<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-18198
DEVLIEG-BULLARD, INC.
---------------------
(Exact name of registrant as specified in its charter)
Delaware 62-1270573
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 Case Parkway South, Twinsburg, Ohio 44087
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(Address of principal executive offices) (Zip Code)
330-963-0699
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of common stock outstanding as of June 1, 1999 was
12,834,899.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DeVlieg-Bullard, Inc.
Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
April 30, July 31,
1999 1998
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 356 $ 365
Accounts receivable, net 17,999 24,895
Inventories, net 44,530 45,459
Other current assets 2,415 1,418
--------- ---------
Total current assets 65,300 72,137
Property, plant and equipment, net 7,753 8,781
Assets held for sale 861 1,692
Engineering drawings 15,613 16,393
Goodwill 10,634 11,025
Other assets 17,885 13,887
--------- ---------
Total assets $ 118,046 $ 123,915
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,090 $ 17,625
Accrued expenses and other current liabilities 11,299 10,007
Revolving credit agreement 27,415 25,670
Current portion of long-term debt (related party $4,375, $0) 17,770 5,201
--------- ---------
Total current liabilities 75,574 58,503
Long-term debt (related party $0, $4,375) -- 13,528
Postretirement benefit obligation 22,387 21,357
Other noncurrent liabilities 9,569 11,121
--------- ---------
Total liabilities 107,530 104,509
Stockholders' equity:
Common stock, $0.01 par value; authorized
30,000 shares; issued and outstanding
12,834,899 and 12,334,900 shares 128 123
Additional paid-in capital 34,230 34,230
Excess purchase price over net assets acquired from
related parties (16,242) (16,242)
Retained earnings (7,439) 1,438
Cumulative translation adjustment (161) (143)
--------- ---------
Total stockholders' equity 10,516 19,406
--------- ---------
Total liabilities and stockholders' equity $ 118,046 $ 123,915
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
DeVlieg-Bullard, Inc.
Statement of Operations
(unaudited - in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 24,515 $ 32,240 $ 75,544 $ 86,731
Cost of sales 20,463 24,239 61,716 66,339
-------- -------- -------- --------
Gross profit 4,052 8,001 13,828 20,392
Operating expenses:
Engineering 625 443 2,047 1,448
Selling 2,708 3,211 8,999 8,882
General and administrative 2,884 2,893 11,541 9,468
-------- -------- -------- --------
Total E S G & A expenses 6,217 6,547 22,587 19,798
Impairment loss on disposal -- -- -- 250
Other expense/(income), net (6) (18) (211) (36)
-------- -------- -------- --------
Total operating expenses 6,211 6,529 22,376 20,012
-------- -------- -------- --------
Operating income (2,159) 1,472 (8,548) 380
Interest expense (including related party interest
of $193, $176, $556 and $527) 1,491 1,339 4,473 3,976
-------- -------- -------- --------
Income/(loss) before income taxes (3,650) 133 (13,021) (3,596)
(Benefit)/provision for income taxes (1,142) 56 (4,144) (1,509)
-------- -------- -------- --------
Net (loss)/income $ (2,508) $ 77 $ (8,877) $ (2,087)
======== ======== ======== ========
Income per common share:
Basic $ (0.18) $ 0.01 $ (0.63) $ (0.15)
======== ======== ======== ========
Diluted $ (0.18) $ 0.01 $ (0.63) $ (0.15)
======== ======== ======== ========
Average number of shares outstanding:
Basic 14,325 14,091 14,195 14,072
======== ======== ======== ========
Diluted NA 15,172 NA NA
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
DeVlieg-Bullard, Inc.
