<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 1996
REGISTRATION NO. 333-14955
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------
DT INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE CORPORATE CENTRE, SUITE 2-300 44-0537828
(State or other 1949 E. SUNSHINE (I.R.S. Employer
jurisdiction of SPRINGFIELD, MISSOURI 65804 Identification No.)
incorporation or (417) 890-0102
organization) (Address, including zip code, and
telephone number, including area code,
of Registrant's principal executive offices)
</TABLE>
------------------
STEPHEN J. GORE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DT INDUSTRIES, INC.
CORPORATE CENTRE, SUITE 2-300
1949 E. SUNSHINE
SPRINGFIELD, MISSOURI 65804
(417) 890-0102
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
<TABLE>
<S> <C>
MATTHEW G. MALONEY, ESQ. LAWRENCE D. LEVIN, ESQ.
DICKSTEIN SHAPIRO MORIN & OSHINSKY LLP MARK D. WOOD, ESQ.
2101 L STREET, N.W. KATTEN MUCHIN & ZAVIS
WASHINGTON, D.C. 20037 525 WEST MONROE STREET, SUITE 1600
(202) 785-9700 CHICAGO, ILLINOIS 60661-3693
(312) 902-5200
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock,
$0.01 par value 5,462,500(3) -- -- --
385,250 $38.3125 $14,759,891 $4,473
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</TABLE>
(1) Includes 762,750 shares subject to the Underwriters' over-allotment option.
(2) Calculated pursuant to Rule 457(c) based on the average of the high and low
prices reported on the Nasdaq National Market on October 28, 1996.
(3) A filing fee of $63,109, calculated pursuant to Rule 457(c) based on the
average of the high and low prices reported on the Nasdaq National Market on
October 24, 1996, was paid on October 28, 1996 in connection with the filing
of the Registrant's Registration Statement on Form S-3 on such date relating
to the registration of these shares.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE AS MAY
BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be
used in connection with a United States offering (the "U.S. Prospectus") and one
to be used in connection with a concurrent international offering (the
"International Prospectus"). The U.S. Prospectus and the International
Prospectus are identical except that the International Prospectus contains (i) a
different front cover page, (ii) a different inside front cover page and (iii) a
Subscription and Sale Section in lieu of an Underwriting Section. In addition,
the International Prospectus omits the Notice to Canadian Residents section
contained in the U.S. Prospectus. The form of U.S. Prospectus is included herein
and the different pages discussed above for the International Prospectus which
are labelled "Alternate Pages for International Prospectus" follow the U.S.
Prospectus.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 1, 1996
5,085,000 Shares
[DTI LOGO]
Common Stock
($0.01 par value)
------------------
Of the shares of common stock, $0.01 par value per share (the "Common Stock")
offered hereby by the Underwriters (the "Offering"), 2,250,000 shares are being
sold by DT Industries, Inc. ("DTI" or the "Company") and 2,835,000 shares
are being sold by the Selling Stockholders named herein. See "Principal
and Selling Stockholders." Of the 5,085,000 shares of Common Stock
being offered, 4,068,000 shares are initially being offered in
the United States and Canada (the "U.S. Shares") by the U.S.
Underwriters (the "U.S. Offering") and 1,017,000 shares are
initially being concurrently offered outside the United
States and Canada (the "International Shares") by the
Managers (the "International Offering" and, together
with the U.S. Offering, the "Offering"). The
offering price and underwriting discounts
and commissions of the U.S. Offering and
the International Offering are identical.
On October 30, 1996, the reported last
sale price of the Common Stock on the
Nasdaq Stock Market's National
Market ("NNM") was $39 1/2
per share.
------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" ON PAGE 6 HEREIN.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Discounts Proceeds to
Price to and Proceeds to Selling
Public Commissions Company(1) Stockholders
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share.................................... $ $ $ $
Total(2)..................................... $ $ $ $
</TABLE>
(1) Before deduction of expenses payable by the Company, estimated at $500,000.
(2) The Company and the Selling Stockholders have granted the U.S. Underwriters
and the Managers an option, exercisable by CS First Boston Corporation for
30 days from the date of this Prospectus, to purchase a maximum of 312,500
additional shares of Common Stock from the Company and a maximum of 450,250
additional outstanding shares from the Selling Stockholders to cover over-
allotments of shares. If the option is exercised in full, the total Price
to Public will be $ , Underwriting Discounts and Commissions will be
$ , Proceeds to Company will be $ and Proceeds to Selling
Stockholders will be $ .
------------------
The U.S. Shares are offered by the several U.S. Underwriters when, as and
if delivered to and accepted by the U.S. Underwriters, and subject to their
right to reject orders in whole or in part. It is expected that the U.S. Shares
will be ready for delivery on or about , 1996, against payment in
immediately available funds.
CS First Boston
Morgan Stanley & Co.
Incorporated
Schroder Wertheim & Co.
The date of this Prospectus is , 1996
<PAGE> 4
IN CONNECTION WITH THIS OFFERING CS FIRST BOSTON ON BEHALF OF THE U.S.
UNDERWRITERS AND THE MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH
STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NNM OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN U.S. UNDERWRITERS (AND SELLING
GROUP MEMBERS, IF ANY) AND THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NNM IN ACCORDANCE WITH
RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934 (SEE "UNDERWRITING").
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES 10b-6,
10b-7 AND 10b-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company (File
No. 0-23400) with the Securities and Exchange Commission (the "Commission") are
incorporated herein by reference:
(1) Annual Report on Form 10-K for the fiscal year ended June 30, 1996,
filed with the Commission on September 30, 1996, as amended by
Amendment No. 1 to Annual Report on Form 10-K/A, filed with the
Commission on October 10, 1996.
(2) Current Report on Form 8-K, filed with the Commission on August 5,
1996, as amended by Amendment No. 1 to Current Report on Form 8-K/A,
filed with the Commission on September 23, 1996.
(3) The description of the Company's Common Stock which is contained in the
Company's Registration Statement on Form 8-A, filed with the Commission
on February 11, 1994, including any amendment or reports filed for the
purpose of updating such description.
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subsequent to the date of this Prospectus and prior to the
termination of this Offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing such reports and
documents. Any statement contained in a document, all or a portion of which is
incorporated by reference herein, shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained or
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Upon oral or written request, the Company will provide without charge to
each person to whom this Prospectus is delivered a copy of any or all of such
documents which are incorporated herein by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into the documents that this Prospectus incorporates). Requests for such copies
should be directed to the attention of Bruce P. Erdel, Vice President -- Finance
and Chief Financial Officer, DT Industries, Inc., Corporate Centre, Suite 2-300,
1949 E. Sunshine, Springfield, Missouri 65804, telephone: (417) 890-0102.
Unless the context otherwise requires, "DTI" or the "Company" refers to DT
Industries, Inc. and its subsidiaries. Unless otherwise indicated, all
references to any "fiscal" year shall mean the fiscal year of the Company which
is a 52-53 week period that ends on the last Sunday in June.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by reference
to the more detailed information and financial data appearing elsewhere or
incorporated by reference into this Prospectus. Except as otherwise indicated,
all information contained in this Prospectus assumes no exercise of the
over-allotment option of the U.S. Underwriters and the Managers. Investors
should carefully consider the information set forth under the heading "Risk
Factors."
THE COMPANY
DTI 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. The Company believes it is the
largest manufacturer of integrated assembly and test systems in North America.
Substantial growth opportunities are believed to be provided by certain trends
among the Company's customers, including increased emphasis on productivity,
quality, flexibility, globalization, outsourcing, downsizing and vendor
rationalization. To capitalize on these trends, DTI has implemented a business
strategy to provide, develop and acquire complementary technologies and
capabilities to supply customers with integrated processing, assembly, testing
and packaging systems for their products. As part of this strategy, the Company
seeks to cross-sell the products produced by acquired companies through its
larger company-wide sales force, thus providing for greater geographic and
customer coverage. The Company operates in two business segments: Special
Machines and Components. Through acquisitions and product development, the
Company's Special Machines business has grown from historical consolidated net
sales of $28.5 million in fiscal 1993 to historical consolidated net sales of
$193.9 million in fiscal 1996. The Company's Components business, which produces
precision metal components and wear parts for a broad range of industrial
applications, has grown from historical consolidated net sales of $22.1 million
in fiscal 1993 to historical consolidated net sales of $42.1 million in fiscal
1996, primarily as a result of internal growth.
SPECIAL MACHINES SEGMENT. 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 these
products 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. The Special Machines segment, which accounted for
approximately 87% of the Company's pro forma consolidated fiscal 1996 net sales,
after giving effect to the acquisition of Mid-West Automation Enterprises, Inc.
("Mid-West") described below, consists of two groups: DTI Automation and DTI
Packaging. Each group offers a class of products and services that complement
one another in terms of markets, engineering requirements, product needs and
systems capabilities.
DTI Automation. 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 DTI Automation 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 large thermoforming systems. The Company believes it is the largest
manufacturer of integrated assembly and test systems in North America.
DTI Packaging. DTI Packaging designs and builds proprietary machines and
integrated systems used to perform processing and packaging tasks. Core
capabilities of DTI Packaging include the design and manufacture of
thermoforming, blister packaging and foam extrusion systems, and a complete line
of tablet processing and packaging systems. The Company believes it is the
largest manufacturer of tablet packaging equipment in North America.
COMPONENTS SEGMENT. The Components segment, which accounted for
approximately 13% of pro forma consolidated fiscal 1996 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's principal executive offices are located at Corporate Centre,
Suite 2-300, 1949 E. Sunshine, Springfield, Missouri 65804, and its telephone
number is (417) 890-0102.
3
<PAGE> 6
RECENT ACQUISITIONS
On July 19, 1996, the Company acquired the stock of Mid-West, a designer
and manufacturer of integrated precision assembly systems. Mid-West's revenues
for its fiscal year ended May 25, 1996 were approximately $88.2 million and its
operating income, before certain nonrecurring charges, was approximately $18.4
million. Mid-West's customers are major U.S. corporations serving the
electronics industry. The results of Mid-West are included with those of the
Company for periods subsequent to the date of acquisition.
On September 30, 1996, the Company acquired the stock of Hansford
Manufacturing Corporation ("Hansford"), a designer and manufacturer of automated
assembly systems. For the first eight months of calendar year 1996, Hansford
recorded net sales of $33 million and an operating profit of $2.3 million. The
results of Hansford will be included with those of the Company for periods
subsequent to the quarter ended September 29, 1996.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company................................. 2,250,000 shares
The Selling Stockholders.................... 2,835,000 shares
---------
5,085,000 shares
=========
Common Stock offered for sale in:
U.S. Offering............................... 4,068,000 shares
International Offering...................... 1,017,000 shares
Common Stock to be outstanding after the
Offering....................................... 11,261,375 shares (a)
Use of proceeds.................................. The net proceeds to the Company will be
used to reduce indebtedness. See "Use of
Proceeds."
Dividend policy.................................. The Company expects to continue to pay
quarterly cash dividends of $0.02 per
share.
NNM symbol....................................... DTII
</TABLE>
- ---------------
(a) Does not include 951,575 shares as of October 15, 1996 issuable upon
exercise of stock options granted, or 637,050 additional shares available
for issuance, under the Company's employee benefit plans.
4
<PAGE> 7
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA(1)
THREE MONTHS THREE MONTHS ENDED PRO FORMA(1) FISCAL YEAR ENDED
ENDED --------------------- YEAR ENDED ---------------------------------
SEPT. 29, SEPT. 29, SEPT. 24, JUNE 30, JUNE 30, JUNE 25, JUNE 26,
1996 1996 1995 1996 1996 1995 1994
------------ --------- --------- ------------ --------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................ $ 89,807 $ 82,635 $ 44,788 $ 324,098 $ 235,946 $ 147,369 $ 107,499
Gross profit............. 24,666 22,765 11,241 92,422 63,378 37,691 27,944
Operating income......... 12,221 11,177 4,616 43,865 27,933 16,263 14,069
Income before income
taxes and extraordinary
loss................... 10,682 8,462 3,855 39,307 23,134 14,414 10,563
Income before
extraordinary loss..... 6,157 4,873 2,226 22,601 13,491 8,450 5,993
Net income............... 6,157 4,549 2,226 22,601 13,491 8,450 5,814
Earnings per share before
extraordinary loss..... $ 0.53 $ 0.52 $ 0.25 $ 2.01 $ 1.50 $ 0.94 $ 1.10
Earnings per share....... 0.53 0.48 0.25 2.01 1.50 0.94 1.07
Weighted average common
shares outstanding..... 11,665,738 9,415,738 9,000,000 11,250,257 9,000,257 9,000,000 5,458,337
OTHER DATA:
Depreciation and
amortization........... $ 2,644 $ 2,394 $ 1,441 $ 9,563 $ 6,116 $ 4,561 $ 3,357
Capital expenditures..... 2,417 2,417 2,070 11,998 10,249 7,718 2,272
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996
--------------------------
ACTUAL AS ADJUSTED(2)
-------- --------------
(Dollars in thousands)
<S> <C> <C>
BALANCE SHEET DATA:
Cash..................................................................... $ 2,653 $ 2,653
Working capital.......................................................... 48,870 61,526
Total assets............................................................. 346,962 346,962
Short-term debt.......................................................... 15,922 3,266
Long-term debt (net of current portion).................................. 153,695 81,975
Stockholders' equity..................................................... 92,365 176,741
RATIO ANALYSIS:
Ratio of total debt to total capitalization.............................. 64.7% 32.5%
</TABLE>
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(1) The pro forma consolidated statement of operations amounts illustrate the
estimated effects of (i) the acquisition of Mid-West and the financing
thereof and (ii) the Offering contemplated hereby and the application of the
estimated net proceeds to the Company therefrom to reduce indebtedness. See
"Pro Forma Financial Information."
(2) The as adjusted consolidated balance sheet data amounts illustrate the
effects of the Offering as described above. See "Pro Forma Financial
Information."
5
<PAGE> 8
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this Prospectus, and in the documents incorporated
by reference herein, that are not historical facts are forward-looking
statements that are subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995. When used in this Prospectus the words
"anticipate," "believe," "estimate," "expect" and similar expressions are
intended to identify such forward-looking statements. A number of important
factors could cause the Company's actual results for fiscal 1997 and beyond to
differ materially from those expressed in, or implied by, such forward-looking
statements. These factors include, without limitation, those listed below in
"Risk Factors."
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be carefully considered in evaluating the Company and its
business before purchasing shares of Common Stock offered hereby:
RAPID GROWTH; INTEGRATION OF RECENTLY-ACQUIRED OPERATIONS. The Company has
made 14 acquisitions since its formation in 1992, including four acquisitions in
fiscal 1996 and two acquisitions, Mid-West and Hansford, subsequent to June 30,
1996. Primarily as a result of these acquisitions, the Company's historical
consolidated net sales have increased from $50.6 million for fiscal 1993 to
$235.9 million for fiscal 1996. There can be no assurance that the Company will
continue to experience such rapid growth, that the Company will be successful in
integrating these operations or that such rapid growth and integration will not
divert management resources, cause temporary disruptions in the management of
the business or otherwise have a material adverse effect on the Company's
business, financial condition or results of operations. See "Business."
ACQUISITION STRATEGY. The Company expects to continue a strategy of
identifying and acquiring companies with complementary products and services
which could be expected to enhance the Company's operations and profitability.
There can be no assurance that the Company will continue to identify suitable
new acquisition candidates, obtain financing necessary to complete such
acquisitions or acquire businesses on satisfactory terms or that any business
acquired by the Company will be integrated successfully into the Company's
operations or prove to be profitable. In addition, although the proceeds of the
Offering will be used to reduce indebtedness, the Company will continue to have
a leveraged capital structure and any future acquisitions made by the Company
are likely to be financed with additional indebtedness which, in turn, may
result in a highly-leveraged capital structure. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
DEPENDENCE ON SIGNIFICANT CUSTOMERS. The Company's sales are concentrated.
After giving effect to the acquisition of Mid-West, on a pro forma basis, sales
to a significant customer in the electronics industry accounted for 22.7% of pro
forma consolidated net sales for fiscal 1996 and the Company's top five
customers in fiscal 1996 accounted for 44.3% of the Company's pro forma
consolidated net sales. The loss of, or reduced demand for products from, one or
more of the Company's significant customers could have a material adverse effect
on the Company's business, financial condition or results of operations. See
"Business -- Customers."
FLUCTUATIONS IN QUARTERLY RESULTS; PROFITABILITY OF FIXED PRICE
CONTRACTS. Because orders for certain of the Company's products can be several
million dollars or more, a relatively limited number of orders can constitute a
meaningful percentage of the Company's revenue in any one quarterly period. As a
result, 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. Certain
of the Company's revenues are derived from fixed price contracts. To the extent
that original cost estimates prove to be inaccurate, profitability from a
particular contract may be adversely affected. Gross margins in the Special
Machines segment may also vary between comparable periods as a result of the
variations in 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
6
<PAGE> 9
or related fiscal year. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Seasonality and Fluctuations in Quarterly
Results."
