Parts sales increased from $83,860,000 in 2000 to $93,493,000 in 2001, an increase of $9,633,000, or 11.5%. The increase was primarily due to the mobile asphalt paving and asphalt segments. Both segments have focused heavily on parts sales improvements. Excluding acquisitions, parts sales increased 4.7%. Gross profit decreased to $90,924,000, or 20.0% of net sales in 2001, compared to $122,875,000, or 23.6% of net sales in 2000. A lack of utilization of capacity, decreased sales volumes (except mobile asphalt paving) and competitive price pressure resulted in all segments having reduced gross margins. In 2001, selling, general and administrative expenses increased to $71,691,000, or 15.7% of net sales from $69,011,000, or 13.3% of net sales in 2000. The SG&A increase was the result of two acquisitions in the fourth quarter of 2000 being included in 2001 for a full twelve months. Excluding the increase from the acquisitions, SG&A would have decreased slightly in 2001 from 2000. Excluding increases in legal fees, legal settlements and bad debt expenses related to one large repossession, the Company’s SG&A expense would have reflect- ed the expense reductions made throughout 2001. Research and development expenses increased by $722,000, or 10.7%, from $6,726,000 in 2000 to $7,448,000 in 2001. Excluding the increase in research and development resulting from acquisitions in 2000, research and development increased 4.3% as the Company continued developing innovative products. Interest expense for 2001 increased to $9,367,000, or 2.1% of net sales, from 8,652,000, or 1.7% of net sales for 2000. The increased dollar amount related primarily to interest on borrowings required for acquisitions in 2000 and increased working capital. The increased percentage amount was impacted by decreased sales volume. Income tax expense for 2001 was $1,481,000, or 41.2% of pre-tax income, compared to $16,441,000, or 38.5% in 2000. The non-tax deductible items in 2001 had a greater impact on the effective tax rate percentage relative to a smaller pre-tax income. The backlog at December 31, 2001 was $64,934,000, compared to $89,552,000 at December 31, 2000. The backlog for asphalt plant orders, aggregate orders, aggregate systems and mobile equipment decreased. The Company is unable to determine whether this backlog effect was experienced by the industry as a whole. We are unable to assess the amount of the impact attributable to the TEA-21 legislation, which became effective in October 1998. While the backlog reflects a decline, management believes that this is reflective of the current economic conditions in the United States and the current hesitancy of the Company’s customers to commit to capital equipment purchases. The hesitancy is a result of our customers awaiting improvement of economic conditions or the awarding of new contracts for jobs. The total value of highway contracts increased by $1.1 bil- lion, or 3.6%, in 2001 as reported by the American Road and Transportation Builders Association in January 2002. The number of contracts put in place in 2001 declined, but the average size increased. Some contracts are multi-year contracts. Highway funding in 2002 is dependent upon funding of highway programs by the states, TEA-21 federal funding and the economy, which we expect to have a gradual recovery. Forecasts by the Office of Management and Budget and the Treasury Department indicate a decline in funding for TEA-21 in 2003. Legislation has been introduced to restore part of the $8.6 billion projected shortfall and legislative efforts are underway to restore the entire shortfall. Unquestionably, increased funding is needed to restore the nation’s highways to a quality level required for safety, fuel efficiency and mitigation of congestion. Asphalt Group: For 2001, this segment had a decrease in sales of $45,149,000, or 24.0%, to $142,674,000 from $187,823,000 for 2000. The asphalt segment experienced a decrease in profit of $12,975,000, or 72.1%, to $5,022,000 for 2001 compared to $17,997,000 for 2000. The primary reason for the decrease in sales is the economic downturn. Competitive price pressure and lack of utilization of capacity significantly impacted gross profits and segment income. Aggregate and Mining Group: For 2001 sales for this segment decreased $8,063,000, or 4.2%, to $182,868,000 from $190,931,000 for 2000. Excluding acquisitions, sales declined $25,102,000, or 13.1%. The decline in domes- tic sales, due to the weakness of the U.S. economy, was partially offset by increased international sales. For 2001 segment profit decreased $10,907,000, or 59.4%, to $7,460,000 from $18,367,000 for 2000. Competitive price pressure, lack of utilization of capacity and product mix impacted gross profit and segment income. Mobile Asphalt Paving Group: For 2001 sales in this segment increased $15,220,000, or 24.1%, to $78,488,000 from $63,268,000 for 2000. Excluding acquisitions, sales increased $9,727,000, or 15.4%. Both domestic and international sales increased over 2000 levels. For 2001 segment profit increased $677,000, or 8.1% to $9,021,000 from $8,344,000 for 2000. Product mix, lack of utilization of capacity and increased SG&A expenses impacted the 2001 profit. Underground Group: The 2001 sales in this segment decreased by $27,093,000, or 35.8% to $48,655,000 from $75,748,000 for 2000, primarily due to fewer small machine sales to the communications industry. MANAGEMENT’S DISCUSSION AND ANALYSIS  (CONTINUED)