Statements of Cash Flows
(unaudited - in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,877) $ (2,087)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 3,634 3,988
Deferred income taxes (4,366) --
Provision for losses on accounts receivable 363 194
(Gain)/loss on disposal of assets (241) 250
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable 6,533 768
Inventories 929 (1,651)
Other current assets (997) (350)
Accounts payable 1,465 3,962
Accrued expenses and other current liabilities 504 (7,082)
Other, net (532) 95
-------- --------
Net cash used for operating activities (1,585) (1,913)
Cash flows from investing activities:
Proceeds from sale of assets 2,311 --
Capital expenditures (451) (735)
-------- --------
Net cash provided by/(used for) investing activities 1,860 (735)
Cash flows from financing activities:
Borrowings under revolving credit agreement 82,156 91,754
Repayments under revolving credit agreement (80,411) (89,042)
Proceeds from issuance of long-term debt 2,500 2,514
Payments of long-term debt (4,516) (2,894)
Proceeds from exercise of stock options and warrants 5 84
-------- --------
Net cash (used for)/provided by financing activities (266) 2,416
Effect of exchange rate changes on cash (18) (9)
-------- --------
Net decrease in cash and cash equivalents (9) (241)
Cash and cash equivalents at beginning of period 365 637
-------- --------
Cash and cash equivalents at end of period $ 356 $ 396
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 4,334 $ 3,456
Income taxes, net of refunds 85 328
</TABLE>
During the nine months ended April 30, 1999 and 1998 the Company entered into
capital leases for computer equipment totaling $585 and $834, respectively,
which were financed by capital lease obligations. The amortization of the debt
discount was $472 and $431 during the nine months ended April 30, 1999 and 1998,
respectively.
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
DeVlieg-Bullard, Inc.
Notes to Financial Statements
NOTE 1: BASIS OF PRESENTATION
Pursuant to the rules and regulations of the Securities and Exchange Commission
for Form 10-Q, the financial statements, footnote disclosures and other
information normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed. The financial
statements contained in this report are unaudited but, in the opinion of
DeVlieg-Bullard, Inc. (the "Company"), reflect all adjustments, consisting of
only normal recurring adjustments, necessary to fairly present the financial
position as of April 30, 1999 and the results of operations and cash flows for
the interim periods of the fiscal year ending July 31, 1999 ("fiscal 1999") and
the fiscal year ended July 31, 1998 ("fiscal 1998") presented herein. The
results of operations for any interim period are not necessarily indicative of
results for the full year. These financial statements, footnote disclosures and
other information should be read in conjunction with the financial statements
and the notes thereto included in the Company's annual report on Form 10-K for
the year ended July 31, 1998. Certain amounts in the fiscal 1998 financial
statements have been reclassified to conform to the fiscal 1999 presentation.
The financial statements include all accounts of the Company after elimination
of all significant interdivision transactions and balances. Amounts in these
notes, except per share data, are expressed in thousands.
The accompanying financial statement data has been prepared assuming the
Company will continue as a going concern. Given the Company's current liquidity
situation, as discussed under the caption "Financing and Investing" in the
Management's Discussion and Analysis, if the Company's lenders accelerate
payment of amounts outstanding under the debt agreements, the Company would not
be able to continue to operate. The Company is considering various alterna-
tives, including the sale of certain non-core assets and the restructuring of
the senior debt. The accompanying financial statement data does not include any
adjustment needed to reflect changes in the carrying value of assets and
liabilities should the Company be unable to continue as a going concern.
NOTE 2: INVENTORIES
<TABLE>
<CAPTION>
April 30, July 31,
Inventories consisted of: 1999 1998
---- ----
(unaudited)
<S> <C> <C>
Raw materials $ 892 $ 1,620
Work-in-process 11,859 14,671
Finished goods 31,779 29,168
------- -------
$44,530 $45,459
======= =======
</TABLE>
Valuation reserves for obsolete, excess and slow-moving inventory aggregated
$9,263 and $10,901 at April 30, 1999 and July 31, 1998, respectively.
Inventories valued using LIFO were $19,420 and $14,189 at April 30, 1999 and
July 31, 1998, respectively. There was no material difference between current
cost and recorded cost. The financial accounting basis for the inventories of
acquired companies exceeds the tax basis by $12,224 at April 30, 1999 and July
31, 1998.
