relaxed through June 30, 2002 the two financial ratio covenants that were breached as of September 30, 2002; added a minimum earnings before interest expense, income tax expense, depreciation, and amortization covenant for the fourth quarter of 2002; provided additional security to the lenders in the form of real estate mortgages on certain of the Company's property; and waived the violations of financial ratios for the quarter ended September 30, 2002.

No assurances can be provided that financial ratio covenant violations or other covenant violations of the note purchase agreement will not occur in the future or, if such violations occur, that the note holders will not elect to pursue their contractual remedies under the note purchase agreement, including requiring the immediate repayment in full of all amounts outstanding. There can also be no assurance that the Company can secure adequate or timely replacement financing to repay its note holders in the event of an unanticipated repayment demand.

The Company entered into a security agreement dated May 13, 2002 in order to comply with the terms of the credit agreement and the note purchase agreement. The Trigger Date, as defined in the credit agreement and the note purchase agreement, occurred on March 31, 2002, requiring the Company to secure its credit facility and the senior notes with its inventory, machinery and equipment, and trade receivables.

As of September 30, 2002, the Company had working capital of $150,360,000, compared to $161,867,000 at December 31, 2001. Total short-term borrowings, including current maturities of long-term debt, were $2,560,000 at September 30, 2002, compared to $2,368,000 at December 31, 2001. A financing agreement for imported, purchased inventory items accounted for $1,849,000 of the short-term borrowings at September 30, 2002, while outstanding Industrial Development Revenue Bonds accounted for $500,000 of the current maturities of long-term debt at September 30, 2002 and December 31, 2001. Net cash provided by operating activities for the nine months ended September 30, 2002 was approximately $22,709,000, compared to net cash used for operating activities for the nine months ended September 30, 2001 of $752,000. Operating activities contributing to cash during 2002 were primarily (a) increased accounts payable for invoices not yet due under normal terms and under extended payment terms and (b) inc reased other accrued liabilities from increased insurance reserves associated with the Company's captive insurance company, from increased reserves related to settlements of lawsuits, and from increased various payroll, benefit and tax related reserves in the normal course of business. These operating activities were partially offset by increased finance receivables and increased inventory levels during 2002.

Long-term debt, less current maturities, decreased to $109,650,000 at September 30, 2002 from $127,285,000 at December 31, 2001. At September 30, 2002, $80,000,000 was outstanding under the senior secured note agreement, $10,900,000 was outstanding under the revolving credit facility, $18,700,000 was outstanding under the long-term principal portion of Industrial Revenue Bonds and $50,000 was outstanding under other long-term obligations.

Capital expenditures in 2002 for plant expansion and for further modernization of the Company's manufacturing processes are expected to total approximately $19,025,000. This amount includes approximately $11,200,000 of capital additions made during October 2002 for the purchase of the new manufacturing facility located in Loudon County, Tennessee. The Company expects to finance these remaining expenditures using internally generated funds and amounts available from its credit facilities. Net cash used by investing activities for the nine months ended September 30, 2002 was approximately $2,175,000, compared to net cash used totaling $12,698,000 for the nine months ended September 30, 2001. Capital expenditures for the nine months ended September 30, 2002 were $5,595,000, compared to $6,406,000 for the nine months ended September 30, 2001. Proceeds from the sale and repayment of lease portfolio was approximately $14,198,000 for the nine months ended September 30, 2002, compared to $3 0,134,000 for the nine months ended September 30, 2001. The decrease in proceeds from the sale and repayment of lease portfolio was the result of decreased customer financing activity through Astec Financial, which in turn decreases the volume of portfolios sold during 2002 compared to the same period of 2001. Expenditures for equipment on operating lease was approximately $11,618,000 for the nine months ended September 30, 2002, compared to $36,481,000 for the same period ended September 30, 2001. The decrease in expenditures for equipment on operating lease was also due to a decrease in the number of the Company's equipment sales that were financed through Astec Financial Services on operating leases during 2002 compared to the same periods of 2001.

On July 15, 2002, Astec announced that it has entered into two agreements to sell its Trencor facility in Grapevine, Texas to the same purchaser/developer through a tax-free exchange for which the Company would receive $24,000,000 in cash. On November 1, 2002, the closing dates for the sale of both parcels of property were extended until December 31, 2002. See " - Strategic Alliances; Acquisitions; Dispositions."

Subject to the matters discussed above regarding the Company's ability to comply with its Senior Secured Note and revolving credit agreement covenants, or to obtain additional waivers related thereto, the Company believes that its current working capital, cash flows generated from future operations and availability remaining under its credit facility will be sufficient to meet the Company's working capital and capital expenditure requirements through September 30, 2003.