SURRENDER OF VOTING CONTROL BY CONTROLLING STOCKHOLDERS. As of October 30,
1996, Peer Investors L.P. ("Peer L.P."), Harbour Group Investments II, L.P.
("Investments L.P."), Harbour Group II Management Co. ("Harbour Group") and Peer
Investors II L.P. ("Peer II L.P."), all of whom are under the common control of
Sam Fox, collectively owned approximately 32.2% of the outstanding Common Stock
of the Company and, as a result, have been able, as a practical matter, to elect
all of the directors of the Company and to exercise control over the management
and policies of the Company. In addition, the Fox Family Foundation, a
charitable foundation of which Sam Fox is a trustee, was also the beneficial
owner of 4.3% of the outstanding Common Stock as of such date. As a result of
the Offering, these entities collectively will own 4.1% of the shares
outstanding (less than 1.0% if the over-allotment option is exercised in full)
and may no longer be able to exercise practical control over the Company. The
Company is unaware of any current intent of these entities or their affiliates
to reacquire such control in the future. In addition, as a result of the
Offering, it is likely that there will be a greater number of beneficial owners
of Common Stock and a larger number of shares outstanding available for resale
in the secondary market.
Affiliates of Harbour Group have entered into certain agreements with the
Company whereby such entities provide the Company with operations consulting and
corporate development services as requested from time to time by the Company.
See "Certain Transactions -- Related Party Transactions." Such affiliates have
had a significant role in assisting the Company in its pursuit of its
acquisition strategy. In addition, four individuals who are affiliates of
Harbour Group serve as directors of the Company and are expected to continue to
serve as directors following the Offering. Harbour Group and its affiliates have
advised the Company that, as a result of the Offering and the surrender of
practical control over the Company, it is likely that Harbour Group and its
affiliates will diminish their involvement with the Company over an as yet
undetermined period of time. There can be no assurance that the surrender of
practical control or the diminution in involvement in the Company's affairs will
not have a material adverse effect on the Company.
SUSCEPTIBILITY TO GENERAL ECONOMIC CONDITIONS. The Company's revenues and
results of operations will be subject to fluctuations based upon general
economic conditions. If there were to be a general economic downturn or a
recession in the United States or certain other markets, the Company believes
that certain of its customers may reduce or delay their demand for the Company's
products, leading to a reduction in the Company's revenues and/or backlog. Most
of the factors that might influence customers and prospective customers to
reduce their capital budgets under these circumstances are beyond the Company's
control. In the event of such an economic downturn, the Company's business,
financial condition and operating results could be materially and adversely
affected. There can be no assurance that growth in the markets for the Company's
products will occur or that such growth will result in increased demand for the
Company's products. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
ANTI-TAKEOVER PROVISIONS. The existence of authorized but unissued capital
stock may have the effect of making more difficult or discouraging an
acquisition of the Company deemed undesirable by its Board of Directors. In
addition, the issuance of authorized but unissued preferred stock, which can be
effected by the Company's Board of Directors without stockholder approval, may
adversely affect the market price of, and voting and other rights attributable
to, the Common Stock. Provisions in the Company's Restated Certificate of
Incorporation permitting the Board to amend the Bylaws without stockholder vote
and provisions in the Bylaws permitting the Board to increase or decrease the
size of the Board could, alone or in combination with the authorized but
unissued capital stock, also deter or discourage acquisitions deemed undesirable
by the Board. Furthermore, the Board has approved and submitted for adoption by
the Company's stockholders at the annual meeting to be held on November 11,
1996, an amendment to the Restated Certificate of Incorporation dividing the
Company's Board of Directors into three classes with staggered terms, which if
adopted could have the effect of making more difficult or discouraging an
acquisition of the Company deemed undesirable by the Board. In addition, certain
provisions of Delaware law applicable to the Company, including Section 203 of
the Delaware General Corporation Law, could have the effect of delaying,
deferring or preventing a change of control of the Company.
7
<PAGE> 10
STOCK PRICE VOLATILITY. The market price of the Common Stock could
continue to fluctuate substantially due to a variety of factors, including
quarterly fluctuations in results of operations, the impact of acquisitions,
adverse circumstances affecting the introduction or market acceptance of new
products and services offered by the Company or its customers, changes in the
general economic environment, changes in earnings estimates by analysts, changes
in accounting principles, sales of Common Stock by existing holders, loss of key
personnel and other factors. The market price for the Company's Common Stock may
also be affected by the Company's ability to meet analysts' expectations, and
any failure to meet such expectations, even if minor, could have a material
adverse effect on the market price of the Company's Common Stock. In addition,
the stock market is subject to extreme price and volume fluctuations. This
volatility has had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to the operating performance of
these companies. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. Any such litigation instigated against
the Company could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect on the
Company's business, operating results and financial condition. See "Price Range
of Common Stock and Dividend Information."
RECENT DEVELOPMENTS
On September 30, 1996, the Company acquired the stock of Hansford, a
designer and manufacturer of automated assembly systems. For the first eight
months of calendar year 1996, Hansford recorded net sales of $33 million and
operating profit of $2.3 million. At September 30, 1996, Hansford's backlog was
$21.1 million. The Company paid $8.9 million of the $17.4 million cash purchase
price at the closing and agreed to pay the $8.5 million balance on June 30,
1997. The Company also agreed, subject to achieving a minimum level of future
earnings attributable to the Hansford business, to make additional cash payments
payable over a two-year period beginning after the end of fiscal 1999. The
actual amount of such additional payments, if any, will be determined by a
formula based on the earnings of Hansford and will not exceed $20 million. The
acquisition will be accounted for under the purchase method of accounting, with
the purchase price allocated to the estimated fair market value of the assets
acquired and liabilities assumed and the excess allocated to goodwill. The
results of Hansford will be included with those of the Company subsequent to the
quarter ended September 29, 1996.
The Company believes that Hansford's advanced engineering and technological
expertise adds a valued new dimension to DTI Automation. Among other
innovations, Hansford has developed a reusable and flexible light modular
assembly system, which is expected to address many of the Company's customers'
requests for greater flexibility in assembly systems. This recently-introduced
product is also expected to open new markets for DTI, particularly among
lower-volume electronic and medical device manufacturers who could not
previously justify product-specific automation systems.
Hansford's manufacturing operations are conducted in two leased facilities
in Rochester, New York consisting of approximately 139,000 square feet in the
aggregate. At the time of acquisition, Hansford had approximately 250 employees.
Concurrent with the acquisition of Hansford, the Company amended its Second
Amended and Restated Credit Facilities Agreement (the "Amended Facility"),
increasing the total amount of the facility from $200 million to $210 million.
See Note 4 to the Consolidated Financial Statements.
8
<PAGE> 11
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of shares of
Common Stock in the Offering (after deduction of estimated Underwriters'
discounts and commissions and expenses payable by the Company in connection with
the Offering) are estimated to be approximately $84.4 million (approximately
$96.7 million if the over-allotment option is exercised in full). Such proceeds
are expected to be used to reduce indebtedness, bearing interest at a weighted
average rate of approximately 7.5% and maturing on July 23, 2001, incurred in
connection with (i) the acquisitions of Advanced Assembly Automation, Inc.
("AAA"), the Lakso division of Package Machinery Company ("Lakso"), the business
and assets of Armac Industries, Ltd. ("Armac"), the business and assets of H.G.
Kalish, Inc. ("Kalish"), the business and assets of Arrow Precision Elements,
Inc. ("Arrow"), Assembly Machines, Inc. ("AMI"), Mid-West and Hansford and (ii)
capital improvements. Under the terms of the Amended Facility, the effects of
the prepayment of indebtedness through the application of the proceeds of the
Offering are expected to result in a reduction in interest rates of 0.75% per
annum on borrowings outstanding under the Amended Facility. In addition, under
the terms of the Amended Facility, the prepayment of indebtedness through
application of the proceeds of the Offering will establish a loan commitment
equal to the amount of the reduction in indebtedness, which commitment will be
available for use by the Company to finance future acquisitions for up to two
years following the consummation of the Offering, subject to the provisions of
the Amended Facility. The Company has from time to time engaged, and expects to
engage in the future, in discussions relating to potential complementary
acquisitions. There are no material business acquisitions that are currently
proposed or probable.
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders.
PRICE RANGE OF COMMON STOCK AND DIVIDEND INFORMATION
The Company's Common Stock is quoted on the NNM under the symbol "DTII."
The following table sets forth, for the fiscal quarters indicated, the high and
low closing sales prices for the Common Stock as reported by the NNM and the
cash dividends per share declared during such periods.
<TABLE>
<CAPTION>
CLOSING
SALES PRICE
------------ QUARTERLY CASH
HIGH LOW DIVIDENDS
---- ---- --------------
<S> <C> <C> <C>
FISCAL 1995
First Quarter...................................................... $17 1/2 $14 3/4 $ 0.02
Second Quarter..................................................... 15 1/2 10 7/8 0.02
Third Quarter...................................................... 11 1/2 8 9/16 0.02
Fourth Quarter..................................................... 12 1/4 10 1/4 0.02
FISCAL 1996
First Quarter...................................................... 14 10 1/2 0.02
Second Quarter..................................................... 14 12 3/4 0.02
Third Quarter...................................................... 19 13 0.02
Fourth Quarter..................................................... 23 1/4 18 1/4 0.02
FISCAL 1997
First Quarter...................................................... 34 1/2 17 3/4 0.02
Second Quarter (through October 30, 1996).......................... 41 7/8 33 1/4
</TABLE>
On October 30, 1996, the closing sales price for the Common Stock as
reported by the NNM was $39 1/2. As of October 23, there were 75 record owners
of DTI's Common Stock.
The Company currently intends to continue to declare and pay cash dividends
on its Common Stock on a quarterly basis. However, all dividend payments are
subject to the Company's earnings, financial condition and capital requirements
at the time of declaration and will be paid only if, as and to the extent
declared by the Company's Board of Directors.
9
<PAGE> 12
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company (i) at September 29, 1996 and (ii) as adjusted to reflect the sale
by the Company of 2,250,000 shares of Common Stock offered hereby at an assumed
offering price of $39 1/2 (and after deducting estimated underwriting discounts
and commissions and expenses of the Offering) and the application of such
estimated net proceeds therefrom as described under "Use of Proceeds." This
table should be read in conjunction with "Selected Historical Consolidated
Financial Data," "Pro Forma Financial Information" and the Consolidated
Financial Statements and related notes of the Company included elsewhere herein.
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(Dollars in thousands)
<S> <C> <C>
Short-term debt....................................................... $ 15,922 $ 3,266
Long-term debt (net of current portion)............................... 153,695 81,975
-------- ---------
Total debt....................................................... 169,617 85,241
Stockholders' equity:
Preferred stock, $.01 par value; authorized: 1,500,000 shares;
issued and outstanding: none..................................... -- --
Common stock, $.01 par value; authorized: 100,000,000 shares; issued
and outstanding: 9,009,375 shares outstanding and 11,259,375
shares outstanding as adjusted (a)............................... 90 113
Additional paid-in capital.......................................... 61,367 145,720
Retained earnings................................................... 30,908 30,908
-------- ---------
Total stockholders' equity....................................... 92,365 176,741
-------- ---------
Total capitalization........................................ $261,982 $ 261,982
======== =========
Total debt to total capitalization.................................... 64.7% 32.5%
======== =========
</TABLE>
- ---------------
(a) Does not include 951,575 shares as of October 15, 1996 issuable upon
exercise of stock options granted, or 637,050 additional shares available
for issuance, under the Company's employee benefit plans.
10
<PAGE> 13
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Company and its subsidiaries and Detroit Tool Group, Inc. ("DTG"), as
predecessor to the Company, for each of the fiscal years in the five year period
ended June 30, 1996 and for the three months ended September 29, 1996 and the
three months ended September 24, 1995. The data for the fiscal years ended June
30, 1996, June 25, 1995 and June 26, 1994 have been derived from the
Consolidated Financial Statements of the Company included herein which have been
audited by Price Waterhouse LLP, independent accountants. The data for the
fiscal years ended June 30, 1993 and 1992 have been derived from Consolidated
Financial Statements of the Company and DTG, as predecessor to the Company,
which have been audited by Price Waterhouse LLP, which are not included herein.
The data for the three months ended September 29, 1996 and the three months
ended September 24, 1995 have been derived from the unaudited consolidated
financial statements of the Company, which, in the opinion of management, have
been prepared on the same basis as the audited financial statements and include
all adjustments which are of a normal recurring nature necessary for a fair
presentation.
The data set forth below should be read in conjunction with the report of
the independent accountants, the Consolidated Financial Statements and related
notes of the Company included elsewhere herein and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein.
<TABLE>
<CAPTION>
PREDECESSOR(1)
COMPANY COMPANY(1) FISCAL YEAR
THREE MONTHS ENDED FISCAL YEAR ENDED ENDED
---------------------- ------------------------------------------------ --------------
SEPT. 29, SEPT. 24, JUNE 30, JUNE 25, JUNE 26, JUNE 30, JULY 30,
1996 1995 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- --------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................... $ 82,635 $ 44,788 $ 235,946 $ 147,369 $ 107,499 $ 50,628 $ 59,130
Cost of sales................ 59,870 33,547 172,568 109,678 79,555 40,066 46,018
--------- --------- --------- --------- --------- --------- -------
Gross profit................. 22,765 11,241 63,378 37,691 27,944 10,562 13,112
Selling, general and
administrative expenses.... 11,588 6,625 35,445 21,428 13,875 6,147 8,758
--------- --------- --------- --------- --------- --------- -------
Operating income............. 11,177 4,616 27,933 16,263 14,069 4,415 4,354
Interest expense, net........ 2,715 761 4,799 1,849 3,506 2,583 3,295
--------- --------- --------- --------- --------- --------- -------
Income before income taxes
and extraordinary loss..... 8,462 3,855 23,134 14,414 10,563 1,832 1,059
Provision for income taxes... 3,589 1,629 9,643 5,964 4,570 1,000 611
--------- --------- --------- --------- --------- --------- -------
Income before extraordinary
loss....................... 4,873 2,226 13,491 8,450 5,993 832 448
Extraordinary loss, net(2)... (324) (179) (428)
--------- --------- --------- --------- --------- --------- -------
Net income................... $ 4,549 $ 2,226 $ 13,491 $ 8,450 $ 5,814 $ 404 $ 448
======== ======== ======== ======== ======== ======== =============
Earnings per share before
extraordinary loss......... $ 0.52 $ 0.25 $ 1.50 $ 0.94 $ 1.10 $ 0.19 -(3)
Earnings per share........... $ 0.48 $ 0.25 $ 1.50 $ 0.94 $ 1.07 $ 0.09 -(3)
Weighted average common
shares outstanding......... 9,415,738 9,000,000 9,000,257 9,000,000 5,458,337 4,481,167 -(3)
BALANCE SHEET DATA:
Working capital (deficit).... $ 48,870 $ 15,545 $ 26,161 $ 16,791 $ 8,846 $ 464 $ (8,219)
Total assets................. 346,962 183,239 233,843 159,263 97,628 62,779 44,032
Short-term debt.............. 15,922 6,174 8,481 6,448 206 2,271 2,490
Long-term debt............... 153,695 41,441 70,846 30,905 226 28,776 21,125
Stockholders' equity
(deficit).................. 92,365 77,066 87,884 75,020 67,234 6,054 (2,834)
</TABLE>
- ---------------
(1) The Company was organized in July 1992 for the purpose of acquiring 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 $540 and $684, less applicable
income tax benefits of $216 and $256, in the periods ended September 29,
1996 and June 30, 1993, respectively, related to the refinancing of debt and
costs of $314, less applicable income tax benefits of $135, in fiscal 1994
related to the extinguishment of debt.
(3) Given the historical organization and capital structure of the predecessor,
share and earnings per share information is not considered meaningful for
the predecessor.
11
<PAGE> 14
PRO FORMA FINANCIAL INFORMATION
The following pro forma unaudited consolidated statements of operations of
DTI for the year ended June 30, 1996 and for the three months ended September
29, 1996, respectively, were prepared to illustrate the estimated effects of (i)
the acquisition of Mid-West (as described further below) and the financing
thereof and (ii) the Offering contemplated hereby at an assumed public offering
price of $39 1/2 (and after deducting estimated underwriting discounts and
commissions and expenses of the Offering) and the application of the estimated
net proceeds to the Company therefrom to prepay outstanding indebtedness
(collectively, the "Pro Forma Transactions"), as if the Pro Forma Transactions
had occurred at the beginning of each respective period. The following pro forma
unaudited consolidated balance sheet of DTI at September 29, 1996 was prepared
to illustrate the estimated effects of the Offering contemplated hereby and the
application of the estimated net proceeds to the Company therefrom to prepay
outstanding indebtedness. Neither the pro forma unaudited consolidated
statements of operations nor the pro forma unaudited consolidated balance sheet
of DTI include the effects of the acquisition of Hansford which was completed on
September 30, 1996.