NOTE 3: SEGMENT REPORTING
<TABLE>
<CAPTION>
Machine Tooling
Services Tool Systems Industrial
Group Group Group Group Corporate Total
----- ----- ----- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Nine Months Ended April 30, 1999
Sales $26,411 $17,499 $13,003 $18,846 $ -- $ 75,759
Intersegment sales (6) -- (209) -- -- (215)
Net sales 26,405 17,499 12,794 18,846 -- 75,544
Operating income/(loss) (a) 1,625 (6,506) (350) 203 (3,520) (8,548)
Identifiable assets 50,204 25,354 16,463 7,701 18,324 118,046
Nine Months Ended April 30, 1998
Sales $29,165 $22,349 $16,132 $19,430 $ -- $ 87,076
Intersegment sales -- -- (345) -- -- (345)
Net sales 29,165 22,349 15,787 19,430 -- 86,731
Operating income/(loss) (a) 4,771 (3,889) 1,371 941 (2,814) 380
Identifiable assets 45,716 34,605 18,203 7,915 13,565 120,004
</TABLE>
(a) Interest expense and income taxes are primarily allocated as Corporate
expenses.
5
<PAGE> 6
NOTE 4: EARNINGS PER SHARE
The table below sets forth the computation of the weighted average number of
shares used for basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three months ended Nine Months ended
April 30, April 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average common shares outstanding 12,796 12,308 12,525 12,288
Stock purchase warrants (a) 1,529 1,783 1,670 1,784
------ ------ ------ ------
Average common shares outstanding-basic 14,325 14,091 14,195 14,072
Contingently issuable stock purchase warrants (b) 747 (b) (b)
Stock options (b) 334 (b) (b)
------ ------ ------ ------
Average common shares outstanding-diluted 14,325 15,172 14,195 14,072
====== ====== ====== ======
</TABLE>
(a) Class A and Class B Stock Purchase Warrants are included in the computation
of basic earnings per share. During the nine months ended April 30, 1999,
250 of the Class A and 250 Class C stock purchase warrants were exercised.
(b) When a net loss is recorded, additional shares for stock options and
contingent stock purchase warrants are not included because their inclusion
would be antidilutive. Because the third quarter and first nine months of
fiscal 1999 and fiscal 1998 results reflect a net loss, basic and diluted
earnings per share are calculated based on the same weighted average number
of shares outstanding.
NOTE 5: LONG-TERM DEBT
On November 6, 1998, the Company amended its credit facility with its senior
lender to increase the term loan by $2,500. The new term loan is to be repaid
from the proceeds from the sales of real estate and excess machinery and
equipment. The proceeds from the new term loan were used to repay a portion of
the outstanding revolving credit agreement. As of April 30, 1999, the balance
outstanding on the new term loan is $392.
In connection with the additional term loan, Charles E. Bradley, a junior
subordinated debenture holder and Chairman of the Board, signed a personal
guaranty for up to $500 of the additional term loan.
At April 30, 1999, the Company was not in compliance with financial covenants
under the senior and subordinated debt agreements. Accordingly, generally
accepted accounting principles require that all amounts outstanding under its
Senior and Subordinated debt agreements be included in current liabilities on
the Company's balance sheet.
6
<PAGE> 7
DeVlieg-Bullard, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Summarized below is a discussion of the results of operations of the Company,
including its Services, Machine Tool, Tooling Systems and Industrial operating
segments. Amounts, except per share data, are expressed in thousands.