The following table discloses aggregate information about the Company's contractual obligations and the periods in which payments are due as of September 30, 2002:

On July 18, 2002 the Company announced it had entered into a strategic alliance with Case Construction Equipment for the manufacture, marketing and sale of trenchers, horizontal directional drills ("HDD") and related equipment for the utility construction market. Under an original equipment manufacturer agreement ("OEM"), the Company's Underground Group will produce the current line of eight Case trenchers, three HDD's, HDD fluid-mixing systems and downhole tools, and will also dedicate selected models of Trencor trenchers and American Augers HDD's to be distributed through the Case dealer networks. As part of the agreement, the Company will also have access to Case's worldwide dealer networks and access to Case's purchasing power for these product lines through its supply base. In addition, the Company will acquire certain intellectual property, tooling and other product-specific manufacturing assets from Case. The Company's subsidiary Trencor, Inc. will manufacture and sell Case tren cher products beginning in early 2003, with the full Case product line integration and related manufacturing operations scheduled for completion by the end of 2003.

On July 15, 2002, Astec announced that it has entered into two agreements to sell its Trencor facility in Grapevine, Texas to the same purchaser/developer through a tax-free exchange for which the Company would receive cash. The original closing date for the sale of the first piece of property was October 21, 2002, and the original closing date for the second piece of property was December 15, 2002. On October 21, 2002, the closing date for the first piece of property was extended until November 8, 2002 upon request by the purchaser/developer to allow time for final negotiations with Grapevine officials concerning economic incentives offered to the purchaser/developer. On November 1, 2002 and upon request by the purchaser/developer, the closing dates for both pieces of property were extended until December 31, 2002. An undisclosed portion of the purchaser/developer's financial backing is coming from a group of investors who are not party to the contract with Trencor. The Company is aware t hat the original investor group is apparently unwilling to consummate the transaction with the purchaser/developer at this time. However, the purchaser/developer has informed the Company that he does not wish to terminate the contracts, and is optimistic that he will be in a position to close the purchases with the support of other investors with which he is now in discussions. The Company is not presently in a position to assess the likelihood of the outcome of these discussions. Proceeds from the sale of the Trencor facility will be used to pay off the $8 million letter of credit that will be used to retire the industrial revenue bonds on the Trencor facility and to repay $11.2 million of debt that was advanced by the lenders to purchase the John Deere facility.

On August 2, 2002, the Company announced an agreement with John Deere Commercial Worksite Products, Inc. to acquire Deere's state-of-the-art 300,000 square-feet manufacturing facility located on 108 acres in Loudon, Tennessee, which was referenced in the July 15 announcement. The acquisition of the John Deere facility closed on October 25, 2002.

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

Certain customers have financed purchases of the Company's products through arrangements in which the Company is contingently liable for customer debt aggregating $13,343,000 at September 30, 2002. These obligations range from 36 to 48 months in duration and have minimal risk.

In addition, the Company is contingently liable under letters of credit of approximately $20,639,000 primarily related to Industrial Revenue Bonds.

As disclosed in our July 15, 2002 and October 17, 2002 press releases, we entered into an agreement to sell our Trencor facility located in Grapevine, Texas. The closing dates for both pieces of property have been extended until December 31, 2002. The Company is aware that the original investor group is unwilling to go forward with the transaction and that the purchaser/developer is currently discussing the transaction with an alternate investor group. If the sale does not close as planned in the fourth quarter or at all, our income from such sale will be less than we expected and disclosed. As a result, the market price of our stock may decline to the extent that the current market price reflects a market assumption that the transaction will close.

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 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 would likely cause our revenues and profits to decrease. In fact, rising gasoline, diesel fuel and liquid asphalt prices significantly increased the operating and raw material costs of our contractor and aggregate producer customers, reducing their profits and causing delays in some of their capital equipment purchases. These delays, along with the general slowdown in the U.S. economy, have decreased demand for several key categories of products.