On July 19, 1996, the Company completed the acquisition of the stock of
Mid-West in a transaction accounted for under the purchase method of accounting.
The aggregate purchase price approximated $75.2 million, plus assumed
liabilities of approximately $15.9 million. The acquisition was financed through
additional borrowings under the Company's Second Amended and Restated Credit
Facilities Agreement, which replaced the Company's existing credit facility.
The purchase price for Mid-West was assigned to the assets acquired and
liabilities assumed based on their estimated fair values at the acquisition
date. Based on such allocations, the aggregate purchase price exceeded the
estimated fair value of the net assets acquired (goodwill) by approximately
$56.2 million, which is being amortized over 40 years and will result in an
annual amortization charge of $1.4 million.
The pro forma unaudited consolidated statements of operations and the pro
forma unaudited consolidated balance sheet do not purport to represent (i) the
actual results of operations or financial condition of the Company, had the Pro
Forma Transactions occurred on the dates assumed, or (ii) the results of
operations or financial position to be expected in the future. They do not
reflect any estimate of cost savings or other efficiencies that may be achieved
from the integration of Mid-West. Management believes that the assumptions used
in preparing the pro forma unaudited consolidated statements of operations and
the pro forma unaudited consolidated balance sheet provide a reasonable basis
for presenting all of the significant effects of the Pro Forma Transactions,
that the pro forma adjustments give appropriate effect to those assumptions, and
that the pro forma adjustments are properly applied in the pro forma unaudited
consolidated statements of operations and the pro forma unaudited consolidated
balance sheet.
The pro forma unaudited consolidated statements of operations and the pro
forma unaudited consolidated balance sheet and accompanying notes should be read
in conjunction with the historical financial statements of the Company and
Mid-West, including the notes thereto, and the other financial information
pertaining to the Company and Mid-West, including the information set forth
under "Capitalization," "Selected Historical Consolidated Financial Data," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere, or incorporated by reference, herein.
12
<PAGE> 15
PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
MID-WEST
CONSOLIDATED
BALANCES
FOR THE
FISCAL PRO FORMA PRO FORMA
YEAR ENDED PURCHASE FOR THE
DTI AS MAY 26, 1996 ACCOUNTING ACQUISITION OFFERING PRO FORMA
REPORTED AS REPORTED ADJUSTMENTS OF MID-WEST ADJUSTMENTS AS ADJUSTED
--------- ------------ ----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $ 235,946 $ 88,152 $ 324,098 $ 324,098
Cost of sales................ 172,568 58,053 $ 1,055(1) 231,676 231,676
--------- ------------ ----------- ----------- ----------- -----------
Gross profit................. 63,378 30,099 (1,055) 92,422 92,422
Selling, general and
administrative expenses.... 35,445 15,214 (2,102)(2) 48,557 48,557
--------- ------------ ----------- ----------- ----------- -----------
Operating income............. 27,933 14,885 1,047 43,865 43,865
Interest expense (income),
net........................ 4,799 (65) 6,605(3) 11,339 $(6,781)(5) 4,558
--------- ------------ ----------- ----------- ----------- -----------
Income before provision for
income taxes............... 23,134 14,950 (5,558) 32,526 6,781 39,307
Provision for income taxes... 9,643 5,994 (1,643)(4) 13,994 2,712(4) 16,706
--------- ------------ ----------- ----------- ----------- -----------
Income before extraordinary
item....................... $ 13,491 $ 8,956 $(3,915) $ 18,532 $ 4,069 $ 22,601
========= ============ =========== =========== =========== ===========
Earnings per common share
before extraordinary
item....................... $ 1.50 $ 2.06 $ 2.01
Weighted average number of
common shares.............. 9,000,257 9,000,257 11,250,257
</TABLE>
- ---------------
<TABLE>
<C> <S> <C>
(1) Cost of sales has been increased (reduced) for the following:
Elimination of capitalized building lease depreciation............................................... $ (303)
Increase in operating lease expense related to the building.......................................... 1,358
-------
$ 1,055
=======
Prior to its acquisition by the Company, Mid-West leased its primary manufacturing facility under a lease
treated as a capital lease for financial reporting purposes. The Company has entered into a new lease for the
facility, concurrent with the acquisition, that will be treated as an operating lease for financial reporting
purposes.
(2) Selling, general and administrative expenses have been increased (reduced) for the following:
Elimination of sales commissions paid to a company related to Mid-West via common ownership.......... $(3,522)
Elimination of capitalized building lease depreciation............................................... (32)
Increase in goodwill amortization.................................................................... 1,452
-------
$(2,102)
=======
(3) Interest expense has been increased for the following:
Financing of purchase, including acquisition costs and deferred financing costs, net of cash $80,800
acquired.............................................................................................
Weighted average DTI interest rate for 1996.......................................................... 7.50%
-------
6,060
Additional amortization related to deferred financing fees (five year amortization period)........... 480
Elimination of historical Mid-West interest income, net.............................................. 65
-------
$ 6,605
=======
The adjustment does not reflect the effect of the writeoff of deferred financing fees related to the Company's
existing credit facility, which was replaced with the Second Amended and Restated Credit Facilities Agreement.
Such writeoff, net of related tax benefits, of approximately $324 is presented as an extraordinary item in the
historical consolidated statement of operations for the three months ended September 29, 1996.
(4) Amount reflects the estimated income tax effect of pro forma adjustments (excluding non-deductible goodwill
amortization).
(5) The reduction in interest expense reflects the application of the net proceeds from the Offering to repay
approximately $84,400 of the outstanding indebtedness of the Company. Further, the reduction reflects the terms
of the Amended Facility which are expected to result in a reduction in interest rates of 0.75% per annum on
borrowings outstanding under the Amended Facility upon prepayment of indebtedness with net proceeds from the
Offering.
</TABLE>
13
<PAGE> 16
PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 29, 1996
<TABLE>
<CAPTION>
MID-WEST
CONSOLIDATED
BALANCES
FOR THE PERIOD
FROM JULY 1, PRO FORMA PRO FORMA
1996 TO PURCHASE FOR THE
DTI AS JULY 18, 1996 ACCOUNTING ACQUISITION OFFERING PRO FORMA
REPORTED AS REPORTED ADJUSTMENTS OF MID-WEST ADJUSTMENTS AS ADJUSTED
--------- -------------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $ 82,635 $7,172 $ 89,807 $ 89,807
Cost of sales................ 59,870 5,183 $ 88(1) 65,141 65,141
--------- ------- ----------- ----------- ----------- -----------
Gross profit................. 22,765 1,989 (88) 24,666 24,666
Selling, general and
administrative expenses.... 11,588 739 118(2) 12,445 12,445
--------- ------- ----------- ----------- ----------- -----------
Operating income............. 11,177 1,250 (206) 12,221 12,221
Interest expense (income),
net........................ 2,715 19 545(3) 3,279 $(1,740)(5) 1,539
--------- ------- ----------- ----------- ----------- -----------
Income before provision for
income taxes............... 8,462 1,231 (751) 8,942 1,740 10,682
Provision for income taxes... 3,589 492 (252)(4) 3,829 696(4) 4,525
--------- ------- ----------- ----------- ----------- -----------
Income before extraordinary
item....................... $ 4,873 $ 739 $(499) $ 5,113 $ 1,044 $ 6,157
========= ============ =========== =========== =========== ===========
Earnings per common share
before extraordinary
item....................... $ 0.52 $ 0.54 $ 0.53
Weighted average number of
common shares.............. 9,415,738 9,415,738 11,665,738
</TABLE>
- ---------------
<TABLE>
<C> <S> <C>
(1) Cost of sales has been increased (reduced) for the following:
Elimination of capitalized building lease depreciation................................................. $(25)
Increase in operating lease expense related to the building............................................ 113
----
$ 88
====
(2) Selling, general and administrative expenses have been increased (reduced) for the following:
Elimination of capitalized building lease depreciation................................................. $ (3)
Increase in goodwill amortization...................................................................... 121
----
$118
====
(3) Interest expense has been increased for the following:
Financing of purchase, including acquisition costs and deferred financing costs, net of cash $505
acquired...............................................................................................
Additional amortization related to deferred financing fees (five year amortization life)............... 40
----
$545
====
The adjustment does not reflect the effect of the writeoff of deferred financing fees related to the Company's
existing credit facility, which was replaced with the Second Amended and Restated Credit Facilities Agreement.
Such writeoff, net of related tax benefits, of approximately $324 is presented as an extraordinary item in the
historical consolidated statement of operations for the three months ended September 29, 1996.
(4) Amount reflects the estimated income tax effect of pro forma adjustments (excluding non-deductible goodwill
amortization).
(5) The reduction in interest expense reflects the application of the net proceeds from the Offering to repay
approximately $84,400 of the outstanding indebtedness of the Company. Further, the reduction reflects the
terms of the Amended Facility which are expected to result in a reduction in interest rates of 0.75% per annum
on borrowings outstanding under the Amended Facility upon prepayment of indebtedness with net proceeds from
the Offering.
</TABLE>
14
<PAGE> 17
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 29, 1996
<TABLE>
<CAPTION>
DTI OFFERING PRO FORMA
AS REPORTED ADJUSTMENTS AS ADJUSTED
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents................. $ 2,653 $ 2,653
Accounts receivable, net.................. 34,940 34,940
Costs and estimated earnings in excess of
amounts billed.......................... 58,088 58,088
Inventories, net.......................... 38,636 38,636
Prepaid expenses and other................ 6,699 6,699
--------- ---------
Total current assets................. 141,016 141,016
Property, plant & equipment, net............... 44,204 44,204
Goodwill, net.................................. 157,753 157,753
Other assets, net.............................. 3,989 3,989
--------- ---------
$ 346,962 $ 346,962
========= =========
Liabilities and stockholders' equity
Current liabilities:
Current portion of long term debt......... $ 15,922 $ (12,656)(a) $ 3,266
Accounts payable.......................... 34,627 34,627
Customer advances......................... 17,534 17,534
Accrued liabilities....................... 24,063 24,063
--------- --------- ---------
Total current liabilities............ 92,146 (12,656) 79,490
Long-term debt................................. 153,695 (71,720)(a) 81,975
Deferred income taxes.......................... 5,261 5,261
Other long-term liabilities.................... 3,495 3,495
Stockholders' equity........................... 92,365 84,376 (a) 176,741
--------- --------- ---------
$ 346,962 $ 0 $ 346,962
========= ========= =========
</TABLE>
- ---------------
(a) Amounts reflect the application of the net proceeds from the Offering to
repay approximately $84,400 of the outstanding debt of the Company.
15
<PAGE> 18
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 made a number of acquisitions for the Special Machines and
Components segments. The acquisitions are elements of a strategy 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 allows 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 the business and assets of
Stokes-Merrill, Inc. ("Stokes-Merrill") in December 1993. During fiscal 1995,
the Company completed the acquisitions of AAA in August 1994 and Lakso and Armac
in February 1995. During fiscal 1996, the Company completed the acquisitions of
Kalish in August 1995, Arrow in September 1995, Swiftpack Automation Limited
("Swiftpack") in November 1995 and AMI in January 1996.
On July 19, 1996, the Company acquired the issued and outstanding stock of
Mid-West for approximately $75.2 million, net of cash acquired. Mid-West is a
designer and manufacturer of integrated precision assembly systems. For its
fiscal year ended May 26, 1996, Mid-West had net sales of $88.2 million and its
operating income, before certain nonrecurring charges, was approximately $18.4
million. The results of operations of Mid-West are included with those of the
Company for periods subsequent to the date of acquisition.
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. Goodwill approximated $157.8
million at September 29, 1996. 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.
The Company operates in two business segments: Special Machines, including
DTI Automation and DTI Packaging, and Components. The Special Machines segment
designs and builds custom equipment, proprietary machines and integrated
systems. The Components segment stamps and fabricates a wide range of standard
and custom metal components.
16
<PAGE> 19
Set forth below is certain financial data relating to each business
segment.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
---------------------- --------------------------------
SEPT. 29, SEPT. 24, JUNE 30, JUNE 25, JUNE 26,
1996 1995 1996 1995 1994
--------- --------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES
Special Machines(1)
DTI Automation.................. $ 50,507 $ 21,906 $106,217 $ 67,119 $ 51,112
DTI Packaging................... 22,019 13,819 87,667 45,051 25,666
--------- --------- -------- -------- --------
Total Special Machines............... 72,526 35,725 193,884 112,170 76,778
Components........................... 10,109 9,063 42,062 35,199 30,721
--------- --------- -------- -------- --------
Total................................ $ 82,635 $ 44,788 $235,946 $147,369 $107,499
======== ======== ======== ======== ========
GROSS PROFIT
Special Machines(1).................. $ 20,392 $ 9,401 $ 53,299 $ 29,015 $ 20,293
Gross margin.................... 28.1% 26.3% 27.5% 25.9% 26.4%
Components........................... $ 2,373 $ 1,840 $ 10,079 $ 8,676 $ 7,651
Gross margin.................... 23.5% 20.3% 24.0% 24.6% 24.9%
--------- --------- -------- -------- --------
Total gross profit................... $ 22,765 $ 11,241 $ 63,378 $ 37,691 $ 27,944
Total gross margin................... 27.5% 25.1% 26.9% 25.6% 26.0%
======== ======== ======== ======== ========
OPERATING INCOME
Special Machines(1).................. $ 11,372 $ 4,556 $ 26,557 $ 13,857 $ 11,506
Operating margin................ 15.7% 12.8% 13.7% 12.4% 15.0%
Components........................... $ 1,411 $ 1,322 $ 6,934 $ 6,676 $ 5,789
Operating margin................ 14.0% 14.6% 16.5% 19.0% 18.8%
Corporate............................ $ (1,606) $ (1,262) $ (5,558) $ (4,270) $ (3,226)
--------- --------- -------- -------- --------
Total operating income............... $ 11,177 $ 4,616 $ 27,933 $ 16,263 $ 14,069
Total operating margin............... 13.5% 10.3% 11.8% 11.0% 13.1%
======== ======== ======== ======== ========
DEPRECIATION AND AMORTIZATION EXPENSE
Special Machines(1).................. $ 1,879 $ 1,072 $ 4,683 $ 3,452 $ 2,299
Components........................... 319 251 1,038 837 771
Corporate............................ 196 118 39 272 287
--------- --------- -------- -------- --------
Total................................ $ 2,394 $ 1,441 $ 6,116 $ 4,561 $ 3,357
======== ======== ======== ======== ========
CAPITAL EXPENDITURES
Special Machines(1).................. $ 1,751 $ 1,440 $ 6,145 $ 4,127 $ 750
Components........................... 318 341 2,138 3,043 1,392
Corporate............................ 348 289 1,966 548 130
--------- --------- -------- -------- --------
Total................................ $ 2,417 $ 2,070 $ 10,249 $ 7,718 $ 2,272
======== ======== ======== ======== ========
IDENTIFIABLE ASSETS
Special Machines(1).................. $ 313,944 $ 158,424 $203,210 $135,328 $ 74,376
Components........................... 29,546 23,247 28,528 23,061 22,251
Corporate............................ 3,472 1,568 2,105 874 1,001
--------- --------- -------- -------- --------
Total................................ $ 346,962 $ 183,239 $233,843 $159,263 $ 97,628
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Excludes operations data for acquired businesses prior to their respective
dates of acquisition.
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<PAGE> 20
Gross margins of the Special Machines segment may vary from period to
period 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 and
engineering support; 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 for customer contracts are measured
based on the ratio of engineering and manufacturing labor hours incurred to date
compared to total estimated engineering and manufacturing labor hours or, for
certain customer contracts, the ratio of total costs incurred to date to total
estimated costs. 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 results expressed in, or implied by, such forward-looking statements if
the Company experiences delays or cancellations of customer orders, delays in
shipping dates of products, cost overruns on certain projects or currency
exchange fluctuations. The Company may also be adversely affected by downturns
in the economy in general or in markets served by substantial customers. See
"Cautionary Statement Regarding Forward-Looking Statements" and "Risk Factors."