As of April 30, 1999, the Company was not in compliance with certain financial
and other covenant requirements in its senior and subordinated debt facilities
related to maintenance of certain minimum ratios and levels of working capital
and stockholders' equity. Although the senior lender is continuing to provide
funding for day-to-day operations, the senior lender is not providing sufficient
funding to enable the Company to make timely payments to its trade and other
creditors. As of April 30, 1999, the Company had past due payables of
approximately $11,800. While deferred payment terms have been negotiated with
some vendors, certain vendors have suspended parts deliveries to the Company. As
a result, the Company has not been able to ship orders on time and believes it
has lost orders due to its lack of liquidity. The Company has also significantly
reduced operations at its Tooling Systems and Industrial Groups as a result of
its lack of liquidity. The Company is pursuing various alternatives, including
the sale of certain non-core assets and a restructuring of the senior debt
facility, to raise funds necessary to fund delinquent balances and meet ongoing
trade obligations.
Management of the Company is meeting with its senior lender to obtain additional
funding in concert with implementing its strategy of increasing its liquidity
through the sale of certain non-core assets. In the event the Company is unable
to obtain the additional liquidity to fund ongoing operations and repay past due
payables, the Company will be required to file a petition seeking reorganization
under the federal bankruptcy laws.
The Company expects sales for the fourth quarter of fiscal 1999 to be adversely
impacted by the current liquidity problems, the decline in the rate of orders
received and the planned plant shutdowns. As a result of the sales volume
decline, the Company also expects further deterioration in gross margin during
the fourth quarter of fiscal 1999, as well as increased interest expense as a
result of the higher default rate of interest which will be charged.
The discussions in this document may include certain forward-looking statements.
Actual results could differ materially from those reflected by the
forward-looking statements contained in this document and a number of factors
may affect future results, liquidity and capital resources. These factors
include the ability of the Company to obtain sufficient financing from its
senior and subordinated lenders to fund ongoing operations and repay past due
payables; the ability of the Company to increase its liquidity through
divestiture of certain non-core assets; the ability of the Company to obtain
sufficient parts from its vendors; the ability of the Company to obtain trade
credit from those vendors on favorable terms; the fact that the Company derives
a substantial portion of its sales from cyclical industries, including the
automotive, aerospace and housing industries; the ability to introduce new
products in a timely fashion; the pace of technological changes affecting the
products manufactured and services provided by the Company; the Company's
substantial debt service requirements, much of which are based on variable
rates; the level of margins achievable in the markets
served by the Company; and the ability to continue to minimize operating
expenses.
THREE MONTHS ENDED APRIL 30, 1999 COMPARED TO THREE MONTHS ENDED APRIL 30, 1998.
Net sales for the third quarter of fiscal 1999 were $24,515 compared to $32,240
for the third quarter of fiscal 1998, a decrease of $7,725, or 24.0%. Although
the decrease in sales was primarily in the Machine Tool Group, all groups showed
declines from the prior year's third quarter.
Gross profit for the third quarter of fiscal 1999 was $4,052 compared to $8,001
for the third quarter of fiscal 1998, a decrease of $3,949, or 49.4%. The
Industrial Group was even with the prior year, while all other groups,
particularly Machine Tool and Tooling Systems Groups, showed declines.
E S G & A expenses were $6,217 and $6,547 in the third quarter of fiscal 1999
and fiscal 1998, respectively. The most significant reduction was in corporate
expenses as the corporate office in Westport was closed.
Interest expense was $1,491 in the third quarter of fiscal 1999 compared to
$1,339 in fiscal 1998's third quarter. The increase in interest expense is a
result of increased debt at a higher effective rate.
An income tax benefit of $1,142 was recorded for the third quarter of fiscal
1999, compared to income tax expense of $56 in the third quarter of the prior
year, reflecting the losses in fiscal 1999 compared to income in the same period
of the prior year.
NINE MONTHS ENDED APRIL 30, 1999 COMPARED TO NINE MONTHS ENDED APRIL 30, 1998.
Net sales for the first nine months of fiscal 1999 were $75,544 compared to
$86,731 for the first nine months of fiscal 1998, a decrease of $11,187, or
12.9%. The decrease in net sales was primarily at the Machine Tool Group, but
all groups were below prior year levels.