General economic downturns, including any downturns in the commercial construction industry, could result in a material decrease in our revenues and operating results. In fact, we believe that the economic downturn was the primary cause of our net losses for the third and fourth quarters of 2001 and for the third quarter of 2002. Demand for many of our products, especially in the commercial construction industry, is cyclical. Sales of our products are sensitive to the states of the U.S., foreign and regional economies in general, and in particular, change in commercial construction spending and government infrastructure spending. In addition, many of our costs are fixed and cannot be quickly reduced in response to decreased demand. We could face a downturn in the commercial construction industry based upon a number of factors, including:

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

As of September 30, 2002, the Company was not in compliance with two financial covenants contained in the credit facility and two financial covenants in the note purchase agreement. The covenant violations in the credit facility were waived by the Company's banking syndicate through an amendment entered into on November 14, 2002 and the covenant violations in the note purchase agreement were waived by a majority of the note holders through an amendment entered into November 14, 2002. No assurances can be provided that financial ratio covenant violations or other violations of the credit facility or note purchase agreement will not occur in the future, or if such violations occur, that the banks and/or note holders, as the case may be, will not elect to pursue their contractual remedies under the credit facility or note purchase agreement, including requiring the immediate repayment in full of all amounts outstanding. There can also be no assurance that the Company can secure adequa te or timely replacement financing to repay its banks or note holders in the event of an unanticipated repayment demand.

We have completed ten acquisitions since 1994 and entered into a recent strategic alliance and plan to acquire additional businesses and enter into additional strategic alliances in the future. We may be unable to achieve the benefits expected to be realized from our acquisitions and alliances. In addition, we may incur additional costs and our management's attention may be diverted because of unforeseen expenses, difficulties, complications, delays and other risks inherent in acquiring businesses and entering into alliances, including the following:

• we may have difficulty integrating the financial and administrative functions of acquired businesses;
• acquisitions and alliances 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 and strategic alliances;
• we may not be able to retain key employees necessary to continue the operations of the acquired business;
• acquisition costs may deplete significant cash amounts or may decrease our operating income;
• we may choose to acquire a company that is less profitable or has lower profit margins than our Company; and future acquired companies may have unknown liabilities that could require us to spend significant amounts of additional capital.

We currently face strong competition in product performance, price and service. Some of our national competitors have greater financial, product development and marketing resources than we have. If competition in our industry intensifies or if our current competitors enhance their products or lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products. This may reduce revenue from our products and services, lower our gross margins or cause us to lose market share. In fact, some key competitors slashed prices in 2001 and 2002 in an effort to make sales as demand in our industry slowed. As a result, we continue to experience price erosion and lower gross margins.

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.

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

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

We hold numerous patents covering technology and applications related to many of our products and systems, and numerous trademarks and trade names registered with the U.S. Patent and Trademark Office and in foreign countries. Our existing or future patents or trademarks may not adequately protect us against infringements and pending patent or trademark applications may not result in issued patents or trademarks. Our patents, registered trademarks and patent applications, if any, may not be upheld if challenged, and competitors may develop similar or superior methods or products outside the protection of our patents. This could reduce demand for our products and materially decrease our revenues. If our products are deemed to infringe upon the patents or proprietary rights of others, we could be required to modify the design of our products, change the name of our products or obtain a license for the use of some of the technologies used in our products. We may be unable to do any of the foregoing in a timely manner, upon acceptable terms and conditions, or at all, and the failure to do so could cause us to incur additional costs or lose revenues.

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.

In the third quarter of 2002, international sales represented approximately 14.3% 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. Any difficulties in expanding our international sales may divert management's attention from our existing operations. In addition, international revenues are subject to the following risks:

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

Our quarterly 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;
• delays in lease portfolio sales;
• product supply shortages; and
• reduced demand due to adverse weather conditions.

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

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:

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

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

We have no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2001.

Within the 90-day period prior to the date of this report, an evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the Company's reports under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the CEO and CFO, as appropriate, to allow timely decisions regarding disclosure. There have been no significant changes in the Company's inte rnal controls or in other factors that could significantly affect internal controls subsequent to the date that Company management conducted its evaluation.

The Company was in default in the performance of the leverage and fixed charge coverage ratio covenants in its secured credit facility and received a waiver for such breaches on November 14, 2002. The Company was also in default in the performance the leverage and fixed charge coverage ratio covenants in its senior secured notes and received a waiver for such breaches on November 14, 2002.

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.

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

1. I have reviewed this quarterly report on Form 10-Q of Astec Industries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

1. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
2. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
3. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
1. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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

1. I have reviewed this quarterly report on Form 10-Q of Astec Industries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

1. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
2. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
3. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
1. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

THIS FORBEARANCE AGREEMENT (this "Agreement") is entered into as of October 24, 2002, by and among Astec Industries, Inc., a Tennessee corporation ("Astec"), Astec Financial Services, Inc., a Tennessee corporation ("AFS", and together with Astec, the "Borrowers"), Bank One, NA, individually and as Agent (the "Agent"), and the other financial institutions signatory hereto (together with Bank One, NA individually, the "Lenders").