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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
---------------------- --------------------------------
SEPT. 29, SEPT. 24, JUNE 30, JUNE 25, JUNE 26,
1996 1995 1996 1995 1994
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................. 72.5 74.9 73.1 74.4 74.0
--------- --------- -------- -------- --------
Gross profit.............................. 27.5 25.1 26.9 25.6 26.0
Selling, general and administrative
expenses................................ 14.0 14.8 15.1 14.6 12.9
--------- --------- -------- -------- --------
Operating income.......................... 13.5 10.3 11.8 11.0 13.1
Interest expense.......................... 3.3 1.7 2.0 1.2 3.3
--------- --------- -------- -------- --------
Income before provision for income taxes
and extraordinary loss.................. 10.2 8.6 9.8 9.8 9.8
Provision for income taxes................ 4.3 3.6 4.1 4.1 4.2
--------- --------- -------- -------- --------
Income before extraordinary loss.......... 5.9 5.0 5.7 5.7 5.6
Extraordinary loss on debt refinancing.... 0.4 0.2
--------- --------- -------- -------- --------
Net income................................ 5.5% 5.0% 5.7% 5.7% 5.4%
====== ====== ====== ====== ======
</TABLE>
18
<PAGE> 21
THREE MONTHS ENDED SEPTEMBER 29, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
24, 1995
NET SALES
Consolidated net sales increased $37.8 million, or 84.5%, to $82.6 million
for the three months ended September 29, 1996 from $44.8 million for the three
months ended September 24, 1995. Of the $37.8 million increase in sales, $32.2
million was due to the incremental sales of recently acquired businesses, with
the remaining $5.6 million increase relating to increased sales from existing
businesses. Recently acquired businesses include Kalish in August 1995, Arrow in
September 1995, Swiftpack in November 1995, AMI in January 1996 and Mid-West in
July 1996.
Sales by the Special Machines segment increased $36.8 million and sales by
the Components segment increased $1.0 million. The increase in sales by the
Special Machines segment was due to an increase in sales from existing
businesses of $5.8 million, or 16.2%, over the first quarter of fiscal 1996 and
$31.0 million in incremental sales from recently-acquired businesses. Sales from
existing businesses were up $2.9 million primarily due to substantially larger
projects with existing assembly systems customers. These increases reflected
international expansion by certain customers and increased penetration into new
markets. The remaining increase of $2.9 million primarily resulted from an
increase in sales of proprietary branded plastics packaging equipment and
welding equipment. The increase in sales by the Components segment of $1.0
million was substantially due to incremental sales arising from the Arrow
acquisition. Sales from existing components businesses were steady despite a
reduction in demand for products from customers in the transportation industry.
The reduced sales to customers in the transportation industry were offset by the
substantial increase in sales to a customer outside the transportation industry.
GROSS PROFIT
Gross profit increased $11.6 million, or 102.5%, to $22.8 million for the
three months ended September 29, 1996 from $11.2 million for the three months
ended September 24, 1995, as a result of the sales increases discussed above and
gross margin improvements. The gross margin increased to 27.5% from 25.1%. Gross
margin exclusive of acquired operations increased to 26.3%, reflecting general
gross margin improvement in the Special Machines segment, particularly on
welding equipment contracts, and gross margin improvement in the Components
segment as a result of production efficiencies on new parts business.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES
SG&A expenses increased $5.0 million, or 74.9%, to $11.6 million for the
three months ended September 29, 1996 from $6.6 million for the three months
ended September 24, 1995. Approximately $3.8 million of the increase was due to
recently acquired businesses, with the remaining increase the result of
personnel additions, increased travel costs, increased investment in marketing
activities, higher compensation expense and increased professional and banking
fees, most of which related to the overall growth of the Company. As a
percentage of consolidated net sales, SG&A expenses decreased to 14.0% from
14.8%. The percentage decrease resulted primarily from lower SG&A expenses
associated with acquired businesses.
OPERATING INCOME
Operating income increased $6.6 million, or 142.1%, to $11.2 million for
the three months ended September 29, 1996 from $4.6 million for the three months
ended September 24, 1995, as a result of the factors noted above. The operating
margin increased to 13.5% from 10.3% in the prior year.
INTEREST EXPENSE
Interest expense increased to $2.7 million for the three months ended
September 29, 1996 from $0.8 million for the three months ended September 24,
1995. The increase in interest expense resulted primarily from the increase in
the debt level of the Company to finance recent acquisitions.
19
<PAGE> 22
INCOME TAXES
Provision for income taxes increased to $3.6 million for the three months
ended September 29, 1996 from $1.6 million for the three months ended September
24, 1995, reflecting an effective tax rate of approximately 42.4% and 42.2% for
each period, respectively. This rate differed from statutory rates due to
permanent differences primarily related to non-deductible goodwill amortization
on certain acquisitions.
NET INCOME
Income before extraordinary loss increased to $4.9 million for the three
months ended September 29, 1996 from $2.2 million for the three months ended
September 24, 1995 as a result of the factors noted above. The Company
recognized an extraordinary loss in July 1996 of $0.3 million, or $0.04 per
share, attributable to the write-off of $0.5 million unamortized deferred
financing fees, net of a related $0.2 million tax benefit. As a result, net
income was $4.5 million, or $0.48 per share. Primary earnings per share before
the extraordinary loss were $0.52 for the three months ended September 29, 1996
versus $0.25 for the three months ended September 24, 1995. The weighted average
common shares outstanding for the three months ended September 29, 1996 were
9,415,738 versus 9,000,000 for the three months ended September 24, 1995. The
increase pertained to common stock equivalents, including stock options and the
estimated maximum contingent shares which may be issuable in conjunction with
the Kalish acquisition, which are dilutive in the current fiscal year.
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.
The increase in sales by the Components segment was 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 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
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 margin declines
in the
20
<PAGE> 23
Components segment. Gross margins exclusive of acquired operations for the
Components segment were down from the prior year as a result of start-up costs
on new parts business, although such gross margins 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 was due to the acquisitions
discussed above. The remaining increase of $3.1 million was 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 recent acquisitions.
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 differed from
statutory rates due to permanent differences primarily related to non-deductible
goodwill amortization arising from certain acquisitions.
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 large
thermoforming systems and strong demand for the Company's line of proprietary
equipment accounted for the increase. These increases were offset by a decrease
in the sale of custom machinery, as sales to a significant 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
21
<PAGE> 24
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 margin decreased to 25.6% from 26.0%. Gross margin exclusive of
acquired operations decreased to 23.1%, reflecting lower custom equipment
margins, product development costs on large thermoforming 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.
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 was 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 differed 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
Net income plus non-cash operating charges provided $7.2 million of
operating cash flow for the quarter ended September 29, 1996. Net increases in
working capital balances used operating cash of $15.8 million, resulting in net
cash used by operating activities of $8.6 million for the quarter ended
September 29, 1996. The net increase in working capital reflected the increased
level of manufacturing activity occurring at the
22
<PAGE> 25
Company, particularly in the Special Machines segment. Additionally, the Special
Machines segment has been working on several significant individual contracts
which do not provide for advance payments. These factors resulted in a $16.5
million increase in costs and earnings in excess of amounts billed and a $4.8
million increase in inventory, partially offset by an $8.2 million increase in
accounts payable.
During the three months ended September 24, 1995, net cash provided by
operating activities was $8.7 million. Net decreases in working capital balances
resulted in net cash provided of $5.3 million, primarily as a result of a
decrease in accounts receivable and inventories and an increase in accounts
payable and customer advances. These effects were partially offset by an
increase in costs and earnings in excess of amounts billed. The decrease in
accounts receivable was due primarily to cash received during the quarter
related to significant fourth quarter fiscal 1995 shipments.
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 reduced 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 reduced 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.
During the three months ended September 29, 1996, financing activities
raised $87.8 million, net of $2.4 million of financing costs and $0.2 million in
dividends, primarily to fund the acquisition of Mid-West for $75.2 million, net
of cash acquired. The net cash provided by financing activities was also used to
finance capital expenditures of $2.4 million and fund working capital
requirements. During the three months ended September 24, 1995, cash provided by
operating activities was used to finance capital expenditures of approximately
$2.1 million and to pay dividends of $0.2 million. Net borrowings of the Company
increased by approximately $10.3 million in the three months ended September 24,
1995, primarily due to the acquisition of Kalish for $16.4 million, which was
partially offset by the cash generated from operating activities in excess of
capital expenditures and dividends.
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.
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 $75.2 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 Company's
previous credit agreement. The facility of $200 million provided by two
institutions included 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. This facility was amended in September 1996 as
described below. The term loan requires quarterly principal payments ranging
from $4.8 million to $5.5 million commencing in January 1997
23
<PAGE> 26
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. At September 29, 1996,
interest rates on these facilities ranged from 7.2% to 8.5%. Borrowing
availability for the revolver is based on percentages of the Company's eligible
accounts receivable, eligible inventory and outstanding letters of credit. The
Company had excess borrowing availability of $8.8 million relating to the
revolving credit facility at September 29, 1996. The credit facility is secured
by substantially all of the assets of the Company and contains certain financial
and other covenants and restrictions. In conjunction with entering into this
credit facility, the Company recognized an extraordinary loss in July 1996 of
$0.3 million attributable to the write-off of $0.5 million unamortized deferred
financing fees, net of related $0.2 million tax benefit.
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
7.9% including letter of credit fees at September 29, 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 the Company
entered into an interest rate swap agreement in June 1995 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 requires the Company to pay a fixed rate of 6.06% in
exchange for a floating rate payment equal to the three month LIBOR determined
on a quarterly basis with settlement occurring on specific dates.
The Company also maintains revolving credit facilities of approximately
$3.0 million through its foreign subsidiaries. At September 29, 1996, total
outstanding indebtedness under such facilities was $1.5 million.
On September 30, 1996, the Company completed the acquisition of Hansford, a
designer and manufacturer of automated assembly systems, for a cash purchase
price of approximately $17.4 million, of which $8.5 million will be paid on June
30, 1997. The purchase price was financed under the acquisition facility of the
Company's Second Amended and Restated Credit Facilities Agreement. Additionally,
the Company amended the credit facility to increase the total facility to $210
million from $200 million with the revolving credit facility increasing to $65
million from $55 million.
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, Missouri and Benton Harbor, Michigan as
well as the expansion in progress at the facility in Erie, Pennsylvania. 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.
24
<PAGE> 27
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, June 15, 1996 and September 13,
1996 to stockholders of record on August 31, 1995, November 30, 1995, February
29, 1996, May 31, 1996 and August 30, 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, DTG, 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 September 29, 1996, the Company had $179.1
million of orders in backlog, which compares to a backlog of approximately $98.0
million as of September 24, 1995. Of the $81.1 million increase, $79.9 million
is due to the acquisitions of Mid-West, AMI and Swiftpack.
The backlog for the Special Machines segment at September 29, 1996 was
$168.5 million, which increased $76.1 million from a year ago. Backlog for the
Components segment increased $5.0 million to $10.6 million from $5.6 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.
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 be several million dollars or more, a relatively limited number of
orders can constitute a meaningful percentage of the Company's revenue in any
one quarterly period. As a result, 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. Certain of the Company's revenues are derived from fixed
price contracts. To the extent that original cost estimates prove to be
inaccurate, profitability from a particular contract may be adversely affected.
Gross margins in the Special Machines segment may also 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.
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<PAGE> 28
BUSINESS
GENERAL
DTI 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. The Company believes it is the
largest manufacturer of integrated assembly and test systems in North America.
Substantial growth opportunities are believed to be provided by certain trends
among its customers, including increased emphasis on productivity, quality,
flexibility, globalization, outsourcing, downsizing and vendor rationalization.
To capitalize on these trends, DTI has implemented a business strategy to
provide, develop and acquire complementary technologies and capabilities to
supply customers with integrated processing, assembly, testing and packaging
systems for their products. As part of this strategy, the Company seeks to cross
sell the products produced by acquired companies through its larger company-wide
sales force providing for greater geographic and customer coverage. The Company
operates in two business segments: Special Machines and Components. Through
acquisitions and product development, the Company's Special Machines business
has grown from historical consolidated net sales of $28.5 million in the fiscal
year ended June 30, 1993 to fiscal 1996 historical consolidated net sales of
$193.9 million. In addition, the Company's Components business, which produces
precision metal components and wear parts for a broad range of industrial
applications, has grown from historical consolidated net sales of $22.1 million
in fiscal 1993 to historical consolidated net sales of $42.1 million in fiscal
1996, primarily as a result of internal growth.
SPECIAL MACHINES SEGMENT. 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 these
products 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. The Special Machines segment, which accounted for
approximately 87% of the Company's pro forma consolidated fiscal 1996 net sales,
after giving effect to the acquisition of Mid-West, consists of two groups: DTI
Automation and DTI Packaging. Each group offers a class of products and services
that complement one another in terms of markets, engineering requirements,
product needs and systems capabilities.
DTI Automation. 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 DTI Automation 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 large thermoforming systems. The Company believes DTI is the largest
manufacturer of integrated assembly and test systems in North America.
DTI Packaging. DTI Packaging designs and builds proprietary machines and
integrated systems used to perform processing and packaging tasks. Core
capabilities of DTI Packaging include the design and manufacture of
thermoforming, blister packaging and foam extrusion systems, and a complete line
of tablet processing and packaging systems. The Company believes it is the
largest manufacturer of tablet packaging equipment in North America.
COMPONENTS SEGMENT. The Components segment, which accounted for
approximately 13% of pro forma consolidated fiscal 1996 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, DTG and Detroit Tool and Engineering Company
("DTE"). Peer Corporation was organized in June 1992 to acquire Peer and the
stock of DTG, the sole stockholder of DTE and Detroit Tool Metal Products Co.
("DTMP"). Through acquisitions and product development, the Company has grown
from historical consolidated net sales of $50.6 million in fiscal 1993 to $235.9
million in fiscal 1996.
On July 19, 1996, following the end of the Company's fiscal year, the
Company acquired the issued and outstanding stock of Mid-West, a designer and
manufacturer of integrated precision assembly systems. Mid-
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<PAGE> 29
West's revenues for its fiscal year ended May 26, 1996 were approximately $88.2
million and its operating income, before certain nonrecurring charges, was
approximately $18.4 million.
BUSINESS STRATEGY
The business strategy of DTI is to provide, develop and acquire
complementary technologies and capabilities to supply customers with integrated
assembly, testing and packaging systems for their products. Key elements of the
Company's strategy include the following:
ACQUISITIONS. The assembly, testing and packaging equipment markets are
highly 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 continue to 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 and engineering
capacity.
PRODUCT LINE EXPANSION. Through acquisitions, product license arrangements
and strategic alliances, the Company has increased, and plans to continue to
increase, 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 markets the Company currently serves and to provide entree into new markets.
CROSS-SELLING. The Company believes substantial cross-selling
opportunities exist across the product lines of the Special Machines segment. As
the Company implements its acquisition strategy and integrates acquired
operations, it is able to expand its product offering and customer base. For
example, the combined marketing efforts and engineering capabilities of AAA and
AMI were successful in obtaining from a significant customer an $8 million
project that otherwise would have been awarded 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. As a result of its acquisition program, the
Company has a number of machine building facilities, each with its own specific
engineering expertise and manufacturing capabilities. By coordinating with each
customer, the Company intends to optimize its manufacturing capacity by
directing work to that facility which best meets the manufacturing and
engineering needs of the project as well as the Company's own capacity
availability.
INTERNATIONAL. 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 Davis Standard Corporation for the
sales of foam extrusion systems. DTI Automation continued to expand its
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<PAGE> 30
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 allows
the Company to market Claas KGaA's highly regarded automation systems to the
Company's existing customer base. For fiscal 1996, international sales accounted
for less than 25% of the Company's historical consolidated net sales.
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, appliances
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. DTI Automation designs and builds a complete line of
automated assembly and test systems, special machines and large complex dies.
DTI Automation is ideally suited for time-sensitive, 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 61% of
historical consolidated net sales for the quarter ended September 29, 1996, and
45%, 45% and 47% of historical 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 and 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 has been enhanced by the acquisition of AMI during
fiscal 1996 and has been further accelerated with the recent acquisition of
Mid-West. Mid-West offers a variety of precision assembly equipment to industry,
utilizing proprietary modular building blocks which facilitate time-sensitive,
concurrent engineering projects where changes in tooling and processes can occur
in an advanced stage of system design and standardized components in carousel,
in-line and rotary assembly systems.
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.1.,
COMI S.r.1. and PMM S.r.1., the Company has the rights to use certain deep-draw
thermoforming ("RIGO") technology. The Company is utilizing the RIGO technology
in a line of machines designed to produce the inner liners for refrigerators.
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.
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.
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<PAGE> 31
Tooling and Dies. The Company possesses considerable expertise in the
design, engineering and production of precision tools and dies. In addition,
personnel trained as tool and die makers often apply their skills to the
manufacture of the Company's special machines.
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 27% of historical consolidated net sales for the quarter ended
September 29, 1996, and 37%, 31% and 24% of historical consolidated net sales
for fiscal 1996, 1995 and 1994, respectively.
Thermoformers. A thermoformer heats plastic material and uses pressure
and/or a vacuum to mold it into 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 plastics 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 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
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<PAGE> 32
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. 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.
