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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File Number 0-23400
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DT INDUSTRIES, INC.
[Exact name of registrant as specified in its charter]
DELAWARE 44-0537828
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Corporate Centre, Suite 2-300
1949 E. Sunshine 65804
Springfield, MO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (417) 890-0102
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
(Title of each class)
--------------------
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K X .
----
As of September 16, 1996, the aggregate market value of the voting stock
held by non-affiliates (5,521,104 shares) of the registrant was $179,435,880
(based on the closing sales price, on such date, of $32.50 per share).
As of September 16, 1996, there were 9,009,250 shares of common stock,
$0.01 par value outstanding.
--------------------
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement Dated October 1, 1996 (portion) (Part III).
Annual Report to Shareholders for the Fiscal Year
Ended June 30, 1996 (portion) (Parts I, II and IV).
DT INDUSTRIES, INC.
INDEX TO FORM 10-K
Page
Part I
Item 1. Business................................................... 1
Item 2. Properties................................................. 12
Item 3. Legal Proceedings.......................................... 13
Item 4. Submission of Matters to a Vote of Security Holders........ 13
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.................................................... 14
Item 6. Selected Financial Data.................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................... 15
Item 8. Financial Statements and Supplementary Data................ 25
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 25
Part III
Item 10. Directors and Executive Officers of the Registrant......... 26
Item 11. Executive Compensation..................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 26
Item 13. Certain Relationships and Related Transactions............. 26
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K................................................... 27
PART I
ITEM 1. BUSINESS
GENERAL
DT Industries, Inc. ("DTI", the "Registrant" or the "Company") is an
engineering-driven designer, manufacturer and integrator of automated production
equipment and systems used to manufacture, test or package a variety of
industrial and consumer products. In addition, the Company produces precision
metal components and wear parts for a broad range of industrial applications.
The Company operates in two business segments: Special Machines and Components:
- The Special Machines segment, which accounts for approximately
80% of the Company's consolidated net sales, consists of two core
groups: DTI Automation and DTI Packaging. DTI Automation designs
and builds a complete line of integrated automated assembly and
testing systems. Integrated systems combine a variety of
manufacturing technologies into a complete automated manufacturing
system. Core capabilities of the Automation Group include the
design and manufacture of small to large automated assembly
systems, high-speed precision assembly systems, flexible assembly
systems, automated resistance and arc welding systems and RIGO
thermoforming systems. The Automation Group also designs and builds
a variety of custom equipment, special machines and tools and dies.
DTI Packaging designs and builds proprietary machines and
integrated systems used to perform processing and packaging tasks.
Core capabilities of the Packaging Group include the design and
manufacture of thermoforming, blister packaging and foam extrusion
systems, and a complete line of tablet processing and packaging
systems. The Special Machines segment's products are used
principally in the electronics, automotive, pharmaceutical,
nutritional and food processing, consumer products, appliance and
tire industries. Sales of products by the Company's Special
Machines segment also produce a stream of recurring revenues from
replacement parts and service as the Company's substantial
installed base of equipment is maintained and upgraded over time.
Each group is made up of a class of products and services that
complement one another in terms of markets, engineering
requirements, product needs and systems capabilities.
- The Components segment, which accounts for approximately 20% of
consolidated net sales, stamps and fabricates a range of standard
and custom metal components for the transportation, appliance,
heavy equipment, agricultural equipment and electrical industries
as well as wear parts for the textile industry.
The Company is a Delaware corporation organized in January 1993 and the
successor to Peer Corporation, Detroit Tool Group, Inc. ("DTG") and Detroit Tool
and Engineering Company ("DTE"). Peer Corporation was organized in June 1992 to
acquire the business and assets of the Peer Division of Teledyne, Inc. ("Peer")
and the stock of DTG, the sole stockholder of DTE and Detroit Tool Metal
Products Co. ("DTMP"). Through acquisition and product development, the Company
has grown from net sales of $50.6 million in the fiscal year ended June 30, 1993
to fiscal 1996 consolidated net sales of $235.9 million.
On July 19, 1996, following the end of the Company's fiscal year, the
Company acquired the issued and outstanding stock of Mid-West Automation
Enterprises, Inc. ("Mid-West"), a designer and manufacturer of integrated
precision assembly systems. Mid-West's revenues for its fiscal year ended May
26, 1996 were approximately $88 million.
1
The following table summarizes all the acquisitions made by the
Company, segregated by business segment and core business group:
ACQUISITION DATE BUSINESS
SPECIAL MACHINES SEGMENT
DTI AUTOMATION:
Peer Division of Teledyne, July 1992 Designer and manufacturer of resistance
Inc. welding equipment and related parts
Detroit Tool and Engineering August 1992 Designer and manufacturer of integrated
Company manufacturing systems and custom equipment,
including tools and dies
Advanced Assembly August 1994 Designer, manufacturer and integrator of
Automation, Inc. ("AAA") automated production and testing equipment
Assembly Machines, Inc. January 1996 Manufacturer of high-speed assembly systems
("AMI")
Mid-West Automation July 1996 Designer and manufacturer of integrated
Enterprises, Inc. precision assembly systems
DTI PACKAGING:
Sencorp Systems, Inc. August 1993 Designer and manufacturer of plastics
("Sencorp") processing and packaging equipment, systems
and related parts
Stokes-Merrill, Inc. December 1993 Designer and manufacturer of rotary
("Stokes-Merrill") presses, tablet counting equipment and
related parts
Lakso Division of Package February 1995 Designer and manufacturer of automated
Machinery Company ("Lakso") packaging machinery, systems and related
parts
Armac Industries, Ltd. February 1995 Designer and manufacturer of plastics
("Armac") processing and packaging equipment
H.G. Kalish, Inc. ("Kalish") August 1995 Designer, manufacturer and integrator of
liquid filling and tablet packaging
equipment
Swiftpack Automation November 1995 Designer and manufacturer of packaging
Limited ("Swiftpack") equipment primarily for the pharmaceutical
market
COMPONENTS SEGMENT
Detroit Tool Metal Products Co. August 1992 Manufacturer of custom stamped metal
products
Fred J. Potter Co., Inc. December 1992 Manufacturer of precision wear parts for
("Potter") industrial knitting machines
Arrow Precision Elements, September 1995 Manufacturer and distributor of a line of
Inc. ("Arrow") knitting elements
Financial information about the Company's industry segments is included
in Note 15 to the Consolidated Financial Statements of the Company.
The Company's principal executive offices are located at 1949 E.
Sunshine, Suite 2-300, Springfield, Missouri 65804 and its telephone number is
(417) 890-0102.
2
BUSINESS STRATEGY
The goal of DT Industries, Inc. is to provide, develop or acquire
complementary technologies and capabilities to supply customers with integrated
processing, assembly, testing and packaging systems for their products. The
Company believes certain trends in today's economic environment will provide it
with substantial growth opportunities. These trends among its customer base
include increased productivity and quality focus, flexibility, globalization,
outsourcing, downsizing, and vendor rationalization. The Company believes its
special machines business has greater versatility in manufacturing and
engineering than smaller, less integrated competitors and combining this
versatility with proprietary branded technology will result in greater
opportunities for internal growth. As an element of this operating strategy, DTI
seeks to improve profitability through control of overhead costs and capital
programs to reduce manufacturing costs.
Key elements of the Company's strategy include the following:
ACQUISITIONS. The markets for the Company's products are fragmented.
Special machines, for example, are characterized by a number of industry niches
in which few manufacturers compete. The Special Machines segment has established
its presence in particular niches through acquisitions, and the Company intends
to pursue additional acquisitions, or strategic alliances with, companies which
are established technical and market leaders. The Company can provide its
customers more complete integrated automation systems by continuing to expand
the breadth of its products and engineering expertise, a capability the Company
believes will enable it to benefit from its customers' increasing demand for
complete systems. Additionally, the Company will pursue acquisitions, or
strategic alliances with, companies which provide significant potential for
cross-selling among the various product lines, margin improvement through
greater use of in-house manufacturing and cost savings through more efficient
utilization of manufacturing capacity.
CROSS-SELLING. The Company works closely with its customers to provide
products which meet their evolving needs and it seeks to differentiate itself
from its competitors by emphasizing product quality, service and single source
project management. The Company's sales force capitalizes upon its technical
expertise in Company products and particular industry niches in which the
Company competes. As the Company implements its acquisition strategy and
integrates acquired operations, it is able to expand the range of products it
can offer to its customers. The Company believes substantial cross-selling
opportunities exist across the product lines of the Special Machines segment.
For example, the combined marketing efforts and engineering capabilities of AAA
and AMI were successful in obtaining an $8 million project from a significant
customer that might have gone to a competitor. While AAA had established a
strong customer relationship, the project required certain technologies provided
by AMI.
ENGINEERING EXPERTISE. The Company's engineering strategy is to satisfy
the growing demand for small, medium and large complex, integrated automation
solutions by utilizing the versatile engineering expertise of its special
machines businesses. Additionally, the custom tool and die engineering expertise
of the Company's Special Machines segment provides the Components segment with
the ability to offer customers complex precision stamping solutions. The Company
expects to continue to acquire engineering and design expertise through
acquisitions and licensing arrangements.
MANUFACTURING SYNERGIES. The Company intends to utilize its
manufacturing capacity and engineering capabilities fully by directing work to
facilities with specific capabilities and manufacturing strengths.
3
PRODUCT LINE EXPANSION. Through acquisitions, product license
arrangement and strategic alliances, the Company has increased its engineering
capabilities and product offerings. DTI Packaging now has the capability to
provide customers with fully integrated tablet processing and packaging systems.
DTI Automation has increased its assembly systems capabilities as more fully
described in Markets and Products below. The Company's objective is to provide
customers with integrated automation solutions rather than single use equipment.
The Company also uses its engineering expertise and manufacturing capability to
develop new products and technology for existing markets the Company serves and
to provide entree into new markets.
INTERNATIONAL. Although less than 15% of the Company's consolidated net
sales has been attributable to international sales, the Company seeks to
increase its international sales through strategic alliances, international
agents, foreign offices and acquisitions. The Company acquired Canadian-based
Kalish and the U.K.-based Swiftpack during fiscal 1996 significantly enhancing
its international packaging presence. Also, continued international sales growth
by DTI Packaging has resulted from the strategic alliance with David Standard
Corporation for the sales of foam extrusion systems. DTI Automation continued to
expand its international presence by forming an alliance with a subsidiary of
Claas KGaA to open a sales and service office in Beelen, Germany. This alliance
also makes it possible to market the automation systems of one of Europe's
finest manufacturers to the Company's customer base.
MARKETS AND PRODUCTS
SPECIAL MACHINES. The Special Machines segment designs and builds a
complete line of automated production systems used to manufacture, test and/or
package products for a range of industries, including electronics, automotive,
pharmaceutical, nutritional and food processing, consumer products, appliance
and tires. The Company also manufactures custom production equipment for
specific customer applications, proprietary machines for specific industrial
applications and integrated systems which may combine features of custom and
proprietary equipment. The Special Machines segment consists of two core
business groups: DTI Automation and DTI Packaging.