A. The Borrowers, the Agent and the Lenders are party to that certain $100,000,000 Credit Agreement dated as of September 10, 2001 (as previously amended, the "Credit Agreement").

B. On the date this Agreement is executed, the Borrowers are in default of certain obligations to Lenders under the Credit Agreement and the other Loan Documents, and have requested that for a certain period of time the Lenders forbear from exercising their rights and remedies with respect to such defaults.

C. The Lenders are willing, on a temporary basis only, to forbear from enforcing their rights and remedies with respect to such defaults; provided the Borrowers comply with the terms and conditions set forth in this Agreement.

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

1.01 Capitalized terms used in this Agreement, to the extent not otherwise defined herein, shall have the same meaning as in the Credit Agreement.

2.01 The Forbearance (as defined in Section 4.01 hereof) and the amendments contained in this Agreement shall each be effective on the date that all conditions precedent in Section 6.01 hereof are satisfied.

3.01 As of the date of execution of this Agreement, each Borrower hereby acknowledges, confirms and agrees that the following events have occurred or are expected to occur (the "Existing Defaults"), each of which presently constitutes, or upon its occurrence will constitute, a Default and entitles the Agent and the Lenders to exercise rights and remedies under the Loan Documents:

4.01 In reliance upon the representations, warranties and covenants of each Borrower contained in this Agreement and subject to the terms and conditions of this Agreement and any documents or instruments executed in connection herewith, the Agent and the Lenders hereby (a) agree to forbear, up to and including November 14, 2002, from exercising their rights and remedies under the Loan Documents as a result of the Existing Defaults (the "Forbearance") and (b) waive during the term of the Forbearance the Borrowers' failure to satisfy any conditions precedent set forth in Section 4.02 of the Credit Agreement, but only to the extent such failure arises solely out of the Existing Defaults and only with respect to any Advance requested by the Borrower and funded during the term of the Forbearance which does not cause the Revolving Loan Obligations to exceed $62,500,000. If not sooner terminated pursuant to the terms of this Agreement, the Forbearance shall automatically terminate on t he earlier of (a) November 15, 2002 or (b) the date when the holders of the Senior Notes elect to exercise any remedies as a result of any defaults under the Note Purchase Agreements, and the Agent and the Lenders shall then be entitled to exercise their available rights and remedies without further notice. Except as limited and/or modified by this Agreement and by the documents executed in connection herewith, the Loan Documents shall be deemed to be in full force and effect during the period of this Agreement, and all provisions of the Loan Documents relating to the rights and remedies of the Agent and the Lenders shall continue to be in effect until such time as all Obligations have been paid in full and all Revolving Commitments thereunder have been terminated.

5.01 Reduction of Commitment. As of the date hereof, the Borrowers agree that the Credit Agreement shall be amended by deleting the definitions "Aggregate Commitment" and "Aggregate Tranche A Sublimit" found in Article I and replacing them with the following definitions:

5.02 Sale of Trencor Property. Astec agrees that it shall continue to use reasonable efforts to sell the property of Trencor, Inc. located in Grapevine, Texas in two installments on November 21, 2002, and December 15, 2002, with proceeds of such sale to be promptly (a) applied to repayment of the Obligations or (b) deposited into the Letter of Credit Collateral Account to cash collateralize Facility Letters of Credit.

5.03 Sale of AFS Leases. AFS represents and warrants that it (a) has independently concluded that it is in its best interests to sell substantially all of its lease and financing portfolio and to discontinue its lease financing activities thereafter and (b) intends to use reasonable efforts to accomplish such sale by December 31, 2002. AFS agrees that it shall promptly apply the proceeds of any such sale to (i) the repayment of the Obligations or (ii) cash collateralizing Facility Letters of Credit by depositing the proceeds into the Letter of Credit Collateral Account.

5.04 Limitation on Acquisitions. As of the date hereof, the Borrowers agree that the Credit Agreement shall be amended by deleting the definition "Permitted Acquisition" found in Article I and replacing it with the following definition:

5.05 Additional Financial Information. As of the date that this Agreement is executed, the Borrowers agree that Section 6.1(k) of the Credit Agreement shall be renumbered as Section 6.1(l), and the following shall be added as 6.1(k):

6.01 Conditions to Effectiveness. This Agreement shall become effective upon the execution and delivery hereof by the Borrowers, the Agent and the Required Lenders (without respect to whether it has been executed and delivered by all the Lenders); provided that Section 4.01 hereof shall not become effective until the date (the "Effective Date") when the following additional conditions have also been satisfied:

In the event the Effective Date has not occurred on or before October 30, 2002, Section 4.01 hereof shall not become operative and shall be of no force or effect.