During fiscal 1996, the Company entered into an agreement with Horn & Noack
Pharmatechnik 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.
Packaging Systems. The Company designs, manufactures or distributes a
complete line of products utilized for packaging, liquid filling or tube filling
applications. 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 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 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 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 sells parts and accessories for its
proprietary machines. In addition, the Company 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 12% of historical
consolidated net sales for the quarter ended September 29, 1996, and 18%, 24%
and 29% of historical 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's stamping 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.
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
believes its tool and die design and engineering capabilities give it an
important competitive advantage in its Components segment.
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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 approximately 60 person direct sales force 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. International sales continue to grow as the
business grows and more resources are focused in the international arena.
International sales were approximately 22% of historical consolidated net sales
for fiscal 1996 compared to 10% and 8% of historical consolidated net sales in
fiscal 1995 and fiscal 1994, respectively.
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.
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FACILITIES
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 as of September 29, 1996.
<TABLE>
<CAPTION>
SQUARE
FOOTAGE
LOCATION (APPROXIMATE) OWNED/LEASED LEASE EXPIRATION PRODUCTS
- ---------------------------- ------------- ------------- ----------------- --------------------
<S> <C> <C> <C> <C>
SPECIAL MACHINES SEGMENT
DTI Automation:
Lebanon, Missouri 300,000 Owned Special machines,
integrated systems,
tools and dies
Dayton, Ohio 160,000 Leased July 1, 2016(2) 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 July 31, 2003(3) Integrated precision
assembly systems
DTI Packaging:
Montreal, Quebec 66,000(1) Leased Jan. 31, 1997(4) Tablet packaging,
and liquid filling and
July 31, 1997(4) tube filling
equipment and
systems
Leominster, 60,000 Owned Tablet packaging
Massachusetts equipment
Niles, Illinois 30,000 Leased July 15, 1997(2) Tablet counters
Bristol, Pennsylvania 43,000 Leased April 30, 2000(3) Rotary presses
Hyannis, Massachusetts 98,000 Leased Dec. 31, 1997(3) Plastics processing
and packaging
equipment
Fall River, 37,000 Leased Jan. 31, 2000(3) Plastics processing
Massachusetts and packaging
equipment
Alcester, United 22,000 Owned Electronic counters
Kingdom
COMPONENTS SEGMENT
Lebanon, Missouri 171,000 Owned Metal products
Winsted, Connecticut 28,000 Leased Dec. 31, 1997(3) Wear parts
Asheboro, North 15,000 Leased Sept. 26, 2000(5) Wear parts
Carolina
</TABLE>
- ---------------
(1) Two adjacent buildings of approximately 40,000 square feet and 26,000 square
feet, respectively.
(2) The Company has an option to renew such lease for two additional terms of
five years.
(3) The Company has an option to renew such lease for one additional five year
term.
(4) The Company has an option to renew such lease for one additional one year
term.
(5) The Company has an option to renew such lease for 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 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.
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Expansion projects begun in fiscal 1995 and 1996 have been substantially
completed at several of the Company's owned and leased facilities. The expansion
projects increased manufacturing and office space for the Special Machines and
Components segments 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 anticipated internal growth.
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. 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. 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
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<PAGE> 36
Company's business segments, foreign and domestic operations and export sales,
see Note 15 of the Notes to Consolidated Financial Statements of the Company.
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. For additional
information regarding dependence on a significant customer in the electronics
industry on a pro forma basis, after giving effect to the acquisition of
Mid-West, see "Risk Factors -- Dependence on Significant Customers."
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.
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 products
produced by the Components segment 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, on-time
delivery, price and service. The Company believes that the principal competitive
factors in the sale of the Company's components are price, technical capability,
quality and on-time delivery. The Company believes that it competes favorably
with respect to each of these factors.
ENGINEERING; RESEARCH AND DEVELOPMENT
The Company maintains research and engineering departments at all of its
manufacturing locations. The Company employs more than 350 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
Swiftpack(TM), 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.
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<PAGE> 37
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 Components 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, which was completed in October 1995, costs of compliance with
environmental, health and safety requirements have not been material to the
Company.
The Company believes it is in material compliance with all applicable
environmental laws and regulations.
EMPLOYEES
At September 29, 1996, the Company had approximately 2,200 employees. 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.
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 September 29, 1996, there were 24
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
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.
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<PAGE> 38
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth, as of October 30, 1996 and as adjusted to
reflect the Offering, certain information concerning the beneficial ownership of
Common Stock by (a) each stockholder who is known by the Company to own
beneficially in excess of 5% of the outstanding Common Stock, (b) each director
and executive officer, (c) each Selling Stockholder and (d) all directors and
executive officers as a group. Except as otherwise indicated, all persons listed
below have sole voting and investment power with respect to their shares of
Common Stock. The Common Stock constitutes the only class of equity securities
outstanding.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED OWNED
PRIOR TO THE OFFERING NUMBER OF AFTER THE OFFERING
------------------------- SHARES BEING -----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------ --------- ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Peer L.P.(1)(6)..................... 2,258,360 25.1% 1,940,612 317,748 2.8%
Peer II L.P.(2)(6).................. 394,203 4.4 338,740 55,463 *
Fox Family Foundation(3)(6)......... 390,000 4.3 335,000 55,000 *
Harbour Group(4)(6)................. 202,837 2.3 174,298 28,539 *
Investments L.P.(5)(6).............. 46,350 * 46,350 -- --
First Chicago NBD Corporation(7).... 686,000 7.6 -- 686,000 6.1
Dimensional Fund Advisors(8)........ 474,000 5.3 -- 474,000 4.2
Stephen J. Gore(9).................. 82,287 * -- 82,287 *
James C. Janning(10)(11)............ 93,750 1.0 -- 93,750 *
Gregory A. Fox(10)(12).............. 50,000 * -- 50,000 *
Samuel A. Hamacher(10)(13).......... 3,500 * -- 3,500 *
James J. Kerley(13)................. 7,500 * -- 7,500 *
Donald E. Nickelson(10)(13)......... 2,500 * -- 2,500 *
Lee M. Liberman(13)(14)............. 5,000 * -- 5,000 *
Charles Pollnow(15)................. 1,000 * -- 1,000 *
William H.T. Bush(15)............... 2,000 * -- 2,000 *
Bruce P. Erdel(16).................. 30,612 * -- 30,612 *
------------
Total.......................... 2,835,000
=========
All directors and executive officers
as a group (10 persons)........... 278,149 3.1% 278,149 2.5%
</TABLE>
- ---------------
* Less than 1.0%
(1) Assumes no exercise of the over-allotment option. If the over-allotment
option is exercised in full, the total shares of Common Stock to be sold by
Peer L.P. would be 2,256,976, and its ownership interest after the Offering
would be 1,384 shares of Common Stock, or less than 1.0% of the outstanding
Common Stock. Peer L.P. is a Delaware limited partnership whose address is
7701 Forsyth Boulevard, St. Louis, Missouri 63105. Its general partner is
Fox HG II Companies Investments L.P., a Delaware limited partnership ("Fox
HG II") of which Sam Fox is the general partner.
(2) Assumes no exercise of the over-allotment option. If the over-allotment
option is exercised in full, the total shares of Common Stock to be sold by
Peer II L.P. would be 393,962, and its ownership interest after the
Offering would be 241 shares of Common Stock.
(3) Assumes no exercise of the over-allotment option. If the over-allotment
option is exercised in full, the total shares of Common Stock to be sold by
the Fox Family Foundation would be 385,250, and its ownership interest
after the Offering would be 4,750 shares of Common Stock, or less than 1.0%
of the outstanding Common Stock. The Fox Family Foundation is a charitable
foundation of which Sam Fox is a trustee.
(4) Assumes no exercise of the over-allotment option. If the over-allotment
option is exercised in full, the total shares of Common Stock to be sold by
Harbour Group would be 202,712, and its ownership interest after the
Offering would be 125 shares of Common Stock, or less than 1.0% of the
outstanding
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<PAGE> 39
Common Stock. Excludes shares owned by Investments L.P. Harbour Group is a
Missouri corporation which serves as the general partner of Investments
L.P.
(5) Investments L.P. is a Delaware limited partnership. Its general partner is
Harbour Group, a Missouri corporation controlled by Sam Fox. Harbour Group
has a 1% interest in Investments L.P. Investments L.P. was organized to
make subordinated debt and equity investments in certain operating
companies controlled by Harbour Group and its affiliates. Its limited
partners consist mainly of institutional investors.
(6) Peer L.P., Peer II L.P., Harbour Group and Investments L.P. are under the
common control of Sam Fox; and Sam Fox is a trustee of the Fox Family
Foundation. Based upon the holdings of all such entities, Sam Fox may be
deemed to be the beneficial owner of 3,291,750 shares (or 36.5% of the
outstanding shares prior to the Offering). Subsequent to the Offering, and
assuming no exercise of the over-allotment option, Sam Fox may be construed
to be the beneficial owner of 456,750 shares, or 4.1% of the shares to be
outstanding after the Offering. If the over-allotment option is exercised
in full, Sam Fox may be construed to be the beneficial owner of 6,500
shares, or less than 1.0% of the shares to be outstanding after the
Offering.
(7) Based on a filing of Form 13G filed in February 1996, these shares were
held in a fiduciary capacity by First Chicago NBD Corporation. The Form 13G
filed in February 1996 reports that, of the shares beneficially owned, this
stockholder has sole power to vote 669,400 shares, sole power to dispose of
667,000 shares and shared power to dispose of 19,000 shares. Its address is
One First National Plaza, Chicago, Illinois 60670.
(8) Based on a filing of Form 13F filed in August 1996, this stockholder has
sole power to dispose of all of these shares and sole power to vote 342,000
of these shares. Its address is 1299 Ocean Avenue, Santa Monica, California
90401.
(9) Includes 14,687 shares issuable pursuant to options granted under the 1994
Employee Stock Option Plan which have become exercisable and excludes
110,313 shares issuable pursuant to such options which are not currently
exercisable.
(10) Excludes shares owned by Peer L.P., Peer II L.P., Harbour Group and
Investments L.P. Each of these individuals is an officer and/or director of
affiliates of Peer L.P., Peer II L.P., Harbour Group and/or Investments
L.P. and each such person disclaims beneficial ownership of shares
beneficially owned by Peer L.P., Peer II L.P., Harbour Group and
Investments L.P.
(11) Excludes 1,000 shares owned by Mr. Janning's spouse, as to which Mr.
Janning disclaims beneficial ownership. Includes 3,750 shares issuable
pursuant to options granted under the 1994 Directors Nonqualified Stock
Option Plan which have become exercisable and excludes 11,250 shares
issuable pursuant to such options which are not currently exercisable.
(12) Includes 5,000 shares issuable pursuant to options granted under the 1994
Employee Stock Option Plan which have become exercisable and excludes
10,000 shares issuable pursuant to such options which are not currently
exercisable.
(13) Includes 2,500 shares issuable pursuant to options granted under the 1994
Directors Nonqualified Stock Option Plan which have become exercisable and
excludes 7,500 shares issuable pursuant to such options which are not
currently exercisable.
(14) Excludes 1,500 shares owned by J&L Investments, a partnership in which Mr.
Liberman holds a 50% interest, as to which shares Mr. Liberman disclaims
beneficial ownership.
(15) Excludes 10,000 shares issuable pursuant to options granted under the 1994
Directors Nonqualified Stock Option Plan which are not currently
exercisable.
(16) Includes 7,312 shares issuable pursuant to options granted under the 1994
Employee Stock Option Plan which have become exercisable and excludes
46,788 shares issuable pursuant to such options which are not currently
exercisable.
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<PAGE> 40
CERTAIN TRANSACTIONS
RELATED PARTY TRANSACTIONS
The Company is party to an Operations Consulting and Advisory Services
Agreement dated February 10, 1994, as amended (the "HGL Services Agreement"),
with Harbour Group Ltd. ("HGL"), pursuant to which HGL provides management
consulting services to the Company for a one-year term, which term automatically
renews from year to year until terminated by the Company or HGL upon 30 days'
written notice. HGL is an affiliate of Peer L.P., Investments L.P. and Harbour
Group. Under the HGL Services Agreement, the Company compensates HGL for
management consulting services at HGL's approximate costs incurred in performing
such services. The Company is also party to a Corporate Development Consulting
and Advisory Services Agreement (the "HGI Services Agreement") dated February
10, 1994 with Harbour Group Industries, Inc. ("HGI") pursuant to which HGI
provides corporate development services to the Company for a one-year term,
which term automatically renews from year to year until terminated by the
Company or HGI upon 30 days' written notice. HGI is an affiliate of Peer L.P.,
Investments L.P. and Harbour Group. Under the HGI Services Agreement, the
Company compensates HGI for corporate development services by paying an annual
fee equal to the greater of $100,000 or HGI's approximate costs incurred in
performing such services, plus a transaction fee equal to an amount which ranges
from 2.5% of the first $1 million of the purchase price to 0.5% of the portion
of the purchase price in excess of $4 million for each completed acquisition or
disposition by the Company in which HGI performs services during the term of the
HGI Services Agreement, subject to a minimum fee per transaction of $125,000.
The terms of the HGL Services Agreement were determined by HGL and the
Company to preserve the historical arrangement between the Company and HGL
whereby HGL provided the Company with management consulting and advisory
services at approximate cost. The terms of the HGI Services Agreement were
determined in part to reimburse HGI for the estimated approximate annual cost of
HGI personnel engaged in performing services for the Company thereunder and in
part with reference to customary formulas utilized by financial advisors for
providing acquisition and/or divestiture-related services. The Company believes
that the rate agreed to by the Company and HGI is less than the rate customarily
charged by other financial advisory service providers. Charges totaling $285,000
and $783,000 were paid by the Company to HGL and HGI, respectively, during the
fiscal year ended June 30, 1996.
Until April 1994, the Company had been included in an insurance program
maintained by HGL providing workers compensation and employer's liability,
general liability and automobile liability and physical damage insurance
coverage for all companies controlled by Harbour Group or its affiliates. The
insurance program utilized a retrospective rating plan and automatic premium
adjustment plan, which provide for calculations of the premiums for the
insurance program based on the application of rating formulae to actual incurred
losses and reserves for future losses which required adjustment of the premiums
retrospectively. In connection with this program, the Company entered into an
Insurance Agreement with HGL pursuant to which it agreed to reimburse HGL, and
HGL agreed to reimburse the Company, for their respective pro rata shares of any
retrospective premium adjustment. The Company continues to participate in an
insurance program providing umbrella and excess coverages to the Company and
certain other companies controlled or advised by HGL.
The Company believes that each of the related party transactions described
herein was on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties.
AGREEMENTS WITH CERTAIN STOCKHOLDERS
Prior to 1994, Stephen J. Gore, Bruce P. Erdel, Gregory A. Fox and James C.
Janning, together with certain other members of the management of the Company,
acquired shares of Common Stock at prices determined by the Board of Directors
of the Company, and the purchase price therefor was paid partly in cash and
partly by delivery of promissory notes payable to the Company secured by all or
some portion of the purchased shares. Such notes have a ten-year maturity, bear
interest at fixed rates of interest from 5.84% to 6.28% per annum and are
payable interest only annually, with one principal payment at maturity. In
connection with such promissory notes, the Company agreed to pay annual bonuses
to such stockholders in
38
<PAGE> 41
amounts equal to the annual interest payments on the notes plus all federal and
state income taxes applicable to such payments. In connection with the purchase
of his shares of the Common Stock, each such stockholder entered into an
agreement with the Company and Peer L.P., which agreements were amended in
connection with the Company's initial public offering (as amended, the
"Stockholder Agreements"). The Stockholder Agreements provide for, among other
things, restrictions on transfer of shares of the Common Stock owned by such
stockholder, a right to acquire additional securities of the Company in order to
maintain the stockholder's percentage of equity interest in the Company in
certain circumstances and "tag-along" and "drag-along" rights in the event of
certain sales of the Common Stock by Peer L.P. The transfer restrictions of the
Stockholder Agreements, which are subject to modification or waiver by the
Company, generally prohibited the sale of 50% of such shares of Common Stock
until April 15, 1996, and an aggregate 65% of such shares until October 15,
1995. A pro rata portion of the indebtedness originally incurred to purchase
such shares must be repaid in connection with any permitted sale of such Common
Stock by such stockholder. The transfer restrictions of the Stockholder
Agreements are in addition to any other restrictions on the sale or transfer of
such shares imposed under applicable law. Certain of the Stockholder Agreements,
including the Stockholder Agreements of Messrs. Gore, Erdel and Fox, also
contain provisions concerning noncompetition and confidentiality applicable to
such stockholders and provisions for payments to such stockholders, under
certain circumstances, following the termination of their employment with the
Company. In the event of a termination of any such stockholder's employment by
the Company without cause or his voluntary resignation within 60 days of a
substantial reduction in his duties, responsibilities or compensation, the
Stockholder Agreements provide for payment of up to one year's base salary to
such executive.