Gross profit for the first nine months of fiscal 1999 was $13,828 compared to
$20,392 for the first nine months of fiscal 1998, a decrease of $6,564, or
32.2%. The most significant declines in gross margin
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<PAGE> 8
were at the Tooling Systems and Machine Tool Groups, but all groups showed
declines, reflecting the reduced volume, as well as the impact of certain
reserves related to inventory at the Machine Tool Group.
E S G & A expenses were $22,587 and $19,798 in the first nine months of fiscal
1999 and fiscal 1998, respectively. During the second quarter of fiscal 1999,
the Company accrued approximately $2,200 for costs associated with management
restructuring and plant closings. Included in the charge was severance costs
related to several senior management changes, as well as moving and other costs
associated with closing the Company's headquarters in Westport, Connecticut; a
charge for potential costs associated with the closing the Company's Cleveland
facility; and the write-off of an investment in a mainframe computer system that
will not be utilized.
Interest expense was $4,473 in the first nine months of fiscal 1999 compared to
$3,976 in the same period in fiscal 1998. The increase in interest expense is a
result of increased debt and higher effective interest rates.
An income tax benefit of $4,144 was recorded for the first nine months of fiscal
1999 compared to a benefit of $1,509 for the same period last year, reflecting
the losses in both years.
OPERATING RESULTS BY BUSINESS SEGMENT
SERVICES GROUP sales for the third quarter of fiscal 1999 were $8,309, compared
to $10,509 in the third quarter of fiscal 1998. Sales for the first nine months
of fiscal 1999 were $26,411 compared with $29,165 in the same period in the
prior year. The decline in sales is the result of the Company's lack of
liquidity, which resulted in difficulties obtaining credit from vendors and
maintaining sufficient inventory levels. The Services Group recorded a net
operating profit of $542 for the third quarter of fiscal 1999, compared with
$1,495 during the third quarter of fiscal 1998. For the first nine months of
fiscal 1999, operating income was $1,625 compared to $4,771 in the same period
of fiscal 1998. During the second quarter, the Services Group recorded a charge
of approximately $700 for severance and related costs for management changes, as
well as a write-off of the investment in a computer system, which has been
abandoned.
MACHINE TOOL GROUP sales for the third quarter of fiscal 1999 were $5,676,
compared to $9,669 in the third quarter of fiscal 1998. Sales for the first nine
months of fiscal 1999 were $17,499 compared with $22,349 in the same period in
the prior year. The decline in sales is the result of the Company's lack of
liquidity, which resulted in difficulties obtaining credit from vendors and
maintaining sufficient inventory levels to complete machines. The Machine Tool
Group recorded a net operating loss of $1,821 for the third quarter of fiscal
1999, compared with a net operating loss of $28 in the same period of fiscal
1998. For the first nine months of fiscal 1999, the Machine Tool Group's
operating loss was $6,506 compared with an operating loss of $3,969 in the first
nine months of fiscal 1998. During the second quarter of fiscal 1999, the
Machine Tool Group recorded charges of approximately $2,300 for additional
severance and related costs for the closing of the Cleveland facility, as well
as costs incurred in moving the Mideastern operation to a new, larger facility
in Pennsylvania and charges to record certain inventories at net realizable
value.
TOOLING SYSTEMS GROUP sales were $4,163 for the third quarter of fiscal 1999,
compared to $5,437 in the third quarter of fiscal 1998. Sales for the first nine
months of fiscal 1999 were $13,003 as compared to $15,787 in the first nine
months of the prior year. The Tooling Systems Group recorded a net operating
loss of $466 in the third quarter of fiscal 1999 compared to net operating
income of $483 in the same period a year ago. For the first nine months of
fiscal 1999, a net operating loss of $350 was recorded, compared to net
operating income of $1,371 recorded in the first nine months of fiscal 1998. The
declines in operating income are related to the volume declines.