7.01 Conditions to Continuation of Forbearance. In addition to and not in limitation of any other provision of this Agreement, unless each of the following conditions are and continue to be fully satisfied, the Forbearance shall terminate (each condition being separate and independent of each other condition, such that the satisfaction of any one or more, or the waiver of satisfaction by the Required Lenders of any one or more, shall not affect the absolute obligation of the Borrower to satisfy each separate condition):

7.02 Failure of Condition. The failure of any condition in this Agreement to be satisfied shall constitute a Default under the Credit Agreement and a default under this Agreement, and upon such occurrence the Required Lenders shall be entitled to terminate the Forbearance and to exercise any and all of its rights and remedies available under any of the Loan Documents as if such Forbearance had never been granted.

8.01 Nothing contained herein shall be construed as a waiver by any Lender of any covenant or provision of the Credit Agreement, the other Loan Documents, this Agreement, or of any other contract or instrument between either Borrower and any one or more Lenders, and any Lender's failure at any time or times hereafter to require strict performance by a Borrower of any provision thereof shall not waive, affect or diminish any right of any Lender to thereafter demand strict compliance therewith. Subject to the express terms of the Forbearance, the Agent and each Lender hereby reserves all rights granted under the Credit Agreement, the other Loan Documents, this Agreement and such other contract or instrument between either Borrower and such Lender or the Agent. This Agreement is not to be construed as a cure or forgiveness of any of the Existing Defaults.

9.01 Ratifications. The terms and provisions set forth in this Agreement shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and the other Loan Documents, and except as expressly modified and superseded by this Agreement, the terms and provisions of the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. Each Borrower and the Lenders agree that the Credit Agreement and the other Loan Documents, as modified hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.

9.02 Representations and Warranties. Each Borrower hereby represents and warrants to each Lender and agrees that (a) the execution, delivery and performance of this Agreement and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all proper organizational proceedings on the part of the Borrowers and will not violate any of the organizational documents of the Borrowers; (b) the representations and warranties contained in the Credit Agreement, after giving effect hereto, and any other Loan Document are true and correct on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date; (c) other than the Existing Defaults, no Default or Unmatured Default under the Credit Agreement has occurred and is continuing; (d) other than the Existing Defaults, the Borrowers are in full compliance with all covenants and agreements contained in the Credit Agreement and the other Loan Documents, as modified hereby; and (e) each Borrower, at the Agent's request, shall promptly execute or cause to be executed and shall deliver to the Agent all documents, instruments and agreements deemed necessary by the Agent to give effect to or carry out the terms or intent of this Agreement.

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

10.02 Expenses of Agent. The Borrowers agree to pay on demand all costs and expenses incurred by the Agent in connection with the preparation, negotiation and execution of this Agreement and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the costs and fees of the Agent's legal counsel, and all costs and expenses incurred by the Agent or any Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as modified hereby, or any other Loan Documents, including, without limitation, the costs and fees of the Agent and any Lender's legal counsel.

10.03 Severability. Any provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

10.04 Successors and Assigns. This Agreement is binding upon and shall inure to the benefit of each Lender, the Borrowers and their respective successors and assigns, except the Borrowers may not assign or transfer any of their respective rights or obligations hereunder.

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

10.06 Headings. The headings, captions, and arrangements used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

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

[signature pages follow]

IN WITNESS WHEREOF, the parties have executed this Forbearance Agreement as of the date and year first above written.

 EXHIBIT 10.46

This Amendment and Waiver (this "Amendment") is entered into as of November 14, 2002, by and among Astec Industries, Inc., a Tennessee corporation ("Astec"), Astec Financial Services, Inc., a Tennessee corporation ("AFS" and together with Astec, the "Borrowers"), Bank One, NA, individually and as agent ("Agent"), and the other financial institutions signatory hereto.

A. The Borrowers, the Agent and the Lenders are party to that certain credit agreement, dated as of September 10, 2001 (as previously amended, the "Credit Agreement"). Unless otherwise specified herein, capitalized terms used in this Amendment shall have the meanings ascribed to them by the Credit Agreement.

B. The Borrower, the Agent and the undersigned Lenders wish to amend the Credit Agreement and waive certain provisions thereof on the terms and conditions set forth below.

Now, therefore, in consideration of the mutual execution hereof and other good and valuable consideration, the parties hereto agree as follows:

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and year first above written.