During the fiscal year ended June 30, 1996, the following executive
officers and directors had promissory notes in excess of $60,000 outstanding to
the Company:
<TABLE>
<CAPTION>
BALANCE OUTSTANDING
-----------------------------
HIGHEST DURING AT JUNE 30, INTEREST
SHAREHOLDER POSITION FISCAL 1996 1996 RATE DUE DATE
- ----------------------- -------------------------- -------------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Stephen J. Gore........ President & Chief $ 84,600 $ 84,600 6.28% 9/30/03
Executive Officer,
Director
James C. Janning....... Director 112,800 112,800 6.28 9/30/03
Gregory A. Fox......... Director 66,600 66,600 5.84 11/30/03
</TABLE>
REGISTRATION RIGHTS
Pursuant to a registration rights agreement between the Company and Peer
L.P., Investments L.P. and Harbour Group (the "Registration Rights Agreement"),
Peer L.P., Investments L.P., Harbour Group and such of their respective
permitted transferees as may be deemed to be affiliates of the Company have
rights to demand registration under the Securities Act of 1933, as amended (the
"Securities Act"), of its or their shares of the Company's Common Stock. In
addition, in the event the Company proposes to register any of its securities
under the Securities Act, such persons (or their permitted transferees) will
have rights, subject to certain exceptions and limitations, to have the shares
of the Company's capital stock then owned by them included in such registration
statement. The Company has agreed that, in the event of any registration of
securities owned by such person (or a permitted transferee) in accordance with
the provisions thereof, it will indemnify such person, and certain related
persons, against liabilities incurred in connection with such registration,
including liabilities arising under the Securities Act.
The registration rights described above are subject to certain limitations
intended to prevent undue interference with the Company's ability to distribute
securities, including the provision that demand registration rights may not be
exercised within 90 days after the effective date of the Company's most recent
registration statement. As a result of the Offering, the Registration Rights
Agreement will terminate in accordance with its terms.
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<PAGE> 42
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain material United States
Federal income and estate tax consequences of the ownership and disposition of
Common Stock by a holder that, for United States Federal income tax purposes, is
not a "United States person" (a "Non-United States Holder"). This discussion is
not intended to be exhaustive and is based on statutes, regulations, rulings and
court decisions as currently in effect all of which may be changed either
retroactively or prospectively. Treasury Regulations were recently proposed that
would, if adopted in their present form, revise in certain respects the rules
applicable to Non-United States Holders of Common Stock governing information
reporting and withholding (the "Proposed Regulations"). The Proposed Regulations
are generally proposed to be effective with respect to payments made after
December 31, 1997. This discussion does not consider any specific facts or
circumstances that may apply to a particular Non-United States Holder and
applies only to Non-United States Holders that hold Common Stock as a capital
asset. Prospective investors are strongly urged to consult their tax advisors
regarding the United States Federal tax consequences of acquiring, holding and
disposing of Common Stock (including such investor's status as a United States
person or Non-United States Holder) as well as any tax consequences that may
arise under the laws of any state, municipality or other taxing jurisdiction.
For purposes of this discussion, "United States person" means a citizen or
resident of the United States, a corporation or partnership created or organized
in the United States or under the laws of the United States or of any state, or
an estate or trust whose income is includible in gross income for United States
Federal income tax purposes regardless of its source. Generally for taxable
years beginning after December 31, 1996, a trust will be treated as a U.S.
person if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all substantial decisions of the
trust.
DIVIDENDS
Dividends paid to a Non-United States Holder generally will be subject to
withholding of United States Federal income tax at the rate of 30%, unless the
withholding rate is reduced under an applicable income tax treaty between the
United States and the country of tax residence of the Non-United States Holder.
No U.S. withholding will apply if the dividend is effectively connected with a
trade or business conducted or deemed to be conducted within the United States
by the Non-United States Holder (or, alternatively, where an income tax treaty
applies, if the dividend is attributable to a permanent establishment maintained
or deemed to be maintained within the United States by the Non-United States
Holder), but, instead, the dividend will be subject to the United States Federal
income tax on net income that applies to United States persons. With respect to
corporate holders, the dividend may also be subject to the branch profits tax of
30% (or if applicable, a lower treaty rate) imposed on "effectively connected
earnings and profits" as defined for purposes of the United States Federal
income tax. A Non-United States Holder may be required to satisfy certain
certification requirements (which may change prospectively if the Proposed
Regulations are adopted in their present form) in order to claim treaty benefits
or to otherwise claim a reduction of or exemption from withholding under the
foregoing rules. A Non-United States Holder that is eligible for a reduced rate
of U.S. withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund with
the United States Internal Revenue Service (the "Service").
GAIN ON DISPOSITION
Subject to special rules described below, a Non-United States Holder will
generally not be subject to United States Federal income tax on gain recognized
on a sale or other disposition of Common Stock unless the gain is effectively
connected with a trade or business conducted or deemed to be conducted within
the United States by the Non-United States Holder (or, alternatively, where an
income tax treaty applies, unless the gain is attributable to a permanent
establishment maintained or deemed to be maintained within the United States by
the Non-United States Holder). Any such effectively connected gain would be
subject to the United States Federal income tax on net income that applies to
United States persons (and, with respect to corporate holders, may also be
subject to the branch profits tax). Such tax is not collected by withholding.
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<PAGE> 43
In addition, an individual Non-United States Holder who holds Common Stock
would generally be subject to tax at a 30% rate on any gain recognized on the
disposition of such Common Stock (which may be offset by capital losses
allocable to U.S. sources) if such individual is present in the United States
for 183 days or more in the taxable year of disposition and certain other
conditions are met. Individual Non-United States Holders may also be subject to
tax pursuant to provisions of United States Federal income tax law applicable to
certain former citizens and long-term residents of the United States. Non-United
States Holders should consult applicable income tax treaties, which may provide
for different rules.
Also, special rules apply to Non-United States Holders if the Company is or
becomes a "United States real property holding corporation" for United States
Federal income tax purposes. The Company believes that it has not been, is not
currently, and is not likely to become, a United States real property holding
corporation. If the Company were a United States real property holding
corporation, gain or loss on a sale of the Common Stock by any Non-United States
Holder (other than, in most cases, a Non-United States Holder that owns or owned
(directly or constructively) 5% or less of the Common Stock during the five-year
period ending on the date of such sale) would be treated as income effectively
connected with the conduct of a trade or business within the United States by
the holder and subject to the net income tax described above.
UNITED STATES FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as specially defined for United States Federal estate tax
purposes) of the United States at the date of death, or Common Stock subject to
certain lifetime transfers made by such an individual, will be included in such
individual's estate for United States Federal estate tax purposes and may be
subject to United States Federal estate tax, unless an applicable estate tax
treaty provides otherwise. Estates of nonresident aliens are generally allowed a
credit that is equivalent to an exclusion of $60,000 of assets from the estate
for United States Federal estate tax purposes, however, applicable estate tax
treaties may provide for a different credit.
LEGISLATIVE DEVELOPMENTS
Legislation has been proposed from time to time that, if enacted, would
result, under certain circumstances, in the imposition of United States Federal
income tax on gain realized from the disposition of Common Stock by certain
Non-U.S. Holders who own or owned 10% or more of the Common Stock.
It is impossible to predict whether or in what form any such legislation or
other legislation might be enacted and what the scope or effective date of any
such legislation might be.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-United
States Holder the amount of dividends paid to, and any tax withheld with respect
to, such holder, regardless of whether any tax was actually withheld. That
information may also be made available to the tax authorities of the country in
which a Non-United States Holder resides.
United States Federal backup withholding tax (which, generally, is imposed
at the rate of 31% on certain payments to persons not otherwise exempt who fail
to furnish information required under United States information reporting
requirements) generally will not apply to dividends paid to a Non-United States
Holder either at an address outside the United States (provided that the payor
does not have actual knowledge that the payee is a United States person) or if
the dividends are subject to withholding at the 30% rate (or lower treaty rate).
As a general matter, information reporting and backup withholding also will not
apply to a payment of the proceeds of a sale of Common Stock through a foreign
office of a broker. However, information reporting requirements (but not backup
withholding) will apply to a payment of the proceeds of a sale of Common Stock
by or through a foreign office of a broker that is a (i) United States person or
(ii) foreign broker that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States, or that is
a "controlled foreign corporation" for United States Federal income tax
purposes, unless the broker has documentary evidence in its records that the
holder is a Non-United States Holder and certain conditions are met, or the
holder otherwise establishes an exemption. Payment by a United
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<PAGE> 44
States office of a United States or foreign broker of the proceeds of a sale of
Common Stock of a Non-United States Holder is subject to both backup withholding
and information reporting unless the holder certifies as to its name, address
and non-United States status under penalties of perjury or otherwise establishes
an exemption (and the broker has no actual knowledge to the contrary). The
backup withholding tax is not an additional tax and may be credited against the
Non-United States Holder's United States Federal income tax liability or
refunded to the extent excess amounts are withheld, provided that the required
information is supplied to the Service.
The backup withholding and information reporting rules are currently under
review by the United States Treasury Department and their application to the
receipt of payments attributable to the Common Stock is subject to change,
including by application of the Proposed Regulations if they are adopted in
their present form.
42
<PAGE> 45
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated November , 1996 (the "U.S. Underwriting Agreement"), the
underwriters named below (the "U.S. Underwriters"), for whom CS First Boston
Corporation, Morgan Stanley & Co. Incorporated and Schroder Wertheim & Co.
Incorporated are acting as representatives (the "Representatives") have
severally but not jointly agreed to purchase from the Company and the Selling
Stockholders, the following respective numbers of U.S. Shares:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER U.S. SHARES
------------------------------------------------------------------------- -----------
<S> <C>
CS First Boston Corporation..............................................
Morgan Stanley & Co. Incorporated........................................
Schroder Wertheim & Co. Incorporated.....................................
-----------
Total............................................................... 4,068,000
=========
</TABLE>
The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all the U.S. Shares offered hereby
(other than those shares covered by the over-allotment option described below)
if any are purchased. The U.S. Underwriting Agreement provides that, in the
event of a default by a U.S. Underwriter, in certain circumstances the purchase
commitments of non-defaulting U.S. Underwriters may be increased or the U.S.
Underwriting Agreement may be terminated.
The Company and the Selling Stockholders have entered into a Subscription
Agreement (the "Subscription Agreement") with the managers of the International
Offering (the "Managers") providing for the concurrent offer and sale of the
International Shares outside the United States and Canada. The closing of the
U.S. Offering is a condition to the closing of the International Offering and
vice versa.
The Company and the Selling Stockholders have granted to the U.S.
Underwriters and the Managers an option, exercisable by CS First Boston
Corporation, expiring at the close of business on the 30th day after the date of
this Prospectus, to purchase, first, up to 312,500 additional shares from the
Company and then an aggregate of 450,250 additional outstanding shares from the
Selling Stockholders at the initial public offering price less the underwriting
discounts and commissions, all as set forth on the cover page of this
Prospectus. Such option may be exercised only to cover over-allotments in the
sale of the shares of Common Stock offered hereby. To the extent such option is
exercised, each U.S. Underwriter and each Manager will become obligated, subject
to certain conditions, to purchase approximately the same percentage of such
additional shares being sold to the U.S. Underwriters and the Managers as the
number of U.S. Shares set forth next to such U.S. Underwriter's name in the
preceding table and as the number set forth next to such Manager's name in the
corresponding table in the prospectus relating to the International Offering
bears to the sum of the total number of shares Common Stock in such tables.
The Company has been advised by the Representatives that the U.S.
Underwriters propose to offer the U.S. Shares in the United States and Canada to
the public initially at the public offering price set forth on the cover page of
this Prospectus and, through the Representatives, to certain dealers at such
price less a concession of $ per Share, and the U.S. Underwriters and such
dealers may allow a discount of $ per Share on sales to certain other
dealers. After the initial public offering, the public offering price and
concession and discount to dealers may be changed by the Representatives.
The public offering price, the aggregate underwriting discounts and
commissions per share and per share concession and discount to dealers for the
U.S. Offering and the concurrent International Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and the Managers (the
"Intersyndicate
43
<PAGE> 46
Agreement") relating to the Offering, changes in the public offering price,
concession and discount to dealers will be made only upon the mutual agreement
of CS First Boston Corporation, as representative of the U.S. Underwriters, and
CS First Boston Limited ("CSFBL"), on behalf of the Managers.
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any prospectus
relating to the Common Stock to any person outside the United States or Canada
or to any other dealer who does not so agree. Each of the Managers has agreed or
will agree that, as part of the distribution of the International Shares and
subject to certain exceptions, it has not offered or sold, and will not offer or
sell, directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock in the United States or Canada or to any
other dealer who does not so agree. The foregoing limitations do not apply to
stabilization transactions or to transactions between the U.S. Underwriters and
the Managers pursuant to the Intersyndicate Agreement. As used herein, "United
States" means the United States of America (including the States and the
District of Columbia), its territories, possessions and other areas subject to
its jurisdiction, "Canada" means Canada, its provinces, territories, possessions
and other areas subject to its jurisdiction, and an offer or sale shall be in
the United States or Canada if it is made to (i) any individual resident in the
United States or Canada or (ii) any corporation, partnership, pension,
profit-sharing or other trust or other entity (including any such entity acting
as an investment adviser with discretionary authority) whose office most
directly involved with the purchase is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
U.S. Underwriters and the Managers of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold shall be the public
offering price, less such amount as may be mutually agreed upon by CS First
Boston Corporation, as representative of the U.S. Underwriters, and CSFBL, on
behalf of the Managers, but not exceeding the selling concession applicable to
such shares. To the extent there are sales between the U.S. Underwriters and the
Managers pursuant to the Intersyndicate Agreement, the number of shares of
Common Stock initially available for sale by the U.S. Underwriters or by the
Managers may be more or less than the amount appearing on the cover page of the
Prospectus. Neither the U.S. Underwriters nor the Managers are obligated to
purchase from the other any unsold shares of Common Stock.
The Company and its directors, executive officers and certain affiliated
stockholders have agreed that, for a period of 90 days after the date of this
Prospectus, they will not, without the prior written consent of CS First Boston
Corporation, offer, sell, contract to sell, announce its intention to sell,
pledge or otherwise dispose of directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the Securities
Act of 1933, as amended, (the "Securities Act") relating to, any shares of
Common Stock or any securities convertible into, or exchangeable for, or
warrants to purchase, any additional shares of Common Stock, or grant any option
to purchase or right to acquire or acquire any option to dispose of any shares
of Common Stock except, in the case of the Company, in certain limited
circumstances.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the Managers against certain liabilities, including civil
liabilities under the Securities Act, or to contribute to payments that the U.S.
Underwriters and the Managers may be required to make in respect thereof. The
U.S. Underwriters and the Managers have agreed to indemnify the Company and the
Selling Stockholders against certain liabilities, including civil liabilities
under the Securities Act, or to contribute to payments that the Company and the
Selling Stockholders may be required to make in respect thereof.
Certain of the U.S. Underwriters and their affiliates have from time to
time performed, and continue to perform, various investment banking services for
the Company, for which customary compensation has been received.
44
<PAGE> 47
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of Common Stock are effected. Accordingly, any resale of the Common
Stock in Canada must be made in accordance with applicable securities laws which
will vary depending on the relevant jurisdiction, and which may require resales
to be made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from whom
such purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Common Stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions".
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company pursuant to the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and
at the Commission's regional offices located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. The Commission
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information
45
<PAGE> 48
statements and other information regarding registrants that file electronically
with the Commission. Copies of such information may also be inspected at the
reading room of the library of the National Association of Securities Dealers,
Inc., 1735 K Street N.W., 2nd Floor, Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus, which constitutes part of the Registration Statement, omits
certain of the information contained in the Registration Statement and the
exhibits and schedules thereto on file with the Commission pursuant to the
Securities Act and the rules and regulations of the Commission thereunder.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, or incorporated by reference therein,
each such statement being qualified in all respects by such reference.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
Common Stock offered hereby will be passed upon for the Company by Dickstein
Shapiro Morin & Oshinsky LLP, Washington, D.C. Dickstein Shapiro Morin &
Oshinsky LLP has in the past represented, and continues to represent, Peer L.P.,
Peer II L.P., Investments L.P., Harbour Group, the Fox Family Foundation and
their respective affiliates with respect to various matters unrelated to the
Company as well as in connection with their ownership of capital stock of the
Company. Certain legal matters in connection with the Offering will be passed
upon for the U.S. Underwriters and the Managers by Katten Muchin & Zavis,
Chicago, Illinois.
EXPERTS
The Consolidated Financial Statements of the Company included in this
Prospectus as of June 30, 1996 and June 25, 1995 and for each of the three years
in the period ended June 30, 1996, have been so included in reliance on the
reports of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The consolidated financial statements of Mid-West, incorporated by
reference in this Prospectus as of May 26, 1996 and May 28, 1995 and for each of
the three years in the period ended May 26, 1996, have been so incorporated by
reference in reliance on the reports of Altschuler, Melvoin and Glasser LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
46
<PAGE> 49
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Consolidated Financial Statements PAGE
- ----------------------------------------------------------------------------------- ----
<S> <C>
Consolidated Balance Sheets at September 29, 1996 (unaudited) and June 30, 1996.... F-2
Consolidated Statement of Operations for the three months ended September 29, 1996
(unaudited) and September 24, 1995 (unaudited)................................... F-3
Consolidated Statement of Changes in Stockholders' Equity for the three months
ended September 29, 1996 (unaudited)............................................. F-4
Consolidated Statement of Cash Flows for the three months ended September 29, 1996
(unaudited) and September 24, 1995 (unaudited)................................... F-5
Notes to Unaudited Consolidated Financial Statements............................... F-6
Report of Independent Accountants.................................................. F-11
Consolidated Balance Sheets at June 30, 1996 and June 25, 1995..................... F-12
Consolidated Statement of Operations for the fiscal years ended June 30, 1996, June
25, 1995 and June 26, 1994....................................................... F-13
Consolidated Statement of Changes in Stockholders' Equity for the fiscal years
ended June 30, 1996, June 25, 1995 and June 26, 1994............................. F-14
Consolidated Statement of Cash Flows for the fiscal years ended June 30, 1996, June
25, 1995 and June 26, 1994....................................................... F-15
Notes to Consolidated Financial Statements......................................... F-17
</TABLE>
F-1
<PAGE> 50
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
SEPTEMBER 29, JUNE 30,
1996 1996
------------- --------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 2,653 $ 1,210
Accounts receivable, net......................................... 34,940 32,092
Costs and estimated earnings in excess of amounts billed on
uncompleted contracts........................................... 58,088 19,130
Inventories, net................................................. 38,636 31,403
Prepaid expenses and other....................................... 6,699 10,153
------------- --------
Total current assets........................................ 141,016 93,988
Property, plant and equipment, net.................................... 44,204 36,713
Goodwill, net......................................................... 157,753 101,187
Other assets, net..................................................... 3,989 1,955
------------- --------
$ 346,962 $233,843
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................ $ 15,922 $ 8,481
Accounts payable................................................. 34,627 19,621
Customer advances................................................ 17,534 17,201
Accrued liabilities.............................................. 24,063 22,524
------------- --------
Total current liabilities................................... 92,146 67,827
------------- --------
Long-term debt........................................................ 153,695 70,846
Deferred income taxes................................................. 5,261 4,756
Other long-term liabilities........................................... 3,495 2,530
------------- --------
Total long-term obligations................................. 162,451 78,132
------------- --------
Commitments and contingencies (See notes 10 and 11)
Stockholders' equity:
Preferred stock, $0.01 par value; 1,500,000 shares authorized; no
shares issued and outstanding
Common stock, $0.01 par value; 100,000,000 shares authorized;
9,009,375 and 9,001,250 shared issued and outstanding at
September 29, 1996 and June 30, 1996, respectively.............. 90 90
Additional paid-in capital....................................... 61,367 61,255
Retained earnings................................................ 30,908 26,539
------------- --------
Total stockholders' equity.................................. 92,365 87,884
------------- --------
$ 346,962 $233,843
========== ========
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
F-2
<PAGE> 51
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
SEPTEMBER 29, SEPTEMBER 24,
1996 1995
------------- -------------
<S> <C> <C>
Net sales....................................................... $ 82,635 $ 44,788
Cost of sales................................................... 59,870 33,547
------------- -------------
Gross profit.................................................... 22,765 11,241
Selling, general and administrative expenses.................... 11,588 6,625
------------- -------------
Operating income................................................ 11,177 4,616
Interest expense................................................ 2,715 761
------------- -------------
Income before provision for income taxes and extraordinary
loss.......................................................... 8,462 3,855
Provision for income taxes...................................... 3,589 1,629
------------- -------------
Income before extraordinary loss................................ 4,873 2,226
Extraordinary loss on debt refinancing less applicable income
tax benefits of $216.......................................... 324
------------- -------------
Net income...................................................... $ 4,549 $ 2,226
========== ==========
Primary earnings per common share:
Income before extraordinary loss.............................. $ 0.52 $ 0.25
Extraordinary loss............................................ 0.04
------------- -------------
Net income.................................................... $ 0.48 $ 0.25
========== ==========
Weighted average common shares.................................. 9,415,738 9,000,000
========== ==========
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
F-3
<PAGE> 52
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS
ENDED SEPTEMBER 29, 1996
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -------
<S> <C> <C> <C> <C>
Balance, June 30, 1996.................................. $ 90 $ 61,255 $ 26,539 $87,884
Exercise of stock options (unaudited)................... 112 112
Net income for the three months ended September 29, 1996
(unaudited)........................................... 4,549 4,549
Cash dividend at $0.02 per common share (unaudited)..... (180) (180)
------ ---------- -------- -------
Balance, September 29, 1996 (unaudited)................. $ 90 $ 61,367 $ 30,908 $92,365
====== ======= ======= =======
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
F-4
<PAGE> 53
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 29, 1996 SEPTEMBER 24, 1995
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................. $ 4,549 $ 2,226
Adjustments to reconcile net income to net cash provided
(used) by
operating activities:
Depreciation.......................................... 1,307 884
Amortization.......................................... 1,087 557
Deferred income tax provision......................... 200 (194)
Other................................................. 12
(Increase) decrease in current assets, excluding the effect
of acquisitions:
Accounts receivable................................... (1,072) 4,602
Costs and earnings in excess of amounts billed........ (16,512) (3,601)
Inventories........................................... (4,801) 2,077
Prepaid expenses and other............................ 2,787 (915)
Increase (decrease) in current liabilities, excluding the
effect of acquisitions:
Accounts payable...................................... 8,214 1,304
Accrued liabilities................................... (3,701) 349
Customer advances..................................... (678) 1,424
Other................................................. 16 18
------------------ ------------------
Net cash provided (used) by operating
activities..................................... (8,592) 8,731
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................. (2,417) (2,070)
Acquisition of Mid-West Automation Enterprises, Inc.
stock, net of cash acquired of $21,572.............. (75,179)
Acquisition of H.G. Kalish Inc. net assets, net of
cash acquired of $709............................... (16,424)
Other................................................. (200)
------------------ ------------------
Net cash used by investing activities............ (77,796) (18,494)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt........................ 62,450 22,239
Repayments of term loans.............................. (155) (11,750)
Net borrowings (repayments) on revolving loans........ 28,009 (173)
Repayments of capital leases and other long-term
obligations......................................... (42) (54)
Financing costs....................................... (2,363)
Exercise of stock options............................. 112
Dividends............................................. (180) (180)
------------------ ------------------
Net cash provided by financing activities........ 87,831 10,082
------------------ ------------------
Net increase in cash....................................... 1,443 319
Cash and cash equivalents at beginning of period........... 1,210 646
------------------ ------------------
Cash and cash equivalents at end of period................. $ 2,653 $ 965
============== ==============
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
F-5
<PAGE> 54
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
NOTE 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of DT
Industries, Inc. (DTI or the Company) have been prepared in accordance with the
instructions for Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. However, in the opinion of management, such information
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of operations for the periods
presented. Operating results for any quarter are not necessarily indicative of
the results for any other quarter or for the full year. These statements should
be read in conjunction with the consolidated financial statements and notes to
the consolidated financial statements thereto for the fiscal year ended June 30,
1996 included elsewhere herein.
NOTE 2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
NOTE 3. ACQUISITIONS
On July 19, 1996, DTI purchased the outstanding stock of Mid-West
Automation Enterprises, Inc. (Mid-West), a designer and manufacturer of
integrated precision assembly systems, in a transaction accounted for under the
purchase method of accounting. The purchase price of approximately $75,179, net
of cash acquired, was financed by borrowings under the Second Amended and
Restated Credit Facilities Agreement. The purchase price has been preliminarily
allocated to the acquired assets and assumed liabilities based on their
estimated fair value at the date of acquisition. The excess of purchase price
over the estimated fair value of net assets acquired has been recorded as
goodwill. The accompanying consolidated financial statements include the results
of Mid-West from the date of acquisition.
In August 1995 and September 1995, respectively, the Company acquired
certain assets of and assumed certain liabilities of H.G. Kalish Inc. (Kalish)
and Arrow Precision Elements, Inc. (Arrow). The Company also acquired the stock
of Swiftpack Automation Limited (Swiftpack) in November 1995 and Assembly
Machines, Inc. (AMI) in January 1996. See the consolidated financial statements
and notes thereto for the fiscal year ended June 30, 1996 included elsewhere
herein for additional information relating to these acquisitions.
The following table sets forth pro forma information for DTI as if the
acquisitions of Kalish, Arrow, Swiftpack, AMI and Mid-West had taken place on
July 1, 1996 and June 26, 1995, respectively. This information is unaudited and
does not purport to represent actual net sales, income before extraordinary loss
and earnings per share before extraordinary loss had the acquisitions actually
occurred on July 1, 1996 and June 26, 1995:
<TABLE>
<CAPTION>
PRO FORMA INFORMATION
FOR THE PERIODS (UNAUDITED)
----------------------------------------
JULY 1, 1996 JUNE 26, 1995
TO TO
SEPTEMBER 29, 1996 SEPTEMBER 24, 1995
------------------ ------------------
<S> <C> <C>
Net sales................................... $ 89,807 $ 78,538
Income before extraordinary loss............ $ 5,112 $ 4,263
Earnings per share before extraordinary
loss...................................... $ 0.54 $ 0.47
Weighted average shares outstanding......... 9,415,738 9,000,000
</TABLE>
F-6
<PAGE> 55
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 4. REVENUE RECOGNITION
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 for customer contracts are measured
based on the ratio of engineering and manufacturing labor hours incurred to date
compared to total estimated engineering and manufacturing labor hours or, for
certain customer contracts, the ratio of total costs incurred to date to total
estimated costs. Any revisions in the estimated total labor hours, 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.
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.
NOTE 5. FOREIGN CURRENCY TRANSLATION
The accounts of the Company's foreign subsidiaries are maintained in their
local currency. Assets and liabilities are translated into U.S. dollars using
period-end exchange rates, and statement of operations items are translated
using weighted average exchange rates for the period. Adjustments resulting from
the process of translating the accounts into U.S. dollars are accumulated in a
separate translation account, included in stockholders' equity. Foreign currency
transaction gains and losses are included in current earnings. The cumulative
translation adjustment account and foreign currency transaction gains and losses
are not considered material.
NOTE 6. EARNINGS PER SHARE
The computation of primary earnings per share was based on the weighted
average number of outstanding common shares during the period plus, when the
effect was dilutive, common stock equivalents consisting of certain shares
subject to stock options and contingent purchase price payable in common stock
related to an acquired business. The common equivalent shares arising from the
effect of outstanding stock options was computed using the treasury stock
method, if dilutive. The number of contingent shares used in the primary
calculation was based on the average stock price for the prior fiscal year and
the end of the period stock price assuming maintenance of current earnings. As
all potentially dilutive securities are considered common stock equivalents,
there was not a material difference between primary and fully diluted earnings
per share.
NOTE 7. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996 JUNE 30, 1996
------------------ -------------
(UNAUDITED)
<S> <C> <C>
Inventories, net:
Raw materials.............................. $ 15,581 $14,814
Work in process............................ 18,357 12,145
Finished goods............................. 4,698 4,444
---------- ----------
$ 38,636 $31,403
=========== ==========
</TABLE>
F-7
<PAGE> 56
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 7. SUPPLEMENTAL BALANCE SHEET INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996 JUNE 30, 1996
------------------ -------------
(UNAUDITED)
<S> <C> <C>
Accrued liabilities:
Accrued employee compensation and
benefits................................. $ 8,245 $ 6,030
Taxes payable and related reserves......... 6,107 5,120
Product liability.......................... 1,773 1,711
Other...................................... 7,938 9,663
---------- ----------
$ 24,063 $22,524
========== ==========
</TABLE>
NOTE 8. FINANCING
As of September 29, 1996 and June 30, 1996, long-term debt consisted of the
following:
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996 JUNE 30, 1996
------------------ -------------
(UNAUDITED)
<S> <C> <C>
Term loans to banks............................. $110,239 $47,917
Loan Notes...................................... 13,974 13,974
Revolving loans to banks........................ 44,759 16,749
Capital lease obligations and other long-term
debt.......................................... 645 687
------------- ----------
169,617 79,327
Less -- current portion of long-term debt....... (15,922) (8,481)
------------- -----------
$153,695 $70,846
============= ===========
</TABLE>
During July 1996, the Company entered into a Second Amended and Restated
Credit Facilities Agreement for $200,000 provided by two institutions. The
agreement provides for a $55,000 revolving credit facility, a $104,000 term
loan, a $20,000 acquisition facility and a $21,000 foreign currency denominated
letter of credit. The term loan requires quarterly principal payments ranging
from $4,750 to $5,500 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. At September 29, 1996, interest rates on these facilities
ranged from 7.2 percent to 8.5 percent. Borrowing availability for the revolver
is based on percentages of the Company's eligible accounts receivable, eligible
inventory and outstanding letters of credit. The Company had excess borrowing
availability of $8,817 relating to the revolving credit facility at September
29, 1996. The credit facility is secured by substantially all of the assets of
DTI and its subsidiaries and contains certain financial and other covenants and
restrictions. In conjunction with entering into the new credit facility, the
Company recognized an extraordinary loss in July 1996 of $324 attributable to
the write-off of $540 unamortized deferred financing fees, net of related $216
tax benefit.
In connection with the acquisition of Swiftpack on November 23, 1995, DT
Industries (UK) Limited (DTUK), a wholly-owned subsidiary, entered into the
Credit Agreement, Specific Counter-Indemnity and Debenture with a foreign bank.
The foreign credit facility was used for the cash portion of the purchase price
of Swiftpack and will be used for funding the redemption of five fixed rate
guaranteed promissory notes (Loan Notes) entered into with certain of the prior
shareholders. The aggregate principal amount of the Loan Notes is $13,974. The
Loan Notes bear interest at 5.3%, are redeemable by the noteholders between
November 25, 1996 and December 23, 1996 and are guaranteed by the foreign credit
facility. The aggregate principal amount of the foreign credit facility is
approximately $21,000. The foreign credit facility bears interest at LIBOR plus
a specified percentage. Principal payments thereunder ranging from $155 to $400
are due quarterly with the remaining principal due August 16, 2000.
F-8
<PAGE> 57
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 8. FINANCING (CONTINUED)
In connection with the issuance of the Loan Notes, the Company entered into
a foreign exchange forward contract to offset exchange gains and losses related
to the Loan Notes recorded by the foreign subsidiary. The contract matures
November 26, 1996 and provides the purchase of the equivalent of $13,974 of
Pounds Sterling at a rate of $1.5457 per Pound Sterling.
The Company has revolving credit facilities through its foreign
subsidiaries of approximately $3,000, of which $1,467 was outstanding at
September 29, 1996.
To manage its exposure to fluctuations in interest rates, the Company
entered into an interest rate swap agreement in June 1995 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 requires the Company to pay a fixed rate of 6.06% in
exchange for a floating rate payment equal to the three month LIBOR determined
on a quarterly basis with settlement occurring on specific dates. Amounts
accruing under the swap agreement did not result in a material amount of
additional interest expense for the three months ended September 29, 1996.
NOTE 9. STOCK OPTION PLANS
A summary of stock option transactions pursuant to the 1994 Employee Stock
Option Plan and the 1994 Directors Non-Qualified Stock Option Plan follows:
<TABLE>
<CAPTION>
SHARES SUBJECT
AVERAGE PRICE TO OPTION
------------- --------------
<S> <C> <C>
Summary of Stock Options
Beginning of period, June 30, 1996............. $ 13.86 662,250
Options granted................................ 18.44 260,950
Options exercised.............................. 13.78 (8,125)
Options cancelled.............................. 18.25 (1,000)
----------
End of period, September 29, 1996.............. 15.18 914,075
==========
Exercisable at September 29, 1996.............. 86,224
==========
</TABLE>
On September 18, 1996, the Board of Directors of the Company adopted the
Long-Term Incentive Plan (the Plan), subject to stockholder approval prior to
June 29, 1997. The Plan will become effective on the date of its approval by the
stockholders. The Plan provides for the granting of four types of awards on a
stand alone, combination, or a tandem basis, specifically, nonqualified stock
options, incentive stock options, restricted shares and performance stock
awards. The Plan provides for the granting of up to a total of 600,000 shares of
common stock, provided that the total number of shares with respect to which
awards are granted in any one year may not exceed 100,000 shares to any
individual employee and 200,000 shares in the aggregate, and the total number of
shares with respect to which grants of restricted and performance stock awards
are made in any year shall not exceed 50,000 shares to any individual employee
and 100,000 shares in the aggregate.
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company is a party to certain lawsuits involving employee matters,
product liability and other matters. Management and legal counsel do not expect
the outcome of any litigation to have a material adverse effect on the Company's
financial position, results of operations or liquidity.
The fiscal 1990, 1991, 1992 and 1993 federal income tax returns for DTG and
DTI have been audited by the Internal Revenue Service (the IRS). During the
fourth quarter of fiscal 1996, the Company reached an
F-9
<PAGE> 58
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
agreement in principle to settle these periods with the IRS. The additional
taxes due under the agreement are not material to the Company's financial
position, results of operations or liquidity. The Company expects the matter to
be settled during the fiscal year. There are no other material audits underway
or notification of audits for DTI or any of its subsidiaries.
NOTE 11. SUBSEQUENT EVENT
On September 30, 1996, DTI completed the acquisition of Hansford
Manufacturing Corporation (Hansford), a privately held designer and manufacturer
of automated assembly systems, in a transaction accounted for under the purchase
method of accounting. The purchase price of approximately $17,400 was financed
under the Company's credit facility, which was increased concurrent with the
acquisition to $210,000 from $200,000. DTI also agreed to make additional cash
payments totaling up to $20,000, payable over a two-year period beginning in
approximately three years. The amount, if any, will be determined by a formula
based on the earnings of the acquired business. Any additional purchase price
paid is expected to result in additional goodwill. As the transaction occurred
subsequent to the end of the first quarter, Hansford's balance sheet and results
of operations are excluded from the historical consolidated balance sheet and
results of operations of DTI.
F-10
<PAGE> 59
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of DT Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the financial
position of DT Industries, Inc. and its subsidiaries at June 30, 1996 and June
25, 1995, and the results of their operations and their cash flows for each of
the three fiscal years in the period ended June 30, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
St. Louis, Missouri
August 9, 1996
F-11
<PAGE> 60
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
JUNE 30, JUNE 25,
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................... $ 1,210 $ 646
Accounts receivable, net........................................... 32,092 28,936
Costs and estimated earnings in excess of amounts billed ($15,640
and $8,654, respectively) on uncompleted contracts................ 19,130 7,788
Inventories, net................................................... 31,403 23,822
Prepaid expenses and other......................................... 10,153 2,589
-------- --------
Total current assets..................................... 93,988 63,781
Property, plant and equipment, net...................................... 36,713 27,056
Goodwill, net........................................................... 101,187 67,445
Other assets, net....................................................... 1,955 981
-------- --------
$233,843 $159,263
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................. $ 8,481 $ 6,448
Accounts payable................................................... 19,621 12,773
Customer advances.................................................. 13,850 12,581
Billings in excess of costs and earnings ($14,097) on uncompleted
contracts......................................................... 3,351
Accrued liabilities................................................ 22,524 15,188
-------- --------
Total current liabilities................................ 67,827 46,990
-------- --------
Long-term debt.......................................................... 70,846 30,905
Deferred income taxes................................................... 4,756 3,756
Other long-term liabilities............................................. 2,530 2,592
-------- --------
78,132 37,253
-------- --------
Commitments and contingencies (Notes 2 and 11)
Stockholders' equity:
Preferred stock, $.01 par value; 1,500,000 shares authorized; no
shares issued and outstanding.....................................
Common stock, $.01 par value; 100,000,000 shares authorized;
9,001,250 and 9,000,000 shares issued and outstanding,
respectively...................................................... 90 90
Additional paid-in capital......................................... 61,255 61,162
Retained earnings.................................................. 26,539 13,768
-------- --------
Total stockholders' equity............................... 87,884 75,020
-------- --------
$233,843 $159,263
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-12
<PAGE> 61
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JUNE 30, JUNE 25, JUNE 26,
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales................................................... $ 235,946 $ 147,369 $ 107,499
Cost of sales............................................... 172,568 109,678 79,555
--------- --------- ---------
Gross profit................................................ 63,378 37,691 27,944
Selling, general and administrative expenses................ 35,445 21,428 13,875
--------- --------- ---------
Operating income............................................ 27,933 16,263 14,069
Interest expense............................................ 4,799 1,849 3,506
--------- --------- ---------
Income before provision for income taxes and extraordinary
loss...................................................... 23,134 14,414 10,563
Provision for income taxes.................................. 9,643 5,964 4,570
--------- --------- ---------
Income before extraordinary loss............................ 13,491 8,450 5,993
Extraordinary loss on early extinguishment of debt, net of
income tax benefit of $135................................ (179)
--------- --------- ---------
Net income.................................................. $ 13,491 $ 8,450 $ 5,814
======== ======== ========
Earnings per share:
Income before extraordinary loss....................... $ 1.50 $ .94 $ 1.10
Extraordinary loss..................................... (.03)
--------- --------- ---------
Net income............................................. $ 1.50 $ .94 $ 1.07
======== ======== ========
Weighted average number of common shares.................... 9,000,257 9,000,000 5,458,337
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-13
<PAGE> 62
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollar in thousands, except per share data)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -------
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1993.................................. $ 43 $ 5,607 $ 404 $ 6,054
Issuance of common stock to management............. 4 162 166
Contribution of common stock by existing
stockholders..................................... (2) 2
Issuance of common stock in initial public offering
on April 22, 1994................................ 45 55,335 55,380
Cash dividend at $0.02 per common share............ (180) (180)
Net income......................................... 5,814 5,814
------ ---------- -------- -------
BALANCE, JUNE 26, 1994.................................. 90 61,106 6,038 67,234
Payments on stock subscriptions receivable......... 56 56
Cash dividend at $0.08 per common share............ (720) (720)
Net income......................................... 8,450 8,450
------ ---------- -------- -------
BALANCE, JUNE 25, 1995.................................. 90 61,162 13,768 75,020
Exercise of stock options.......................... 17 17
Payments on stock subscriptions receivable......... 76 76
Cash dividend at $0.08 per common share............ (720) (720)
Net income......................................... 13,491 13,491
------ ---------- -------- -------
BALANCE, JUNE 30, 1996.................................. $ 90 $ 61,255 $ 26,539 $87,884
====== ======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-14
<PAGE> 63
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------
JUNE 30, JUNE 25, JUNE 26,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................... $ 13,491 $ 8,450 $ 5,814
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................ 3,411 2,738 2,271
Amortization........................................ 2,705 1,823 1,086
Deferred income tax provision....................... 981 3,921 826
Loss on refinancing of long-term debt............... 314
Other............................................... 116 36 16
(Increase) decrease in current assets, excluding the
effects of acquisitions:
Accounts receivable................................. 4,274 (13,503) (4,328)
Costs and earnings in excess of amounts billed...... (8,520) (2,593)
Inventories......................................... 3,873 (3,937) 5,959
Prepaid expenses and other.......................... (5,797) (634) (499)
Increase (decrease) in current liabilities, excluding the
effect of acquisitions:
Accounts payable.................................... 838 2,444 1,619
Accrued liabilities................................. 189 (3,068) (681)
Customer advances................................... (3,765) 5,816 (8,751)
Billings in excess of costs and earnings on
uncompleted
contracts......................................... 3,351
Other............................................... (62) 61 87
-------- -------- --------
Net cash provided by operating activities...... 15,085 1,554 3,733
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures..................................... (10,249) (7,718) (2,272)
Acquisition of Sencorp stock and Stokes net assets,
net of cash acquired of $359...................... (26,397)
Acquisition of AAA stock and net assets, net of cash
acquired of $530.................................. (29,181)
Acquisition of Kalish net assets, Arrow net assets,
Swiftpack stock and AMI stock, net of cash
acquired of $2,484................................ (29,614)
Other............................................... 113 44
-------- -------- --------
Net cash used in investing activities.......... (39,863) (36,786) (28,625)
-------- -------- --------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-15
<PAGE> 64
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------
JUNE 30, JUNE 25, JUNE 26,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt............................ $ 37,031 $ 25,000 $ 21,752
Repayment of debt......................................... (13,854) (1,250) (29,334)
Net borrowings from (repayment of) revolving loans........ 3,633 13,116 (181)
Repayment of subordinated debt -- related party........... (22,600)
Repayment of capital leases and other..................... (209) (243) (252)
Debt issuance costs....................................... (632)
Net proceeds from issuance of common stock in initial
public offering......................................... 55,380
Dividends................................................. (720) (900)
Other..................................................... 93 56 166
-------- -------- --------
Net cash provided by financing activities............ 25,342 35,779 24,931
-------- -------- --------
Net increase in cash........................................... 564 547 39
Cash at beginning of period.................................... 646 99 60
-------- -------- --------
Cash at end of period.......................................... $ 1,210 $ 646 $ 99
======== ======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest............................................. $ 4,280 $ 1,618 $ 4,054
Income taxes......................................... $ 6,369 $ 3,282 $ 2,453
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In fiscal 1994, a total of 443,250 shares of common stock were issued to
members of management in exchange for capital contributions of $166 and notes
receivable totaling $575.
The Company purchased H. G. Kalish Inc., Arrow Precision Elements, Inc.,
Swiftpack Automation Limited and Assembly Machines, Inc. in fiscal 1996;
Advanced Assembly Automation, Inc., Lakso Division of Package Machinery Company
and Armac Industries, Ltd. in fiscal 1995; and Sencorp Systems, Inc. and
Stokes-Merrill, Inc. in fiscal 1994. In conjunction with the acquisition of
Swiftpack, the Company issued Loan Notes totaling approximately $13,974. See
Note 4. The following table represents summary information with respect to these
acquisitions:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Fair value of assets acquired................................. $ 25,447 $ 17,271 $ 14,137
Fair value assigned to goodwill............................... 36,071 25,255 23,516
Cash paid..................................................... (29,614) (29,181) (26,397)
-------- -------- --------
Liabilities assumed and seller financing (See Note 4)......... $ 31,904 $ 13,345 $ 11,256
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-16
<PAGE> 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
NOTE 1. ORGANIZATION
DT Industries, Inc. (DTI or the Company) was organized to acquire the
operations of Detroit Tool Group, Inc. (DTG), the predecessor company to DTI, in
August 1992 and the Peer Division of Teledyne, Inc. in July 1992. Manufacturing
operations are principally based in the U.S. with the exception of two foreign
entities acquired in fiscal 1996. Recent acquisitions including the foreign
acquisitions are described in Note 2. The Company and its subsidiaries operate
in two business segments, the Special Machines segment (including the Automation
Group and the Packaging Group) and the Components segment.
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.
On February 9, 1994, the Company split its shares of common stock at a rate
of 4.5 for 1, and increased authorized shares to 100,000,000. All share and per
share data in the consolidated financial statements have been adjusted to
reflect the stock split for all periods presented.
On April 22, 1994, an initial public offering (Offering) of DTI's common
stock was completed. The Company sold 4,500,000 shares of common stock at an
offering price of $13.50 per share. The net proceeds to the Company of $55,380
were used to repay substantially all indebtedness. In addition, Harbour Group
Investments II, L.P. (Investments L.P.), a significant stockholder of the
Company, under an option granted to the underwriters pursuant to the Offering
for the purpose of covering over-allotments, sold an additional 675,000 shares
at $13.50 per share less underwriting discounts and commissions. The net
proceeds of approximately $8,500 therefrom were paid directly to Investments
L.P.
NOTE 2. ACQUISITIONS
The following table summarizes certain information regarding the Company's
acquisitions during the past three years.
<TABLE>
<CAPTION>
NET CASH
PURCHASE
DATE BUSINESS PRICE
- --------------- ---------------------------------------------------------------- ---------
<S> <C> <C>
August 1993 Sencorp Systems, Inc. (Sencorp)................................. $ 15,300
December 1993 Stokes-Merrill, Inc. (Stokes)................................... 11,100
August 1994 Advanced Assembly Automation, Inc. (AAA)........................ 22,100
February 1995 Lakso Division of Package Machinery Company (Lakso)............. 7,000
February 1995 Armac Industries, Ltd. (Armac).................................. --
August 1995 H.G. Kalish Inc. (Kalish)....................................... 16,400
September 1995 Arrow Precision Elements Inc. (Arrow)........................... 3,000
November 1995 Swiftpack Automation Limited (Swiftpack)........................ 18,400*
January 1996 Assembly Machines Inc. (AMI).................................... 6,700
</TABLE>
- ---------------
* Includes issuance of Loan Notes of $13,974 and approximately $930 related to
the exercise of the option to purchase the remaining 5% interest in Swiftpack.
See Note 4.
During the past three fiscal years, the Company made nine acquisitions
which have significantly expanded its product lines. These acquisitions were
each accounted for under the purchase method of accounting and financed
primarily through bank borrowings, resulting in an increase in the Company's
debt. Results of operations of each acquired company have been included in the
Company's statement of operations from the date of acquisition. The purchase
price of each acquisition was allocated to the assets acquired and
F-17
<PAGE> 66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 2. ACQUISITIONS (CONTINUED)
liabilities assumed, based on their estimated fair value at the date of
acquisition. The excess of purchase price over the estimated fair value of net
assets acquired was, in each instance, recorded as goodwill.
As part of the Kalish and Swiftpack acquisitions, DTI has agreed to make
additional payments of up to $3,000 and approximately $4,700, respectively, to
the sellers. The amount of the additional purchase prices will be determined by
a formula based on the earnings of the acquired businesses. The additional
purchase price specified within the Kalish purchase agreement, which is based on
earnings for the three years after closing of the acquisition, may be paid in
DTI stock at the Company's option. The additional purchase price specified
within the Swiftpack purchase agreement, which is based on earnings for the
three or four years after closing of the acquisition, is payable in cash. No
amount has been accrued to date for any additional purchase price. Any
additional purchase price paid is expected to result in additional goodwill
related to these acquisitions.
The following table sets forth pro forma information for DTI as if all of
the previously discussed acquisitions, excluding Armac and Arrow, had taken
place on June 26, 1995 and June 27, 1994, respectively. The pro forma effect of
Armac and Arrow is immaterial. This information is unaudited and does not
purport to represent actual revenue, net income and earnings per share had the
acquisitions actually occurred on June 26, 1995, and June 27, 1994,
respectively.
Pro Forma Information (unaudited)
<TABLE>
<CAPTION>
JUNE 30, JUNE 25,
FISCAL YEAR ENDED 1996 1995
- ----------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Net sales.............................................................. $ 253,757 $ 209,793
Net income............................................................. $ 14,021 $ 10,866
Net income per share................................................... $ 1.56 $ 1.21
Weighted average shares outstanding.................................... 9,000,257 9,000,000
</TABLE>
See Note 16 for the acquisition of Mid-West Automation Enterprises, Inc. in July
1996.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies utilized by the Company in the preparation of the
financial statements conform to generally accepted accounting principles, and
require that management make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual amounts could differ from these estimates.
The significant accounting policies followed by the Company are described
below.
Revenue Recognition
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.
F-18
<PAGE> 67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Cash deposits received from customers on contracts in progress are
reflected as customer advances in the consolidated balance sheet until the
related revenue is recognized in accordance with the procedures described above.
Costs and estimated earnings in excess of amounts billed on percentage of
completion contracts represents costs incurred and earnings recognized in excess
of customer advances received. Billings in excess of costs incurred and
estimated earnings on uncompleted contracts represents customer advances
received in excess of costs incurred and earnings recognized.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Foreign Currency Translation
The accounts of the Company's foreign subsidiaries are maintained in their
respective local currencies. The accompanying consolidated financial statements
have been translated and adjusted to reflect U.S. dollars on the basis presented
below.
Assets and liabilities are translated into U.S. dollars at year-end
exchange rates. Income and expense items are translated at average rates of
exchange prevailing during the year. Adjustments resulting from the process of
translating the consolidated amounts into U.S. dollars are accumulated in a
separate translation adjustment account included in stockholders' equity. Common
stock and additional paid-in capital are translated at historical U.S. dollar
equivalents in effect at the date of acquisition. Foreign currency transaction
gains and losses are included in earnings currently. The cumulative translation
adjustment account balance and foreign currency transaction gains and losses are
not considered material.
Cash and Cash Equivalents
Book cash overdrafts on the Company's disbursement accounts totaling $6,478
and $4,022 at June 30, 1996 and June 25, 1995, respectively, are included in
accounts payable. All highly liquid debt instruments purchased with original
maturities of three months or less are classified as cash equivalents.
Concentrations of Credit Risk
The Company sells a majority of its special machines to a wide range of
manufacturing companies. