DEAR FELLOW SHAREHOLDERS: Two thousand-two was a difficult year for our Company. Sales for 2002 were $480.6 million  compared to $455.8 million in 2001. Net loss for the year was $4.7 million versus a net income of  $2.0 million for 2001. Our bottom line was significantly affected by increased interest costs and  fees imposed on us by our bank and senior lenders group, the move of our Trencor facility from  Grapevine, Texas to Loudon, Tennessee, and depressed margins due to pricing pressures in a  down market. After September 11, 2001 our business was frozen for almost two months. This resulted in a large  quarterly loss for the fourth quarter of 2001, placing us in violation of two bank-lending group  covenants. The covenants were based on a rolling four quarters, and because of that we were  unable to correct this situation and have continued to violate the covenants for four quarters in a  row. This resulted in increased interest rates and additional fees required for amending the loan. As we prepared our 2003 plan, it became obvious that current 2002 economic conditions would  continue into 2003 and operational changes were required. For that reason the management of  the Company implemented a plan to reduce both debt and expenses as quickly as possible. The  closing of Astec Financial Services, our finance company, was the first step in the implementation  of this plan. When we started Astec Financial approximately six years ago, interest rates were  low and our profitability was strong. The increase in interest rates imposed by the lenders during  2002 made the rates offered by the finance company non-competitive. In addition, the debt of  the finance company added considerably to the leverage of the Company. The closing of Astec  Financial is enabling us to de-leverage the Company. We are arranging with equipment finance  companies to perform the functions that Astec Financial had been providing for our manufacturing  subsidiaries. We also began a program of reducing expenses at all levels of the Company, from Corporate  through each subsidiary. We anticipate that the plan will result in a significant reduction in ex- penses. This plan was implemented during the fourth quarter of 2002; however, the full effect will  not be felt until after the second quarter of 2003. Our Underground Group consisting of Trencor and American Augers has lost money during the  last two years due to the significant downturn in the telecom, utility and pipeline market. We have  downsized both of these operations. In an effort to improve the overall performance of this group,  we entered into a strategic alliance with Case-New Holland to manufacture its trencher line. This  line of trenchers, along with the Case brand directional drills, fits very well with the line of tren- chers and directional drills built by Trencor and American Augers. Trencor and American Augers  historically have supplied the market with the largest drills and trenchers, while Case-New Holland  and two other competitors have built the smaller models. Our direct sales approach has not been  effective in selling our mid-size machines. While the direct sales method works well for the large,  low-volume equipment, we did not have sufficient coverage to sell our smaller machines (100- 300 hp range). The alliance with Case gives us access to their dealer network and a much larger  outlet for our machines. In May of 2002, while in negotiations with Case, a developer offered us $24 million for our Tren- cor facility in Grapevine, Texas, near Dallas. Concurrent with this, John Deere decided to move  its skid steer loader line from Loudon, Tennessee to one of their existing plants in Iowa, making  the four-year old Loudon facility available for purchase. The 300,000 square feet includes 30,000  square feet of office space and a 10,000 square feet training center. It is equipped with modern  metal working machinery and a state-of-the-art powder coat paint system. In November of 2002,  we closed the deal to buy the John Deere facility in Loudon, Tennessee and during the fourth  quarter moved both the Case and Trencor lines into this facility. Our first trenchers were manufac- tured at this plant in January of 2003. Unfortunately, prior to the closing of the John Deere facility, the developer that was to purchase  the Trencor plant was unable to get sufficient investors to close the purchase. We believe that the  2