DTI AUTOMATION. The DTI Automation group designs and builds a complete
line of automated assembly and test systems, special machines and large complex
dies. The Group is ideally suited for fast-paced, concurrent engineering
projects where changes in tooling and processes can occur in an advanced stage
of system design. Sales from DTI Automation accounted for approximately 45%, 45%
and 47% of consolidated net sales for fiscal 1996, 1995 and 1994, respectively.
INTEGRATED SYSTEMS. Integrated systems combine a wide variety of
manufacturing technologies into a complete automated manufacturing system.
Utilizing advanced computers, robotics, vision systems and other technologies,
the Company provides small to large automated assembly systems, high-speed
precision assembly systems, flexible assembly systems, automated resistance and
arc welding systems for the electronics, automotive, appliance, electrical, and
hardware industries. The Company's expansion in providing a full range of
integrated, automated systems was enhanced during fiscal 1996 by the acquisition
of Assembly Machines, Inc. and has been further accelerated with the recent
acquisition of Mid-West Automation Enterprises, Inc. Mid-West offers a variety
of precision assembly equipment to industry, utilizing proprietary modular
building blocks and standardized components in carousel, in-line and rotary
assembly systems.
4
CUSTOM MACHINES. The Company's custom machine building capabilities
include: engineering, project management, machining and fabrication of
components, installation of electrical controls, final assembly and testing. A
customer will usually approach the Company with a manufacturing objective, and
DTI will work with the customer to design, engineer, assemble, test and install
a machine to meet the objective. The customer often retains rights to the design
after delivery of the machine since the purchase contract typically includes the
design of the machine, however, the engineering and manufacturing expertise
gained in designing and building the machine is often reapplied by the Company
in projects for other customers.
RIGO THERMOFORMERS. Under a license agreement with RIGO Group, S.r.l.,
COMI S.r.l. and PMM S.R.l., the Company has the rights to use certain deep-draw
thermoforming technology. The Company is utilizing the RIGO technology in a line
of machines designed to produce the inner liners for refrigerators ("RIGO
Systems"). The Company believes the RIGO technology provides significant
advantages over competing technology, such as quicker changeover of tooling,
lower material costs, higher productivity and greater end product efficiency.
The license agreement continues until terminated in accordance with its
provisions and may be terminated by either party upon 90 days' notice to the
other.
TOOLING AND DIES. The Company possesses considerable expertise in the
design, engineering and production of precision tools and dies. The Company
utilizes its precision machining capability and skilled work force to produce a
variety of precision dies including single stage, progressive and transfer dies.
Progressive and transfer dies are designed to perform multiple functions as the
piece of metal proceeds through the press. The Company is often able to design a
die that minimizes the amount of scrap produced in the stamping process, which
lowers the overall production costs associated with the die. The Company
currently employs approximately 50 tool and die makers and trains them through a
federally-certified apprenticeship program. Personnel trained as tool and die
makers often apply their skills to the manufacture of the Company's special
machines. The Company maintains sophisticated networked CAD/CAM technology which
improves its tool and die production capabilities, lowers costs, increases
flexibility and reduces production time. The Special Machines segment's tool and
die operations also provide marketing opportunities to the Components segment
because the Components Group is often used to test a die and obtain the initial
opportunity to pursue the stamping business.
AUTOMATED RESISTANCE AND ARC WELDING SYSTEMS. The Company manufactures
and sells a line of standard resistance welding equipment as well as special
automated welding systems designed and built for specific applications. Marketed
under the brand name Peer(TM), the Company's products are used in the
automotive, appliance and electrical industries to fabricate and assemble
components and subassemblies. The Company's resistance welding equipment is also
used in the manufacture of file cabinets, school and athletic lockers, store
display shelves, metal furniture and material storage products.
DTI PACKAGING. The DTI Packaging group designs and builds proprietary
machines and integrated systems which are marketed under individual brand names
and manufactured for specific industrial applications using designs owned or
licensed by the Company. Although these machines are generally cataloged as
specific models, they are usually modified for specific customer requirements
and often combined with other machines into integrated systems. Many customers
also request additional accessories and features which typically generate higher
revenues and enhanced profit opportunities. DTI Packaging products include
thermoformers, blister packaging systems, extrusion systems, rotary presses and
complete packaging systems. Packaging systems include: bottle unscrambling,
tablet counting, filling, cottoning, capping, labeling, collating, cartoning and
liquid filling, electronic filling and tube filling, many of which have been
added during fiscal 1996. The Company believes this equipment maintains a strong
reputation among its customers for quality, reliability and ease of operation
and maintenance. The Company also sells replacement parts and accessories for
its substantial installed base of machines. Sales from DTI Packaging accounted
for approximately 37%, 31% and 24% of consolidated net sales for fiscal 1996,
1995 and 1994, respectively.
5
THERMOFORMERS. A thermoformer is a machine which heats plastic material
and uses pressure and/or vacuum to force it into a mold to form a product.
Marketed under the brand names Sencorp(R) and Armac(TM), the Company's
thermoformers are used by customers in North America, Europe and Asia to form a
variety of products including: specialized cups, plates and food containers,
trays for food and medical products and other plastic applications.
The Company's thermoformers are sold primarily to custom formers who
use the machines to create thermoformed items which are sold to a variety of end
users. The Company also sells thermoformers directly to end users, including
large producers of electrical and healthcare products, cosmetics, hardware, and
other consumer products.
The Company's thermoformers can be used to form all thermoplastic
materials which are fed into the machines from rolls. The Company produces a
line of thermoformers of different sizes, heating ovens, maximum draw depths and
press capacities. Certain thermoformers produced by the Company feature a fully
integrated process control system to regulate the thermoformer's functions.
Depending upon the customer's requirements, the control system is capable of
networking with, or downloading to, the customer's computers or other equipment
and the Company's service center. This on-line diagnostic capability allows the
Company to provide real-time service and support to its customers. The Company
believes it is the only thermoformer manufacturer offering such a service.
BLISTER PACKAGING SYSTEMS. Blister packaging is an increasingly common
method of displaying consumer products for sale in hardware stores, convenience
stores, warehouse stores, drug stores and similar retail outlets. Batteries,
cosmetics, hardware items, electrical components, razor blades and toys are
among the large variety of products sold in a clear plastic blister or two-sided
package. The Company designs and manufactures machinery marketed under the brand
names Sencorp(R) and Armac(TM) which performs blister packaging by heat-sealing
a clear plastic bubble, or blister, onto coated paperboard, or by sealing
two-sided packages using heat or microwave technology.
The Company's blister packaging systems are primarily sold to
manufacturers of the end products. These customers, with higher volume
production requirements, may use a thermoformer in-line with a blister sealer to
form blisters, insert their product and seal the package in one continuous
process, referred to as a form/fill/seal configuration. Customers having
relatively low volume production often use a stand-alone blister sealing machine
to seal products in a package using blisters purchased from a custom former.
EXTRUDERS. An extrusion process is used to convert plastic resin and
additives into a continuous melt and force such melt through a die to produce a
desired shape that is then cooled. Marketed under the brand name Sencorp(R), the
Company's foam extruders are used to produce products such as building
insulation, display board, meat trays, bottle wrap protection labels and egg
cartons. The Company's foam extruders are primarily sold to large plastics
companies that use the machines to create end products and sheet products. The
Company also manufactures reclaim extruders which process a variety of plastic
materials from ground form to finished pellet form.
ROTARY PRESSES. The Company believes it is the largest U.S. designer
and manufacturer of rotary presses. The Company designs and manufactures rotary
presses used by customers in the airbag, candy, food supplement, ceramic,
ordnance, specialty chemical, and pharmaceutical industries to produce tablets.
Marketed under the brand name Stokes(TM), the Company's line of rotary presses
includes machines capable of producing 17,000 tablets per minute and other
machines capable of applying up to 40 tons of pressure for large compacts.
Products produced on the Company's rotary presses include Lifesavers(R), and
Breathsavers(R) brand mints, Centrum(R) brand vitamins and inflation pellets for
automotive airbags.
6
During fiscal 1996, the Company established a business alliance with
Horn & Noack Pharmatechnick GmbH, for the purpose of licensing German rotary
press technology designed primarily for the pharmaceutical and nutritional
markets. The agreement gives the Company the exclusive right to manufacture and
market this press technology under the Stokes(TM) brand in North and Central
America and non-exclusively in the rest of the world excluding Europe. The
Company plans to market the pharmaceutical press through DTI Packaging, one of
the world's leaders in pharmaceutical filling and packaging systems.
PACKAGING SYSTEMS. The Company's expansion in providing integrated
packaging lines was accelerated by the acquisition of Kalish in August 1995 and
Swiftpack in November 1995. The Company designs, manufactures or distributes a
complete line of products utilized for packaging, liquid filling or tube filling
applications. The equipment manufactured by the Company, which includes: bottle
unscramblers, slat tablet counters, electronic counters, liquid fillers,
cottoners, cappers and labelers, collators and cartoners, can be sold as an
integrated system or individual units. These machines are marketed under the
brand names of Kalish(TM), Lakso(R), Merrill(R), and Swiftpack(TM) and are
primarily delivered to customers in the pharmaceutical, nutritional, food,
cosmetic, toy and chemical industries.
The Company benefits from a substantial installed base of Lakso(R) and
Merrill(R) slat counters in the aftermarket sale of slats. Slat counting
machines use a set of slats to meter the number of tablets or capsules to be
inserted into bottles. Each size or shape of tablet or capsule requires a
different set of slats. In addition, the practice in the pharmaceutical industry
is to use a different set of slats for each product, even if the tablets are the
same size.
LABORATORY MACHINES, TOOLING, PARTS AND ACCESSORIES. The Company sells
parts and accessories for all of its proprietary machines. The Company also
produces a line of small scale blister sealers and a line of tablet pressing
equipment used to test new materials and techniques for quality control,
laboratory or other small run uses. The Company also designs and builds special
tools and dies used in custom applications of its thermoforming systems, rotary
presses and slat counters.
COMPONENTS. The Company's Components segment produces custom and
precision components for the transportation, agricultural equipment, appliance,
heavy equipment and electrical industries, as well as wear parts for the textile
industry. Sales from Components accounted for approximately 18%, 24% and 29% of
consolidated net sales for fiscal 1996, 1995 and 1994, respectively.
CUSTOM STAMPING AND FABRICATION. The Company produces precision-stamped
steel and aluminum components through its stamping and fabrication operations.
The Company believes it has a reputation with its customers for high quality
metal products, service and delivery. Sales of custom stampings and related
products and services accounted for approximately 15%, 21% and 24% of
consolidated net sales for fiscal 1996, 1995 and 1994, respectively.
STAMPING. Stamping is a process in which steel or aluminum is placed
through dies in a press to blank and/or form the metal into three-dimensional
parts. The Company's presses range in size from 32 tons to 1,500 tons, giving
the Company the flexibility to stamp flat rolled metal ranging in thickness from
.015 inches to .750 inches. Certain of the Company's presses can accommodate
dies up to 190 inches in length to perform several stamping functions in a
single press. The Company produces stamped parts using precision single stage,
progressive and transfer dies, which in some cases are designed and manufactured
by the Company's Special Machines segment. The Company's stamping presses are
capable of handling large coils and sheet sizes for blanking, deep draw and
progressive die-produced parts. Operations such as coining, deep drawing,
extruding, blanking, forming and bending are accomplished through the use of the
Company's range of equipment capabilities. The Company also possesses an Amada
Turret Press, two Trumpf(R) Plasma Presses and a laser cutter which punch,
nibble and cut parts without the need for blanking dies, which is especially
cost effective for fabricating prototype and short- to medium-quantity component
parts.