8
<PAGE> 9
INDUSTRIAL GROUP sales were $6,381 in the third quarter of fiscal 1999, as
compared to $6,625 in the third quarter of fiscal 1998. For the first nine
months of fiscal 1999, sales were $18,846 as compared to $19,430 in the first
nine months of the prior year. Sales have been adversely impacted by the
Company's lack of liquidity, as shipments from vendors are delayed. Operating
income was $185 for the third quarter of fiscal 1999 as compared to $273 in the
third quarter of the prior year. Operating income was $203 for the first nine
months of fiscal 1999, compared to $941 in the same period a year ago. The
decline in operating income is related to the volume decline and increased
computer-related costs due to the installation of a new computer system at the
end of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Historically, the Company's continuing operations have been financed by
internally generated funds. Acquisitions have generally been funded with
increases in indebtedness.
Net cash used for operating activities was $1,585 for the nine months ended
April 30, 1998, compared to $1,913 for the first nine months of fiscal 1998.
FINANCING AND INVESTING
Cash used for capital expenditures was $451 and $735 for the first nine months
of fiscal 1999 and 1998, respectively. The Company currently has no material
commitments for specific capital expenditures. The Company anticipates
approximately $1,900 of capital expenditures for year 2000 compliance upgrades
to computer systems. Proceeds from the sale of assets were $2,311 in the first
nine months of fiscal 1999.
At April 30, 1999, the Company was not in compliance with certain financial
covenants under its senior and subordinated credit facilities. As a result,
amounts outstanding under these facilities have been included in current
liabilities in the balance sheet. The Company's lenders have not accelerated
payment of amounts outstanding under these facilities. Were the lenders to
accelerate payment of amounts outstanding as a result of the Company's default,
the Company would not be able to meet its obligations without additional
financing. The Company is considering various alternatives, including the sale
of certain assets and a restructuring of the senior credit facility. Management
of the Company is meeting with its senior lender to obtain additional funding in
concert with implementing its strategy of increasing liquidity through the sale
of certain non-core assets. In the event the Company is unable to obtain
additional liquidity to fund ongoing operations and repay past due payables, the
Company will be required to file a petition seeking reorganization under the
federal bankruptcy laws.
The balance outstanding under the Company's revolving credit agreement was
$27,415 at April 30, 1999, compared to $25,670 at July 31, 1998. Long-term debt,
including current maturities, at April 30, 1999, was $17,770, compared to
$18,729 at July 31, 1998, a decrease of $959. The Company's total indebtedness
was $45,185 and $44,399 at April 30, 1999 and July 31, 1998, respectively, an
increase of $786. The increase in debt was used to finance working capital
needs, particularly those of the Machine Tool Group. Cash and equivalents at
April 30, 1999 were $356, a decrease of $9 compared to July 31, 1998. Net cash
used for financing activities was $266 in the first nine months of fiscal 1999
compared to net cash provided by financing activities of $2,416 in the first
nine months of the prior year.
The senior credit facility is comprised of $5,202 in term loans and a revolving
credit agreement, which provides for borrowings up to $30,000. Interest on the
outstanding borrowings under the revolving credit agreement is payable monthly
in arrears at 4.25% above the prime rate. The effective rate based on the prime
rate was 12.00% at April 30, 1999. The amount the Company may borrow under the
revolving credit agreement is based upon a formula related to the Company's
eligible accounts receivable and inventories, reduced by outstanding letters of
credit. There were no unused borrowings available at April 30, 1999. Interest on
the term loans is payable monthly at 4.25% above prime rate. The effective rate
based on prime rate was 12.00% at April 30, 1999. Payments on the term loan are
$200 monthly, starting March 31, 1998.
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<PAGE> 10
Pursuant to the subordinated debt facility, the Company issued Subordinated
Debentures in May 1994 in the principal amount of $12,000. Of this amount,
$4,000 was replaced by Junior Subordinated Debentures. Interest payments on the
Subordinated Debentures of 11.5% per annum are payable quarterly in arrears
commencing July 1, 1994. The Subordinated Debentures provide for the repayment
of principal of $4,000 in fiscal 2000 and $4,000 in fiscal 2001. Interest on the
Junior Subordinated Debentures accrues at 14.5%, and the cash interest of 11%
per annum is payable quarterly in arrears commencing January 1, 1996. The Junior
Subordinated Debentures provide for the repayment of principal of $4,000 and
unpaid interest in June 2001 or thirty days after the payment of the
Subordinated Debentures. In November 1998, the Subordinated Debenture agreement
was amended to provide for a delay in the scheduled principal payment to October
1999 under certain circumstances, as defined.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries to represent years. These systems and products
will need to be able to accept four digit entries to distinguish years beginning
with 2000 from prior years. As a result, systems and products that do not accept
four digit year entries will need to be upgraded or replaced to comply with such
"Year 2000" requirements.
The Company believes that its internal systems are Year 2000 compliant or will
be replaced in connection with previously planned upgrades to information
systems prior to the need to comply with Year 2000 requirements. The Company
believes that, with modifications to existing software and conversions to new
systems, the Year 2000 issue will not pose significant operational problems for
its computer systems. However, if such modifications and conversions are not
made, or not completed timely, the Year 2000 issue could have a material impact
on the operations of the Company. In order to assure that this does not occur,
the Company plans to devote all resources required to resolve any significant
Year 2000 issues in a timely manner. A number of the Company's customers and
suppliers may be affected the Year 2000 issue that require that they expend
significant resources to modify or replace their existing systems; their failure
to properly address the Year 2000 issue could have significant impact on the
Company's operations.
The Services, Machine Tool and Tooling Systems Groups will upgrade their current
systems to make them Year 2000 compliant. The Industrial Group has completed its
installation of a new software package that includes additional functionality in
the area of materials requirement planning. The total expected costs for these
upgrades is approximately $2,800, of which $985 has already been spent. A
significant amount of fiscal 1999 capital expenditures will be devoted to
upgrading current hardware and software to add capabilities and comply with Year
2000 issues.
10
<PAGE> 11
PART II - Other Information
Item 3. Defaults Upon Senior Securities.
At April 30, 1999, the Company was not in compliance with financial and other
covenants under the Senior and Subordinated debt agreements. The Company's
lenders have not accelerated payments of amounts outstanding under these
facilities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedules (SEC use only)
(b) Reports on Form 8-K
During the quarter ended April 30, 1999, the Company did not file any reports on
Form 8-K.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
DeVlieg-Bullard, Inc.
-------------------------------------
(Registrant)
Date: June 14, 1999 By: /s/ Richard W. Sappenfield
------------- -------------------------------------
Richard W. Sappenfield
President and Chief Executive Officer
(Acting Principal Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE NINE MONTHS ENDED APRIL 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> APR-30-1999
<CASH> 356
<SECURITIES> 0
<RECEIVABLES> 18,731
<ALLOWANCES> (732)
<INVENTORY> 44,530
<CURRENT-ASSETS> 65,300
<PP&E> 25,036
<DEPRECIATION> 17,283
<TOTAL-ASSETS> 118,046
<CURRENT-LIABILITIES> 75,574
<BONDS> 0
0
0
<COMMON> 123
<OTHER-SE> 10,393
<TOTAL-LIABILITY-AND-EQUITY> 118,046
<SALES> 75,544
<TOTAL-REVENUES> 75,544
<CGS> 61,716
<TOTAL-COSTS> 61,716
<OTHER-EXPENSES> (211)
<LOSS-PROVISION> 363
<INTEREST-EXPENSE> 4,473
<INCOME-PRETAX> (13,021)
<INCOME-TAX> (4,144)
<INCOME-CONTINUING> (8,877)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,877)
<EPS-BASIC> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