7
Through its Special Machines segment, the Company possesses
considerable expertise in the design, engineering and production of precision
tools and dies. The Company produces tools and dies for use in its own blanking
and stamping operations as well as for sale to other industrial customers. The
Company's expertise in the design and engineering of tools and dies enhances its
blanking and stamping operations. The Company is often able to design a die that
minimizes the amount of scrap produced in the stamping process which lowers the
overall cost of the product. The Company believes its tool and die design and
engineering capability gives it an important competitive advantage in its
Components segment.
SECONDARY SERVICES. The secondary value-added services provided by the
Company are an important element of its marketing strength and competitive
position. The Company provides production welding, metal finishing, painting
preparation and painting services for its stamped components to its customers.
This vertically integrated production capability allows the Company to deliver
completed sub-assemblies directly to the customer's assembly line with single
source reliability.
The Company possesses a complete welding shop with American Welding
Society-certified welders capable of welding a variety of metals including
carbon steel, stainless steel and aluminum. The Company's skilled workers employ
a variety of techniques including spot, Mig, Heli-arc and stick welding as
determined by the requirements of the project. The Company has developed
improved processes of painting and drying parts to increase productivity and the
quality of the finish. The Company has the capability to apply most paint
finishes including pre-mixed paints, powder paint, epoxy based primers,
polyurethane finish coats and other two-part paints requiring a catalyst.
WEAR PARTS. The Company is the only full-line U.S. manufacturer of
precision wear parts for industrial knitting machines. Marketed under the brand
names Potter(TM), Arrow(R), S&W(TM) and DURA-TECH(TM), these products are
components of circular knitting machines which produce tee shirts, socks,
pantyhose and other knit fabrics. The Company's branded products, which are
included as original equipment in certain circular industrial knitting machines
sold in the United States, are consumed in use and must be regularly replaced.
The Company believes that its Potter(TM), Arrow(R), S&W(TM) and DURA-TECH(TM)
products have a reputation for high quality.
MARKETING AND DISTRIBUTION
SPECIAL MACHINES. The Company's special machines and systems are sold
primarily through the Company's direct sales force which numbers approximately
60 and to a lesser extent through manufacturers' representatives and agents.
Sales of special machines and integrated systems require the Company's sales
personnel to have a high degree of technical expertise and extensive knowledge
of the industry served. The Company's sales force consists of specialists in
each primary market in which the Company's special machines are sold. Each of
DTE, Peer, Sencorp, Stokes, Merrill, AAA, Lakso, Armac, Kalish, AMI, Swiftpack
and Mid-West has a sales force experienced in the marketing of the equipment
historically produced by each respective business. The Company believes that
cross-selling among the members of the Special Machines segment and integration
of proprietary technology and custom equipment into total production automation
systems for selected industries provide the Company with expanded sales
opportunities.
The Company's special machines are sold throughout the world by more
than 60 manufacturers' representatives and sales agents in nearly 50 countries.
The Company has sales and service offices in China and in fiscal 1996 added
offices in Canada, England and Germany. Export sales continue to grow as the
business grows and more resources are focused in the international arena. While
export sales were approximately 10% and 8% of consolidated net sales in fiscal
1995 and fiscal 1994, respectively, they were approximately 15% of consolidated
net sales for fiscal 1996.
COMPONENTS. The Company's custom stamping products are sold by the
Company's direct sales force. The Company's wear parts are sold to original
equipment manufacturers directly and to the textile industry directly and
through independent domestic distributors.
8
MANUFACTURING AND RAW MATERIALS
SPECIAL MACHINES SEGMENT. The principal raw materials and components
used in the manufacturing of the Company's special machines include carbon
steel, stainless steel, aluminum, electronic components, pumps and compressors,
programmable logic controls, hydraulic components, conveyor systems, visual and
mechanical sensors, precision bearings and lasers. The Company is not dependent
upon any one supplier for raw materials or components used in the manufacture of
special machines. Certain customers specify sole source suppliers for components
of custom machines or systems. The Company believes there are adequate
alternative sources of raw materials and components of sufficient quantity and
quality.
DTI AUTOMATION GROUP. Recent building expansions have been made to
increase manufacturing capacity at the Company's-owned facilities in Missouri,
Michigan and Pennsylvania and the Company's leased facility in Ohio. Integrated
systems to assemble and test various products are designed and manufactured at
the Company's facilities in Illinois, Ohio and Pennsylvania where manufacturing
activity primarily consists of fabrication and assembly and, to a lesser extent,
machining. The facilities in Missouri house the machining, assembly and test
operations primarily used in the manufacture of tools and dies, custom special
machines, RIGO Systems and certain other integrated systems. The facility in
Michigan houses the machining, assembly and test operations used in the
manufacture of resistance welding equipment and systems. A number of
manufacturing technologies are employed at these facilities including:
fabrication of stainless steel, direct numerically controlled machinery,
computer generated surface modeling of contoured components and fully networked
CAD/CAM capabilities.
DTI PACKAGING GROUP. Special machines, integrated systems and related
parts for the Company's tablet packaging and liquid-filling equipment are
designed and assembled at the Company's facilities in Canada, Massachusetts,
Illinois and the United Kingdom from components made to the Company's
specifications by unaffiliated vendors. Rotary presses are assembled at the
Company's leased facility in Pennsylvania. Special machines and integrated
systems for the plastics packaging industry are primarily manufactured at the
two Company manufacturing facilities in Massachusetts which include machining,
fabrication and assembly.
COMPONENTS SEGMENT. The principal raw materials used in the Company's
components manufacturing processes include carbon steel, aluminum, stainless
steel, copper and other metals in coil or sheet form. The Company is not
dependent upon any one supplier for raw materials used in the manufacture of its
metal products. The Company believes there are adequate alternative sources of
raw materials of sufficient quantity and quality.
The Company's components manufacturing operations are primarily located
at the Company's recently expanded facilities in Missouri. Operations conducted
at that facility include blanking, heavy and precision stamping using precision
single stage, progressive and transfer dies, cutting, punching, forming,
welding, cleaning, bonderizing and painting. With the addition in fiscal 1996 of
a Metalsoft(R) FabriVision optical scanning system, the Company's quality focus
and prototyping capabilities were greatly enhanced. At the Company's Connecticut
and North Carolina facilities, manufacturing processes include precision
stamping of wear parts, heat treating, drawing, tumbling, casting, straightening
and grinding.
FINANCIAL INFORMATION RELATING TO BUSINESS SEGMENTS, FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES
The Company operates predominantly in the business segments classified
as Special Machines and Components.
The Company's principal foreign operations consist of manufacturing,
sales and service operations in Canada and the United Kingdom.
For certain other financial information concerning the Company's
business segments, foreign and domestic operations and export sales, see Note 15
of the Notes to Consolidated Financial Statements in the Company's Annual Report
to Shareholders, which is incorporated herein by reference.
9
CUSTOMERS
The majority of the Company's sales is attributable to repeat
customers, some of which have been customers of the Company or its acquired
businesses for over twenty years. The Company believes such repeat business is
indicative of the Company's engineering capabilities, the quality of its
products and overall customer satisfaction.
The Goodyear Tire & Rubber Company, a customer of the Company's Special
Machines segment, accounted for over 10% of the Company's consolidated net sales
in fiscal 1996 and 1994. PACCAR, Inc., a customer of the Company's Components
segment, accounted for over 10% of the Company's consolidated net sales in
fiscal 1995 and 1994. The Company's five largest customers during fiscal 1996
accounted for 32% of the Company's consolidated net sales.
Purchasers of the Company's special machines typically make advance and
progress payments to the Company in connection with the manufacture of the
equipment. Sales of the Company's components are typically made without advance
or progress payments.
BACKLOG
The Company's backlog is based upon customer purchase orders that the
Company believes are firm. As of June 30, 1996, the Company had $112.2 million
of backlog orders, which compares to a backlog of approximately $83.6 million as
of June 25, 1995. The $28.6 million increase was due to the acquisitions of AMI,
Swiftpack, Arrow and Kalish. Excluding the effects of acquisitions, backlog was
comparable to the prior year. The backlog for the Special Machines segment at
the end of the 1996 fiscal year was $106.0 million which increased $27.4 million
from a year ago. Backlog for the Components segment increased $1.2 million to
$6.2 million during fiscal 1996. The level of backlog at any particular time is
not necessarily indicative of the future operating performance of the Company.
Certain purchase orders are also subject to cancellation by the customer upon
notification. The Company believes most of the orders in the backlog will be
recognized as sales within one year. The Company's backlog at June 30, 1996 does
not include the backlog of Mid-West.
COMPETITION
The market for the Company's special machines is highly competitive,
with a large number of companies advertising the sale of production machines.
However, the market for special machines is fragmented and characterized by a
number of industry niches in which few manufacturers compete. The market for the
Company's components is also highly regionally competitive and fragmented. The
Company's competitors vary in size and resources; most are smaller privately
held companies or subsidiaries of larger companies, some of which are larger
than the Company; and none competes with the Company in all product lines. In
addition, the Company may encounter competition from new market entrants. The
Company believes that the principal competitive factors in the sale of the
Company's special machines are quality, technology, price, engineering
expertise, project management, delivery and service. The Company believes that
the principal competitive factors in the sale of the Company's components are
price, technical capability, quality and delivery. The Company believes that it
competes favorably with respect to each of these factors.
10
ENGINEERING; RESEARCH AND DEVELOPMENT
The Company maintains research and engineering departments at all its
manufacturing locations. The Company employs more than 250 people with
experience in the design of production equipment. In addition to design work
relating to specific customer projects, the Company's engineers develop new
products and product improvements designed to address the needs of the Company's
target market niches and to enhance the reliability, efficiency, ease of
operation and safety of its proprietary machines.
TRADEMARKS AND PATENTS
The Company owns and maintains the registered trademarks Sencorp(R),
Merrill(R) and Lakso(R). The Company's use of the registered trademark Arrow(R)
is under a license and the licensor has agreed to assign ownership of the mark
for such use to the Company. Registrations for Company trademarks are also owned
and maintained in countries where such products are sold and such registrations
are considered necessary to preserve the Company's proprietary rights therein.
The Company also has the rights to use the unregistered trademarks Kalish(TM),
Armac(TM), Stokes(TM), Potter(TM) and Peer(TM). The trademarks Kalish(TM),
Armac(TM), Sencorp(R), Merrill(R), Peer(TM), Lakso(R) and Stokes(TM) are used in
connection with the machines and systems marketed by the Special Machines
Segment. The trademarks Arrow(R) and Potter(TM) are used in connection with the
products of the Components segment.
The Company applies for and maintains patents where the Company
believes such patents are necessary to maintain the Company's interest in its
inventions. The Company does not believe that any single patent or group of
patents is material to either its special machines business or its metal
products business, nor does it believe that the expiration of any one or a group
of its patents would have a material adverse effect upon its business or ability
to compete in either line of business. The Company believes that its existing
patent and trademark protection, however, provides it with a modest competitive
advantage in the marketing and sale of its proprietary products.
ENVIRONMENTAL AND SAFETY REGULATION
The Company is subject to federal, state and local environmental laws
and regulations that impose limitations on the discharge of pollutants into the
environment and establish standards for the treatment, storage and disposal of
toxic and hazardous wastes. The Company is also subject to the federal
Occupational Safety and Health Act and other state statutes. Except for costs
incurred in connection with the environmental cleanup of its property in
Lebanon, Missouri, as discussed below, costs of compliance with environmental,
health and safety requirements have not been material to the Company.
The Company notified the Environmental Protection Agency (EPA) and the
Missouri Department of Natural Resources (MDNR) of environmental contamination
at its property in Lebanon, MO and filed a work plan for site remediation in
1989. The Company entered into a Consent Agreement with the MDNR on September
11, 1990, to conduct remediation on its property. An addendum to the work plan
was submitted to, and approved by, MDNR in 1992. Remediation work was completed
in November 1993. Required groundwater monitoring was completed in January 1995.
The Closure Report was submitted to MDNR; MDNR responded with minimal comments
in April 1995, and in August 1995, accepted the Closure Report as being complete
and final. The Company received a release from the Consent Agreement by the
Missouri Attorney General's office in October 1995. The Company does not expect
any further significant remediation costs to be incurred related to this
property.
The Company believes it is in material compliance with all applicable
environmental laws and regulations.
EMPLOYEES
At the end of August 1996, the Company had approximately 2,200
employees, including those employed by Mid-West. None of the Company's employees
are covered under collective bargaining agreements. The Company has not
experienced any work stoppages in the last five years and considers its
relations with employees to be good.
11
ITEM 2. PROPERTIES
The Company's administrative headquarters are located in Springfield,
Missouri. Set forth below is certain information with respect to the Company's
significant manufacturing facilities.
SQUARE
FOOTAGE OWNED/
LOCATION (approximate) LEASED PRODUCTS
SPECIAL MACHINES SEGMENT
DTI Automation Group:
Lebanon, Missouri 300,000 Owned Special machines, integrated systems,
tools and dies
Dayton, Ohio 160,000 Leased Integrated systems, special machines
Benton Harbor, Michigan 43,000 Owned Resistance arc welding equipment and
systems
Erie, Pennsylvania 56,000 Owned High-speed assembly systems
Buffalo Grove, Illinois 260,000 Leased Integrated precision assembly systems
DTI Packaging Group:
Montreal, Quebec 66,000(1) Leased Tablet packaging, liquid filling and
tube filling equipment and systems
Leominster, Massachusetts 60,000 Owned Tablet packaging equipment
Niles, Illinois 30,000 Leased Tablet counters
Bristol, Pennsylvania 43,000 Leased Rotary presses
Hyannis, Massachusetts 98,000 Leased Plastics processing and packaging
equipment
Fall River, Massachusetts 37,000 Leased Plastics processing and packaging
equipment
Alcester, United Kingdom 22,000 Owned Electronic counters
COMPONENTS SEGMENT
Lebanon, Missouri 171,000 Owned Metal products
Winsted, Connecticut 28,000 Leased Wear parts
Asheboro, North Carolina 15,000 Leased Wear parts
(1) Two adjacent buildings of approximately 40,000 square feet and 26,000
square feet respectively.
12
Set forth below is certain information with respect to the
Company's leased manufacturing facilities:
LOCATION LEASE EXPIRATION DATE RENEWAL OPTION
Dayton, Ohio July 1, 2016 Two additional terms of five years
Buffalo Grove, Illinois July 31, 2003 One additional five year term
Montreal, Quebec January 31, 1997 One additional one year term
Montreal, Quebec July 31, 1997 One additional one year term
Niles, Illinois July 15, 1997 Two additional five year terms
Bristol, Pennsylvania April 30, 2000 One additional five year term
Hyannis, Massachusetts December 31, 1997 One additional five year term
Fall River, Massachusetts January 31, 2000 One additional five year term
Winsted, Connecticut December 31, 1997 One additional five year term
Asheboro, North Carolina September 26, 2000 Three additional five year terms
The Company also leases other office, warehouse and service facilities
in Missouri, New Jersey, Canada, the United Kingdom and China. The Company
anticipates no significant difficulty in connection with leasing alternate space
at reasonable rates in the event of the expiration, cancellation or termination
of a lease relating to any of the Company's leased properties.
Expansion projects begun in fiscal 1995 and 1996 are substantially
completed at several of the Company's owned and leased facilities. The expansion
projects increased Special Machines and Components manufacturing and office
space by approximately 200,000 square feet and 54,000 square feet, respectively.
The building expansions reflect the growth occurring at these locations.
Subsequent to the completion of the building expansion programs, the Company
believes that its principal manufacturing facilities will have sufficient
capacity to accommodate future internal growth.
ITEM 3. lEGAL PROCEEDINGS
Product liability claims are asserted against the Company from time to
time for various injuries alleged to have resulted from defects in the
manufacture and/or design of the Company's products. At June 30, 1996, there
were twenty-five such claims pending. The Company does not believe that the
resolution of such suits, either individually or in the aggregate, will have a
material adverse effect on the Company's results of operations or financial
condition. Product liability claims are covered by the Company's comprehensive
general liability insurance policies, subject to certain deductible amounts. The
Company has established reserves for such deductible amounts, which it believes
to be adequate based on its previous claims experience. However, there can be no
assurance that resolution of product liability claims in the future will not
have a material adverse effect on the Company.
In addition to product liability claims, from time to time, the Company
is the subject of legal proceedings, including claims involving employee
matters, commercial matters and similar claims. There are no material claims
currently pending. The Company maintains comprehensive general liability
insurance which it believes to be adequate for the continued operation of its
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is quoted on the Nasdaq National Market
under the symbol "DTII". As of September 16, 1996, the number of record holders
of common stock was 80. Such record holders include several holders who are
nominees for an undetermined number of beneficial owners. The Company believes
that the number of beneficial owners of the shares of common stock issued and
outstanding at such date was in excess of 400.
The following table sets forth, for the quarters indicated, the high
and low sales prices for the Common Stock as reported by the Nasdaq National
Market since April 15, 1994, the effective date of the Company's initial public
offering, and the cash dividends per share declared during such periods.
Sales Quarterly
Prices Cash
High Low Dividends
1996
Fourth Quarter $23 1/4 $18 1/4 $0.02
Third Quarter 19 13 0.02
Second Quarter 14 12 3/4 0.02
First Quarter 14 10 1/2 0.02
1995
Fourth Quarter $12 1/4 $10 1/4 $0.02
Third Quarter 11 1/2 8 9/16 0.02
Second Quarter 15 1/2 10 7/8 0.02
First Quarter 17 1/2 14 3/4 0.02
1994
Fourth Quarter
(beginning April 15, 1994) $16 $13 1/2 $0.02
14
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
Predecessor1
Company1 fiscal year
fiscal year ended ended
June 30, June 25, June 26, June 30, June 30,
1996 1995 1994 1993 1992
STATEMENT OF OPERATIONS DATA
Net sales $ 235,946 $ 147,369 $ 107,499 $ 50,628 $ 59,130
Cost of sales 172,568 109,678 79,555 40,066 46,018
---------- ---------- ---------- ---------- ----------
Gross profit 63,378 37,691 27,944 10,562 13,112
Selling, general and
administrative expenses 35,445 21,428 13,875 6,147 8,758
----------- ----------- ----------- ----------- ----------
Operating income 27,933 16,263 14,069 4,415 4,354
Interest expense, net 4,799 1,849 3,506 2,583 3,295
----------- ----------- ----------- ----------- ----------
Income before income taxes
and extraordinary loss 23,134 14,414 10,563 1,832 1,059
Provision for income taxes 9,643 5,964 4,570 1,000 611
----------- ----------- ----------- ----------- ----------
Income before
extraordinary loss 13,491 8,450 5,993 832 448
Extraordinary loss, net2 (179) (428)
----------- ----------- ----------- ----------- ----------
Net income $ 13,491 $ 8,450 $ 5,814 $ 404 $ 448
----------- ----------- ----------- ----------- ----------
Earnings per share
before extraordinary
loss $ 1.50 $ 0.94 $ 1.10 $ 0.19 (3)
----------- ----------- ----------- ----------- ----------
Earnings per share $ 1.50 $ 0.94 $ 1.07 $ 0.09 (3)
----------- ----------- ----------- ----------- ----------
BALANCE SHEET DATA
Working capital (deficit) $ 26,161 $ 16,791 $ 8,846 $ 464 $ (8,219)
Total assets 233,843 159,263 97,628 62,779 44,032
Short-term debt 8,481 6,448 206 2,271 2,490
Long-term debt 70,846 30,905 226 28,776 21,125
Stockholders' equity (deficit) 87,884 75,020 67,234 6,054 (2,834)
1 DT Industries, Inc. (DTI or the Company) was organized in July 1992 for the
purpose of acquiring Detroit Tool Group, Inc. (DTG), the predecessor company to
DTI, in August 1992 and the Peer Division of Teledyne, Inc. (Peer) in July 1992.
2 Reflects costs incurred by the Company of $314, less applicable income tax
benefits of $135, in the fiscal year ended June 26, 1994 and costs of $684, less
applicable income tax benefits of $256, in the fiscal year ended June 30, 1993,
related to the extinguishment and refinancing of debt, respectively.
3 Given the historical organization and capital structure of the predecessor,
earnings per share information is not considered meaningful for the predecessor.
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company was formed through a series of acquisitions beginning with the
initial acquisitions of DTG and Peer in 1992. Subsequent to those transactions,
the Company or its subsidiaries made a number of acquisitions for the Special
Machines and Components segments. The acquisitions are elements of a strategic
plan to acquire companies with proprietary products and manufacturing
capabilities which have strong market and technological positions in the niche
markets they serve and to accelerate the Company's goal of providing customers
with a full range of integrated automated systems. The Company believes that
emphasis on complementary acquisitions of companies serving target markets will
allow it to broaden its product offerings and to provide customers with a single
source for complete integrated automation systems. The acquisitions also expand
the Company's base of customers, creating greater opportunities for
cross-selling among the various divisions of the Company.
During fiscal 1994, the Company completed the acquisitions of Sencorp
Systems, Inc. (Sencorp) in August 1993 and Stokes-Merrill, Inc. (Stokes-Merrill)
in December 1993. During fiscal 1995, the Company completed the acquisitions of
Advanced Assembly Automation, Inc. (AAA) in August 1994 and the Lakso Division
of Package Machinery Company (Lakso) and Armac Industries, Ltd. (Armac) in
February 1995. During fiscal 1996, the Company completed the acquisitions of
H.G. Kalish Inc. (Kalish) in August 1995, Arrow Precision Elements, Inc. (Arrow)
in September 1995, Swiftpack Automation Limited (Swiftpack) in November 1995
and Assembly Machines, Inc. (AMI) in January 1996.
All of the acquisitions were accounted for under the purchase method of
accounting, with the purchase prices allocated to the estimated fair market
value of the assets acquired and liabilities assumed. In each of the
acquisitions, the excess purchase price paid over the estimated fair value of
the net assets acquired was allocated to goodwill, which resulted in the
recording of an aggregate of approximately $107 million of goodwill. Subsequent
to the acquisition of Mid-West Automation Enterprises, Inc. (Mid-West) in July
1996, as discussed further below, goodwill recorded will approximate $165
million. The amortization of goodwill recorded will result in a non-cash charge
to future operations of approximately $4.2 million per year, including the
effect of the Mid-West acquisition. The following discussion of the consolidated
financial statements includes the results of operations from the acquisition
date of each acquired company.
On July 19, 1996, after the end of fiscal 1996, the Company acquired the
issued and outstanding stock of Mid-West for approximately $77 million, net of
cash acquired. Mid-West is a Chicago-area designer and manufacturer of
integrated precision assembly systems. For the year ended May 26, 1996,
Mid-West had net sales of $88 million. The results of operations of Mid-West
will be included with those of the Company for periods subsequent to the date
of acquisition.
The Company operates in two business segments, Special Machines, including
the Automation and Packaging Groups, and Components. The Special Machines
segment designs and builds custom equipment, proprietary machines and integrated
systems. The Components segment stamps and fabricates a range of standard and
custom metal components for the transportation, appliance, heavy equipment,
agricultural equipment and electrical industries as well as wear parts for the
textile industry.
16
Set forth below is certain financial data relating to each business
segment.
Fiscal Year Ended
June 30, June 25, June 26,
1996 1995 1994
NET SALES
Special Machines1
DTI Automation $ 106,217 $ 67,119 $ 51,112
DTI Packaging 87,667 45,051 25,666
---------- ---------- ----------
Total Special Machines 193,884 112,170 76,778
Components 42,062 35,199 30,721
---------- ---------- ----------
Total $ 235,946 $ 147,369 $ 107,499
---------- ---------- ----------
GROSS PROFIT
Special Machines1 $ 53,299 $ 29,015 $ 20,293
Gross margin 27.5% 25.9% 26.4%
Components 10,079 8,676 7,651
Gross margin 24.0% 24.6% 24.9%
---------- ---------- ----------
Total gross profit $ 63,378 $ 37,691 $ 27,944
Total gross margin 26.9% 25.6% 26.0%
---------- ---------- ----------
OPERATING INCOME
Special Machines1 $ 26,557 $ 13,857 $ 11,506
Operating margin 13.7% 12.4% 15.0%
Components 6,934 6,676 5,789
Operating margin 16.5% 19.0% 18.8%
Corporate (5,558) (4,270) (3,226)
---------- ---------- ----------
Total operating income $ 27,933 $ 16,263 $ 14,069
Total operating margin 11.8% 11.0% 13.1%
---------- ---------- ----------
DEPRECIATION AND AMORTIZATION EXPENSE
Special Machines1 $ 4,683 $ 3,452 $ 2,299
Components 1,038 837 771
Corporate 395 272 287
---------- ---------- ----------
Total $ 6,116 $ 4,561 $ 3,357
---------- ---------- ----------
CAPITAL EXPENDITURES
Special Machines1 $ 6,145 $ 4,127 $ 750
Components 2,138 3,043 1,392
Corporate 1,966 548 130
---------- ---------- ----------
Total $ 10,249 $ 7,718 $ 2,272
---------- ---------- ----------
IDENTIFIABLE ASSETS
Special Machines1 $ 203,210 $ 135,328 $ 74,376
Components 28,528 23,061 22,251
Corporate 2,105 874 1,001
---------- ---------- ----------
Total $ 233,843 $ 159,263 $ 97,628
---------- ---------- ----------
1 Excludes operations data for Mid-West, acquired in July 1996.
17
Gross margins of the Special Machines segment may vary from year to year
as a result of the variations in profitability of contracts for large orders
of special machines. In addition, changes in the product mix in a given period
affect gross margins for the Special Machines segment. Historically, gross
margins for the Components segment have not fluctuated significantly between
periods.
Operating margins for the Special Machines segment differ from the
Components segment.
Higher operating expenses for the Special Machines segment result from
the following: additional staffing required for sales support and the costs
associated with the technical expertise required of the sales and support
staff; research and development activities; higher levels of goodwill
amortization and greater investment in sales and marketing programs.
The percentage of completion method of accounting is used by the Company's
Special Machines segment to recognize revenues and related costs. Under the
percentage of completion method, revenues are measured based on the ratio of
engineering and manufacturing labor hours incurred to date compared to total
estimated engineering and manufacturing labor hours for each customer contract.
Any revisions in the estimated total costs or values of the contracts during the
course of the work are reflected when the facts that require the revisions
become known. Revenue from the sale of products manufactured by the Company's
Components segment is recognized upon shipment to the customer.
Prior to June 26, 1995, revenues from certain customer contracts of the
Special Machines segment were recognized upon shipment, utilizing the "units of
delivery" modification of the percentage of completion method. The change in
accounting method in fiscal 1996 reflects the trend in the Company's Special
Machines business for increasing engineering services provided on customer
contracts and did not have a material impact on the Company's financial position
and results of operations.
Costs and related expenses to manufacture the products are recorded as cost
of sales when the related revenue is recognized. Provisions for estimated losses
on uncompleted contracts are made in the period in which such losses are
determined.
Certain statements contained herein are forward-looking statements subject
to risks and uncertainties. The Company's actual results could differ materially
from the expected results if the Company experiences delays or cancellations of
customer orders, delays in shipping dates of products, cost overruns on certain
projects and currency exchange fluctuations. The Company may also be adversely
affected by downturns in the economy in general or in markets served by
substantial customers. Shareholders should also consider other risks and
uncertainties discussed in documents previously filed by the Company with the
Securities and Exchange Commission.
18
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of net sales represented by certain items reflected in the Company's
consolidated statement of operations.
Fiscal Year Ended
June 30, June 25, June 26,
1996 1995 1994
Net sales 100.0% 100.0% 100.0%
Cost of sales 73.1 74.4 74.0
------- ------- -------
Gross profit 26.9 25.6 26.0
Selling, general and administrative
expenses 15.1 14.6 12.9
------- ------- -------
Operating income 11.8 11.0 13.1
Interest expense 2.0 1.2 3.3
------- ------- -------
Income before provision for income
taxes and extraordinary loss 9.8 9.8 9.8
Provision for income taxes 4.1 4.1 4.2
------- ------- -------
Income before extraordinary loss 5.7 5.7 5.6
Extraordinary loss on debt refinancing 0.2
------- ------- -------
Net income 5.7% 5.7% 5.4%
------- ------- -------
FISCAL 1996 COMPARED TO FISCAL 1995
NET SALES
Consolidated net sales increased $88.5 million, or 60.1%, to $235.9
million for the year ended June 30, 1996, from $147.4 million for the year ended
June 25, 1995. The increase in consolidated net sales was a result of a $81.7
million, or 72.8%, increase in sales by the Special Machines segment and a $6.8
million, or 19.5%, increase in sales by the Components segment.
The increase in sales by the Special Machines segment resulted from the
incremental effects of the acquisitions of AAA in August 1994, Armac and Lakso
in February 1995, Kalish in August 1995, Swiftpack in November 1995 and AMI in
January 1996, totalling $46.5 million, with the remaining $35.2 million, or
31.4%, increase relating to sales from existing businesses. Sales from existing
businesses were up substantially, primarily due to increased sales of custom
automated production equipment and packaging equipment. Approximately one-half
of this increase can be attributed to the increase in machine sales to a
significant customer. The remaining increase is a result of several new
substantial projects with customers for integrated production systems. These
increases reflect international expansion projects by certain customers,
increased penetration into new markets and benefits achieved from the Company's
cross-selling program.
19
The increase in sales by the Components segment is due to an increase in
sales from existing businesses of $4.4 million, or 12.5%, over the year ended
June 25, 1995 and $2.4 million in sales from the Arrow acquisition. The increase
in sales by Components was primarily the result of a new customer outside the
transportation industry obtained in the latter part of fiscal 1995. The new
business has offset the recent reduction in sales resulting from a slowdown in
demand for products provided to the transportation industry. This new business
was made possible through capital investments to expand stamping capacity and
capabilities.
GROSS PROFIT
Gross profit increased $25.7 million, or 68.2%, to $63.4 million for the
year ended June 30, 1996, from $37.7 million for the year ended June 25, 1995,
as a result of the sales increases discussed above and gross profit margin
improvement. Gross profit increased $16.2 million as a result of acquisitions.
Excluding the effect of acquisitions, gross profit increased $9.5 million or
25.2%. The gross profit margin increased to 26.9% from 25.6%. The improvement in
gross margin was due to the higher margins obtained by the acquired businesses.
Gross margin exclusive of acquired operations decreased to 25.2% due primarily
to gross profit margin declines in the Components segment. Gross profit margins
exclusive of acquired operations for the Components segment were down from prior
year as a result of start-up costs on new parts business, although such gross
profit margins have improved during fiscal 1996 as production efficiencies were
realized.
SG&A EXPENSES
SG&A expenses increased $14.0 million, or 65.4%, to $35.4 million for the
year ended June 30, 1996, from $21.4 million for the year ended June 25, 1995.
Approximately $10.9 million of the increase is due to the acquisitions discussed
above. The remaining increase of $3.1 million is the result of personnel
additions and related recruiting and relocation fees, increased costs associated
with compensation and incentive programs, increased investment in marketing
activities and increased professional and banking fees.
OPERATING INCOME
Operating income increased $11.6 million, or 71.8%, to $27.9 million for
the year ended June 30, 1996, from $16.3 million for the year ended June 25,
1995, as a result of the factors noted above. As a percentage of consolidated
net sales, operating income increased to 11.8% from 11.0%.
INTEREST EXPENSE
Interest expense increased to $4.8 million for the year ended June 30, 1996
from $1.8 million for the year ended June 25, 1995. The increase in interest
expense resulted primarily from the increase in the debt level of the Company to
finance the recently acquired businesses.
INCOME TAXES
Provision for income taxes increased to $9.6 million for the year ended
June 30, 1996 from $6.0 million for the year ended June 25, 1995, reflecting
effective tax rates of 41.7% and 41.4%, respectively. These rates differ from
statutory rates due to permanent differences primarily related to non-deductible
goodwill amortization arising from certain acquisitions.
20
NET INCOME
Net income increased to $13.5 million for the year ended June 30, 1996, an
increase of $5.0 million, or 59.7%, over the prior year as a result of the
factors noted above. Earnings per share increased to $1.50 from $0.94 in the
prior year.
FISCAL 1995 COMPARED TO FISCAL 1994
NET SALES
Consolidated net sales increased $39.9 million, or 37.1%, to $147.4
million for the year ended June 25, 1995, from $107.5 million for the year
ended June 26, 1994. The increase in consolidated net sales was a result of a
$35.4 million, or 46.1%, increase in sales by the Special Machines segment and
a $4.5 million, or 14.6%, increase in sales by the Components segment.
The increase in sales by the Special Machines segment resulted from the
incremental effect of the acquisitions of Sencorp in August 1993, Stokes-Merrill
in December 1993, AAA in August 1994, and Lakso and Armac in February 1995,
totaling $33.9 million plus a $1.5 million, or 2.0%, increase in other special
machines sales. Excluding the effect of acquisitions, sales of proprietary
products increased significantly during the year. Sales related to RIGO systems
and strong demand for the Company's line of proprietary equipment resulted in
the increase. These increases were offset by a decrease in the sale of custom
machinery, as sales to a significant custom equipment customer decreased $16.2
million in fiscal 1995. The customer placed significant orders for equipment
which were included in the backlog at June 25, 1995.
The increase in sales by the Components segment resulted from the addition
of new parts supplied to existing customers, continued strength in the markets
served by those customers and the broadening of the customer base through the
addition of new customers. Increased capacity and new capabilities resulted from
capital investments made during the latter part of fiscal 1994. Additional
capital expenditures have been made during the latter part of fiscal 1995 to
further increase capacity.
GROSS PROFIT
Gross profit increased $9.8 million, or 34.9%, to $37.7 million for the
year ended June 25, 1995 from $27.9 million for the prior year. Gross profit
increased $11.4 million as a result of the acquisitions discussed above.
Excluding the effect of acquisitions, gross profit decreased $1.6 million.
The gross profit margin decreased to 25.6% from 26.0%. Gross profit margin
exclusive of acquired operations decreased to 23.1%, reflecting lower custom
equipment margins, product development costs on the RIGO systems and cost
overruns on welding equipment contracts.
SG&A EXPENSES
SG&A expenses increased $7.5 million, or 54.4%, to $21.4 million for fiscal
1995 from $13.9 million for fiscal 1994. Approximately $6.0 million of the
increase is due to the acquisitions discussed above. The remaining increase of
$1.5 million is primarily the result of the incremental costs of being a public
company and increased investment in sales and marketing activities including the
addition of sales people. As a percentage of consolidated net sales, SG&A
increased to 14.6% from 12.9%, reflecting a higher level of SG&A expenses to net
sales associated with recently acquired operations and the increased SG&A
expenses discussed above.
21
OPERATING INCOME
Operating income increased $2.2 million, or 15.6%, to $16.3 million for
fiscal 1995 from $14.1 million for fiscal 1994 as a result of the factors noted
above. As a percentage of consolidated net sales, operating income decreased to
11.0% from 13.1%.
INTEREST EXPENSE
Interest expense decreased to $1.8 million for fiscal 1995 from $3.5
million for fiscal 1994. The decrease is a result of the Company's initial
public offering in April 1994, the proceeds of which were used to repay
substantially all outstanding indebtedness. This decrease was partially offset
by interest expense resulting from additional borrowings to finance acquisitions
and capital expenditures.
INCOME TAXES
Provision for income taxes increased to $6.0 million for fiscal 1995 from
$4.6 million for fiscal 1994, reflecting effective tax rates of 41.4% and 43.3%,
respectively. These rates differ from statutory rates primarily due to permanent
differences related to non-deductible goodwill amortization arising from certain
acquisitions.
NET INCOME
Net income increased to $8.5 million for fiscal 1995 from $5.8 million for
fiscal 1994 as a result of the factors noted above and a $0.2 million decrease
in extraordinary losses. In fiscal 1994, net income was affected by
extraordinary losses incurred resulting from the extinguishment of long-term
debt. The loss represented the write-off of deferred financing costs net of
related tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996, 1995 and 1994, net cash provided by operating
activities was approximately $15.1 million, $1.6 million and $3.7 million,
respectively. Net income plus non-cash operating charges provided $20.7 million,
$17.0 million and $10.3 million of operating cash flow in fiscal 1996, 1995 and
1994, respectively. In fiscal 1996, working capital balances increased $5.6
million primarily due to the increased investment in current assets as a result
of the increased sales and backlog, a decrease in customer advances due to
unusually large advances at June 25, 1995 and large deposits to certain
suppliers at June 30, 1996.
In fiscal 1995, cash provided by operating activities was affected by a
$15.4 million increase in net working capital. Strong year-end sales, orders
and backlog resulted in a significant increase in accounts receivable and
inventories at June 25, 1995. An increase in customer advances and accounts
payable partially offset the increases in working capital assets. Accrued
liabilities decreased during the year reflecting reductions in the income tax
payable balance and accrued acquisition costs.
In fiscal 1994, cash provided by operating activities was affected by a
$6.6 million increase in working capital largely resulting from high sales
activity at the end of the year thereby resulting in an increased accounts
receivable balance.
Working capital balances can fluctuate significantly between periods as a
result of the significant costs incurred on individual contracts and the
relatively large amount invoiced and collected by the Company for a number of
large contracts.
22
During the fiscal year ended June 30, 1996, cash provided by operating
activities was used to finance capital expenditures of approximately $10.2
million, pay dividends of $0.7 million and provide funding towards four
acquisitions. Net borrowings of the Company increased by approximately $42.0
million during fiscal 1996, primarily due to the acquisitions of Kalish for
$16.4 million, Arrow for $3.0 million, Swiftpack for $18.4 million and AMI for
$6.7 million.
During August 1995, the Company entered into an Amended and Restated
Credit Facilities Agreement (Amended Credit Agreement) with six institutions to
provide funding for working capital and acquisitions. In connection with the
acquisition of Swiftpack in November 1995, the Company amended the facility to
provide a total borrowing availability of $90 million. The Amended Credit
Agreement provided for a $25 million revolving credit facility, a $43.5 million
term loan and a $21.5 million letter of credit facility denominated in a foreign
currency to secure loans to finance the Swiftpack acquisition. As of June 30,
1996, the balances outstanding under the revolving credit facility and term loan
were $15.0 million and $41.6 million, respectively. The facilities generally
bear interest at floating rates based upon LIBOR or the bank's base rate plus a
specified percentage which is determined by the Company's ratio of funded debt
to operating cash flow. At June 30, 1996, interest rates on these facilities
ranged from 6.9% to 8.25%.
On November 23, 1995, the Company, through its wholly-owned subsidiary, DT
Industries (UK) Limited (DTUK), acquired ninety-five percent (95%) of the issued
and outstanding stock of Swiftpack and an option (the Option) to acquire the
remaining five percent (5%) of Swiftpack stock. The acquisition was financed by
entering into a Credit Agreement, Specific Counter-Indemnity and Debenture
(collectively, the Foreign Credit Agreements) with a foreign bank which provided
approximately $5.3 million in cash and will provide funding of the principal
amount of $14.0 million in notes (Loan Notes) upon their maturity. The Loan
Notes issued by DTUK directly to certain of the prior shareholders bear interest
at 5.3% and mature the earlier of November 25, 1996, at the holder's option, or
December 23, 1996. The Foreign Credit Agreements provided funding of
approximately $0.9 million upon the exercise of the Option in July 1996. The
Foreign Credit Agreements are denominated in a foreign currency and bear
interest at a variable rate based upon LIBOR (approximately 8.0% including
letter of credit fees at June 30, 1996). Principal payments are due quarterly
with the remaining principal balance due on August 16, 2000. Principal payments
range from approximately $155,000 to $400,000. The Foreign Credit Agreements are
secured by the letter of credit facility provided through the Amended Credit
Agreement.
To manage its exposure to fluctuations in interest rates, on June 28,
1995, the Company entered into an interest rate swap agreement for a notional
principal amount of $30 million, maturing June 29, 1998. Swap agreements involve
the exchange of interest obligations on fixed and floating interest-rate debt
without the exchange of the underlying principal amount. The differential paid
or received on the swap agreement is recognized as an adjustment to interest
expense. The swap agreement provides a fixed rate of 6.06% with a floating rate
payment equal to the three month LIBOR determined on a quarterly basis with
settlement occurring on specific dates.
On July 19, 1996, the Company acquired the issued and outstanding stock of
Mid-West in a transaction accounted for under the purchase method of accounting.
The purchase price paid by the Company of approximately $77 million, net of cash
acquired, was obtained by the Company pursuant to the Company's Second Amended
and Restated Credit Facilities Agreement which replaced the Amended Credit
Agreement. The new facility of $200 million provided by two institutions
includes a $55 million revolving credit facility, a $104 million term loan, a
$20 million acquisition facility and a $21 million foreign currency denominated
letter of credit. The term loan requires quarterly principal payments ranging
from $4.8 million to $5.5 million commencing in January 1997 with final
maturity on July 23, 2001. Borrowings under the agreement bear interest at
prime or LIBOR (at the option of DTI) plus a specified percentage based on the
ratio of funded debt to operating cash flow.
23
The Company made capital expenditures of $10.2 million in fiscal 1996. Such
capital expenditures in fiscal 1996 included a total of approximately $3.8
million related to the completion of building expansions for the Company's
manufacturing facilities in Lebanon, MO, Benton Harbor, MI and the expansion in
progress at the facility in Erie, PA. The building expansions reflect the growth
occurring at these locations. Additionally, due to significant internal growth
being experienced by AAA, the Company is currently expanding its leased facility
in Dayton, OH. The addition is not expected to result in significant capital
expenditures by the Company, but will result in an increase in annual lease
costs. Subsequent to the completion of the current building expansion programs,
the Company believes that its principal manufacturing facilities will have
sufficient capacity to accommodate future internal growth without major
additional capital improvements.
Management anticipates that capital expenditures in future years will
include recurring replacement or refurbishment of machinery and equipment,
which will approximate depreciation expense, and purchases to improve production
methods or processes or to expand manufacturing capabilities.
The Company paid quarterly cash dividends of $0.02 per share on
September 15, 1995, December 15, 1995, March 15, 1996 and June 15, 1996 to
shareholders of record on August 31, 1995, November 30, 1995, February 29, 1996
and May 31, 1996, respectively.
Based on its ability to generate funds from operations and the
availability of funds under its current credit facilities, the Company believes
that it will have sufficient funds available to meet its currently anticipated
operating and capital expenditure requirements.
TAX MATTERS
The Company files a consolidated federal income tax return. The fiscal
1990, 1991, 1992 and 1993 federal income tax returns for DTI and its predecessor
company, Detroit Tool Group, Inc., have been audited by the Internal Revenue
Service (the IRS). During the fourth quarter of fiscal 1996, the Company reached
an agreement in principle to settle with the IRS. The additional taxes due under
the agreement are not material to the Company's financial position, results of
operations or liquidity and are expected to be paid prior to December 31, 1996.
There are no other material audits underway or notification of audits for DTI
or any of its subsidiaries.
BACKLOG
The Company's backlog is based upon customer purchase orders that the
Company believes are firm. As of June 30, 1996, the Company had $112.2 million
of orders in backlog, which compares to a backlog of approximately $83.6 million
as of June 25, 1995. The $28.6 million increase is due to the acquisitions of
AMI, Swiftpack, Arrow and Kalish. Excluding the effects of acquisitions, backlog
was comparable to the prior year. The backlog for the Special Machines segment
at June 30, 1996 was $106.0 million, which increased $27.4 million from a year
ago. Backlog for the Components segment increased $1.2 million to $6.2 million
from $5.0 million. The level of backlog at any particular time is not
necessarily indicative of the future operating performance of the Company.
Additionally, certain purchase orders are subject to cancellation by the
customer upon notification.
Certain orders are also subject to delays in completion and shipment at the
request of the customer. The Company believes most of the orders in the backlog
will be recognized as sales during fiscal 1997.
24
SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS
In general, the Company's business is not subject to seasonal variations in
demand for its products. However, because orders for certain of the Company's
products can exceed a few million dollars, a relatively limited number of orders
can constitute a meaningful percentage of the Company's revenue in any one
period. A relatively small reduction or delay in the number of orders can have a
material impact on the timing of recognition of the Company's revenues. Gross
margins in the Special Machines segment may vary between comparable periods as a
result of the variations in profitability of contracts for large orders of
special machines as well as product mix between the various types of custom and
proprietary equipment manufactured by the Company. Accordingly, results of
operations of the Company for any particular quarter are not necessarily
indicative of results that may be expected for any subsequent quarter or related
fiscal year.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item
are presented under Item 14 and incorporated herein by reference thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A definitive proxy statement is being filed with the Securities and
Exchange Commission on or about October 1, 1996. The information required by
this item is set forth under the caption "Election of Directors" on pages 3
through 6, under the caption "Executive Officers" on page 8 and under the
caption "Compliance with Section 16(a) of the Exchange Act" on page 13 of the
definitive proxy statement, which information is incorporated herein by
reference thereto.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth under the caption
"Executive Compensation" on pages 8 through 12 of the definitive proxy
statement, which information is incorporated herein by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" on pages 6
through 8 of the definitive proxy statement, which information is incorporated
herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the caption
"Certain Transactions" on pages 13 through 15 of the definitive proxy statement,
which information is incorporated herein by reference thereto.
26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and
its subsidiaries, included on pages 25 to 43 in the Annual Report and
the report of independent accountants on page 24 of the Annual Report
are incorporated herein by reference thereto:
Consolidated Balance Sheets as of June 30, 1996 and June 25, 1995
Consolidated Statements of Operations for the Fiscal Years Ended
June 30, 1996, June 25, 1995 and June 26, 1994
Consolidated Statements of Changes in Stockholders' Equity for the
Fiscal Years Ended June 30, 1996, June 25, 1995 and June 26,
1994
Consolidated Statements of Cash Flows for the Fiscal Years Ended
June 30, 1996, June 25, 1995 and June 26, 1994
Notes to Consolidated Financial Statements
Report of Independent Accountants
2. FINANCIAL STATEMENT SCHEDULE
Report of Independent Accounts on Financial
Statement Schedule S-1
Schedule VIII Valuation and Qualifying Accounts and
Reserves for the Fiscal Years Ended
June 30, 1996, June 25, 1995 and
June 26, 1994 S-2
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
3. EXHIBITS
The exhibits listed on the accompanying Index to Exhibits are filed as
part of this Report.
4. REPORTS ON FORM 8-K
None
27
INDEX TO EXHIBITS
Exhibit No. Description
3.1 Restated Certificate of Incorporation of the Registrant (filed
with the Commission as Exhibit 3.1 to the Company's Registration
Statement on Form S-1 Registration No. 33-75174, filed with the
Commission on February 11, 1994, as amended on March 22, 1994
(the "Registration Statement") and incorporated herein by
reference thereto)
3.2 Amended By-Laws of the Registrant (filed as Exhibit 3.2 to
the Registration Statement and incorporated herein by reference
thereto)
10.1* Purchase and Stockholder Agreement, dated September 30, 1993, by
and between Detroit Tool and Engineering Company and Stephen J.
Gore (filed as Exhibit 10.1 to the Registration Statement and
incorporated herein by reference thereto)
10.2* Stock Pledge Agreement, dated September 30, 1993, by and between
Stephen J. Gore and Detroit Tool and Engineering Company (filed
as Exhibit 10.2 to the Registration Statement and incorporated
herein by reference thereto)
10.3* $84,600 Promissory Note, dated September 30, 1993, by Stephen J.
Gore to Detroit Tool and Engineering Company (filed as Exhibit
10.3 to the Registration Statement and incorporated herein by
reference thereto)
10.4* Letter Agreement, dated September 30, 1993, by Stephen J. Gore
to Detroit Tool and Engineering Company (filed as Exhibit 10.4
to the Registration Statement and incorporated herein by
reference thereto)
10.5* Employment Agreement, dated September 19, 1990, by and between
Detroit Tool Group, Inc. and Stephen J. Gore (filed as Exhibit
10.5 to the Registration Statement and incorporated herein by
reference thereto)
10.6* Amendment to Promissory Note and Stock Pledge Agreement, dated
March 16, 1994, by and among DT Industries, Inc., Peer
Investors, L.P. and Stephen J. Gore (filed as Exhibit 10.6 to
the Registration Statement and incorporated herein by reference
thereto)
10.7* Purchase and Stockholder Agreement, dated September 30, 1993, by
and between Detroit Tool and Engineering Company and James C.
Janning (filed as Exhibit 10.7 to the Registration Statement and
incorporated herein by reference thereto)
10.8* Stock Pledge Agreement, dated September 30, 1993, by and between
James C. Janning and Detroit Tool and Engineering Company (filed
as Exhibit 10.8 to the Registration Statement and incorporated
herein by reference thereto)
10.9* $112,800 Promissory Note, dated September 30, 1993, by James C.
Janning to Detroit Tool and Engineering Company (filed as
Exhibit 10.9 to the Registration Statement and incorporated
herein by reference thereto)
10.10* Letter Agreement, dated September 30, 1993, by and between James
C. Janning and Detroit Tool and Engineering Company (filed as
Exhibit 10.10 to the Registration Statement and incorporated
herein by reference thereto)
10.11* Amendment to Promissory Note and Stock Pledge Agreement, dated
March 16, 1994, by and among DT Industries, Inc., Peer
Investors, L.P. and James C. Janning (filed as Exhibit 10.11 to
the Registration Statement and incorporated herein by reference
thereto)
* Management contract or compensatory plan or arrangement.
10.12* Purchase and Stockholder Agreement, dated November 30, 1993, by
and between Detroit Tool and Engineering Company and Gregory Fox
(filed as Exhibit 10.12 to the Registration Statement and
incorporated herein by reference thereto)
10.13* Stock Pledge Agreement, dated November 30, 1993, by and between
Gregory Fox and Detroit Tool and Engineering Company (filed as
Exhibit 10.13 to the Registration Statement and incorporated
herein by reference thereto)
10.14* $66,600 Promissory Note, dated November 30, 1993, by Gregory Fox
to Detroit Tool and Engineering Company (filed as Exhibit 10.14
to the Registration Statement and incorporated herein by
reference thereto)
10.15* Letter Agreement, dated November 30, 1993, by and between
Gregory Fox to Detroit Tool and Engineering Company (filed as
Exhibit 10.15 to the Registration Statement and incorporated
herein by reference thereto)
10.16* Amendment to Promissory Note and Stock Pledge Agreement, dated
March 16, 1994, by and among DT Industries, Inc., Peer
Investors, L.P. and Gregory Fox (filed as Exhibit 10.16 to the
Registration Statement and incorporated herein by reference
thereto)
10.17* DT Industries, Inc. Employee Stock Option Plan (filed as Exhibit
10.21 to the Registration Statement and incorporated herein by
reference thereto)
10.18* DT Industries, Inc. 1994 Directors Non-Qualified Stock Option
Plan (filed as Exhibit 10.22 to the Registration Statement and
incorporated herein by reference thereto)
10.19 Purchase Agreement dated as of October 21, 1994 by and among
Stokes-Merrill Corporation, Package Machinery Company and DT
Industries, Inc., as guarantor (filed as Exhibit 2.1 to the
Company's Report on Form 8-K dated February 10, 1995 filed with
the Commission on February 27, 1995 and incorporated herein by
reference thereto)
10.20 First Amendment to Purchase Agreement dated December 29, 1994 by
and among Stokes-Merrill Corporation, Package Machinery Company
and DT Industries, Inc. (filed as Exhibit 2.2 to the Company's
Report on Form 8-K dated February 10, 1995 filed with the
Commission on February 27, 1995 and incorporated herein by
reference thereto)
10.21 Second Amendment to Purchase Agreement dated January 30, 1995 by
and among Stokes-Merrill Corporation, Package Machinery Company
and DT Industries, Inc. (filed as Exhibit 2.3 to the Company's
Report on Form 8-K dated February 10, 1995 filed with the
Commission on February 27, 1995 and incorporated herein by
reference thereto)
10.22 Asset Purchase Agreement, dated as of August 28, 1995, by and
among H.G. Kalish Inc., Kalish Machinery Ltd., Graham Lewis and
Kalish Canada Inc. (filed as Exhibit 2.1 to the Company's Report
on Form 8-K dated August 28, 1995 filed with the Commission on
September 11, 1995 and incorporated
herein by reference thereto)
10.23 ISDA Master Agreement, dated as of June 28, 1995, between The
Boatmen's National Bank of St. Louis and DT Industries, Inc.
(filed as Exhibit No. 10.29 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 25, 1995 filed with the
Commission on September 22, 1995 (the "1995 10-K") and
incorporated herein by reference thereto)
10.24 Letter agreement, dated June 27, 1995, between DT Industries,
Inc. and The Boatmen's National Bank of St. Louis confirming an
interest rate swap transaction (filed as Exhibit No. 10.30 to
the 1995 10-K and incorporated herein by reference thereto)
10.25 Insurance Agreement, dated July 28, 1993, by and between Harbour
Group Ltd. and Detroit Tool and Engineering Company (filed as
Exhibit No. 10.31 to the Registration Statement and incorporated
herein by reference thereto)
* Management contract or compensatory plan or arrangement.
10.26 Corporate Development Consulting and Advisory Services Letter
Agreement, dated February 9, 1994, by and between DT Industries,
Inc. and Harbour Group Industries, Inc. (filed as Exhibit No.
10.32 to the Registration Statement and incorporated herein by
reference thereto)
10.27 Operations Consulting and Advisory Services Letter Agreement,
dated February 10, 1994, by and between DT Industries, Inc. and
Harbour Group Ltd. (filed as Exhibit No. 10.33 to the
Registration Statement and incorporated herein by reference
thereto)
10.28 Registration Rights Agreement, dated March 18, 1994, by and
among DT Industries, Inc., Peer Investors, L.P., Harbour Group
Investments II, L.P. and Harbour Group II Management Co. (filed
as Exhibit No. 10.34 to the Registration Statement and
incorporated herein by reference thereto)
10.29 Letter Agreement, dated November 7, 1995, between Harbour Group
Ltd, and DT Industries, Inc. amending the Operations Consulting
and Advisory Services Letter Agreement between the parties
dated February 10, 1994 (filed as Exhibit No. 10.37 to the 1995
10-K and incorporated herein by reference thereto)
10.30 Underwriting Agreement, dated April 15, 1994, by and between, CS
First Boston Corporation, Morgan Stanley & Co. Incorporated and
Wertheim Schroder & Co. Incorporated, as representatives of the
Several Underwriters, and DT Industries, Inc. and Harbour Group
Investments II, L.P. (filed as Exhibit No. 10.38 to the 1995
10-K and incorporated herein by reference thereto)
10.31 Agreement of Lease, dated June 12, 1992, between Sydrolar
Holdings Inc. and H.G. Kalish Inc. (filed as Exhibit No. 10.39
to the 1995 10-K and incorporated herein by reference thereto)
10.32 Letter agreement, dated October 30, 1992, between Sydrolar
Holdings Inc. and H.G. Kalish Inc. amending the Agreement of
Lease, dated June 12, 1992, between the parties (filed as
Exhibit No. 10.40 to the 1995 10-K and incorporated herein by
reference thereto)
10.33 Addendum to Agreement, dated October 6, 1993, between Sydrolar
Holdings Inc. and H.G. Kalish Inc. amending the Agreement of
Lease, dated June 12, 1992, between the parties (filed as
Exhibit No. 10.41 to the 1995 10-K and incorporated herein by
reference thereto)
10.34 License Agreement, dated February 7, 1994, by and among RIGO
Group, S.r.l., COMI S.r.l., PMM S.r.l., Sencorp Systems, Inc.
and Detroit Tool and Engineering Company (filed as Exhibit 10.45
to the Registration Statement and incorporated herein by
reference thereto)
10.35 Lease Agreement, Dated February 7, 1995, between Lanard &
Axibund, Inc., as agent, I-95 Business Center at Keystone
Park-1, as lessor, and Stokes-Merrill Corporation, as lessee
(filed as Exhibit No. 10.46 to the 1995 10-K and incorporated
herein by reference thereto)
10.36 Lease, dated as of February 14, 1995, between 925 Airport Road
Realty Trust and Armac Industries, Co. (filed as Exhibit No.
10.47 to the 1995 10-K and incorporated herein by reference
thereto)
10.37 Agreement of Lease, dated August 28, 1995, between Harry G.
Kalish and Kalish Canada Inc. (filed as Exhibit No. 10.48 to the
1995 10-K and incorporated herein by reference thereto)
10.38 Lease, dated December 8, 1989, by and among Parklands Properties
Trust and PI Acquisition, Inc. (filed as Exhibit 10.49 to the
Registration Statement and incorporated herein by reference
thereto)
10.39 Amendment to Lease, dated April 20, 1992, by and between
Parklands Properties Trust and Sencorp Systems, Inc. (filed as
Exhibit 10.50 to the Registration Statement and incorporated
herein by reference thereto)
* Management contract or compensatory plan or arrangement.
10.40 Commercial Lease, dated October 9, 1991, by and among Capplanco
Four, Inc., Sonya Marie Wotka HelmKampf and Joseph Armin Wotka,
individually, and Stephanie McDonald and Thomas L. McDonald,
Trustees of the Stephanie W. McDonald Revocable Trust,
collectively d/b/a/ C.W. Properties Chicago and Stokes-Merrill,
Inc. (filed as Exhibit 10.51 to the Registration Statement and
incorporated herein by reference thereto)
10.41 Lease, dated December 3, 1992, by and between KLM Realty Company
and Detroit Tool Metal Products Co. (filed as Exhibit 10.53 to
the Registration Statement and incorporated herein by reference
thereto)
10.42 Indemnification Agreement, dated March 18, 1994, between DT
Industries, Inc. and Harbour Group Investments II, L.P. (filed
as Exhibit 10.54 to the Registration Statement and incorporated
herein by reference thereto)
10.43* Purchase and Stockholder Agreement, dated November 30, 1993, by
and between Detroit Tool and Engineering Company and Bruce P.
Erdel (filed as Exhibit 10.55 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 26, 1994 filed with
the Commission on September 23, 1994 (the "1994 10-K") and
incorporated herein by reference thereto)
10.44* Stock Pledge Agreement, dated November 30, 1993, by and between
Bruce P. Erdel and Detroit Tool and Engineering Company (filed
as Exhibit 10.56 to the 1994 10-K and incorporated herein by
reference thereto)
10.45* $33,300 Promissory Note, dated November 30, 1993, by Bruce
P. Erdel to Detroit Tool and Engineering Company (filed as
Exhibit 10.57 to the 1994 10-K and incorporated herein by
reference thereto)
10.46* Letter Agreement, dated November 30, 1993, by and between Bruce
P. Erdel and Detroit Tool and Engineering Company (filed as
Exhibit 10.58 to the 1994 10-K and incorporated herein by
reference thereto)
10.47* Amendment to Promissory Note and Stock Pledge Agreement, dated
March 16, 1994, by and among DT Industries, Inc., Peer
Investors, L.P. and Bruce P. Erdel (filed as Exhibit 10.59 to
the 1994 10-K and incorporated herein by reference thereto)
10.48 Stock Purchase Agreement, dated August 31, 1994, by and among
DT Industries, Inc., Advanced Assembly Automation, Inc. and the
stockholders of Advanced Assembly Automation, Inc. named
therein, (filed as Exhibit No. 2 to the Company's Report on Form
8-K dated August 31, 1994 filed with the Commission on September
15, 1994 and incorporated herein by reference thereto)
10.49 Agreement relating to the sale and purchase of 76,000 Ordinary
Shares of (pound)1 each in the capital of Swiftpack, dated as of
November 23, 1995 by and among Peter Harris and Others and DTUK
and the Company (filed as Exhibit No. 2.1 to the Company's
Report on Form 8-K dated November 23, 1995 filed with the
Commission on December 7, 1995 and incorporated herein by
reference thereto)
10.50 Put and Call Option Agreement dated as of November 23, 1995 by
and among the Company, DTUK and Martin Gully (filed as Exhibit
No. 2.2 to the Company's Report on Form 8-K dated November 23,
1995 filed with the Commission on December 7, 1995 and
incorporated herein by reference thereto)
10.51 Credit Agreement dated as of November 23, 1995 between DTUK and
Dresdner Bank (filed as Exhibit No. 2.3 to the Company's Report
on Form 8-K dated November 23, 1995 filed with the Commission on
December 7, 1995 and incorporated herein by reference thereto)
10.52 Specific Counter-Indemnity dated as of November 23, 1995 between
DTUK and Dresdner Bank (filed as Exhibit No. 2.4 to the
Company's Report on Form 8-K dated November 23, 1995 filed with
the Commission on December 7, 1995 and incorporated herein by
reference thereto)
* Management contract or compensatory plan or arrangement.
10.53 Debenture dated as of November 23, 1995 between DTUK and
Dresdner Bank (filed as Exhibit No. 2.5 to the Company's Report
on Form 8-K dated November 23, 1995 filed with the Commission on
December 7, 1995 and incorporated herein by reference thereto)
10.54 Agreement and Plan of Merger, dated July 19, 1996, by and among
Automation Acquisition Corporation, DT Industries, Inc.,
Mid-West Automation Enterprises, Inc. and the Stockholders
listed therein (filed as Exhibit 2.1 to the Company's Report on
Form 8-K dated July 19, 1996 filed with the Commission on August
5, 1996 and incorporated herein by reference thereto)
10.55 Indemnification and Escrow Agreement, dated as of July 19, 1996,
by and among Mid-West Automation Enterprises, Inc., the
stockholders listed therein, and LaSalle National Trust, N.A.,
as Escrow Agent (filed as Exhibit 2.2 to the Company's Report on
Form 8-K dated July 19, 1996 filed with the Commission on August
5, 1996 and incorporated herein by reference thereto)
10.56 Second Amended and Restated Credit Facilities Agreement, dated
July 19, 1996, among The Boatmen's National Bank of St. Louis,
Dresdner Bank AG and the other lenders listed on the signature
pages thereof and DT Industries, Inc. and the other borrowers
listed on the signature pages thereof (filed as Exhibit 2.3 to
the Company's Report on Form 8-K dated July 19, 1996 filed with
the Commission on August 5, 1996 and incorporated herein by
reference thereto)
10.57 Lease dated as of February 20, 1996 by and between CityWide
Development Corporation and Advanced Assembly Automation, Inc.
(filed as Exhibit No. 10 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 24, 1996 filed with the
Commission on May 3, 1996 and incorporated herein by reference
thereto).
10.58 Single-Tenant Industrial Building Lease dated July 19, 1996,
between American National Bank and Trust Company of Chicago, as
Trustee under Trust No. 63442, Landlord, and Mid-West Automation
Enterprises, Inc., an Illinois corporation and Mid-West
Automation Systems, Inc., an Illinois corporation, collectively,
Tenant
10.59* DT Industries, Inc. Amendment to 1994 Employee Stock Option Plan,
adopted May 16, 1996
10.60* DT Industries, Inc. Second Amendment to 1994 Employee Stock
Option, adopted September 18, 1996
10.61* DT Industries, Inc. 1996 Long-Term Incentive Plan
13.0 Annual Report to Stockholders
21.0 Subsidiaries of the Registrant
23.0 Consent of Price Waterhouse LLP
24.0 Powers of Attorney
- ---------------------------------
* Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DT INDUSTRIES, INC.
By: /s/ Bruce P. Erdel
--------------------------------------
Bruce P. Erdel
Vice President - Finance and Secretary
Dated: September 30, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on September 30, 1996.
SIGNATURES TITLE
* Chairman of the Board
- -------------------------------
James C. Janning
* President, Chief Executive Officer and Director
- ------------------------------- (Principal Executive Officer)
Stephen J. Gore
/s/ Bruce P. Erdel Vice President - Finance and Secretary
- ------------------------------- (Principal Financial and Accounting Officer)
Bruce P. Erdel
* Director
- -------------------------------
William H.T. Bush
* Director
- -------------------------------
Gregory A. Fox
* Director
- -------------------------------
Samuel A. Hamacher
* Director
- -------------------------------
Lee M. Liberman
* Director
- -------------------------------
Donald A. Nickelson
* Director
- -------------------------------
Charles Pollnow
*By: /s/ Bruce P. Erdel
--------------------------------------
Bruce P. Erdel
Attorney-In-Fact
- ------------
*Such signature has been affixed pursuant to the following Power of Attorney.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Stephen J. Gore and Bruce P.
Erdel as his true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1996 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and
Stockholders of DT Industries, Inc.
Our audits of the consolidated financial statements of DT Industries,
Inc. and its subsidiaries, referred to in our report dated August 9, 1996,
appearing on page 24 of the Annual Report to Shareholders of DT Industries, Inc.
(which report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an audit of the
Financial Statement Schedule of DT Industries, Inc. listed in item 14(2) of this
Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
St. Louis, Missouri
August 9, 1996
S-1
DT INDUSTRIES, INC.
SCHEDULE VIII
Rule 12-09 Valuation and Qualifying Accounts and Reserves
(In thousands)
Column A Column B Column C Column D Column E Column F Column G
Balance at Charged to Charged to Purchase Balance at
Valuation and Beginning Costs and Other of End of
Reserve Accounts of Period Expenses Accounts Deductions Net Assets Period
For the Fiscal Year Ended June 30, 1996
Deferred Tax Assets Valuation
Allowance $1,029 $1,029
Accounts Receivable Reserve $ 751 $143 $0 ($189) $565(1) $1,294
(1) Reflects increase to Accounts Receivable Reserves due to acquisition of
Kalish, Arrow and AMI.
For the Fiscal Year Ended June 25, 1995
Deferred Tax Assets Valuation
Allowance $1,029 $1,029
Accounts Receivable Reserve $ 815 $ 20 $0 ($484) $400(1) $ 751
(1) Reflects increase to Accounts Receivable Reserves due to acquisition of
AAA $375 and Armac $25.
For the Fiscal Year Ended June 26, 1994
Deferred Tax Assets Valuation
Allowance $ 573 $456(1) $1,029
Accounts Receivable Reserve $ 141 $ 76 $0 ($ 83) $681(2) $ 815
(1) Reflects increase in Valuation Allowance due to acquisition of
Stokes-Merrill.
(2) Reflects increase to Accounts Receivable Reserves due to acquisition of
Sencorp $578 and Stokes-Merrill $103
S-2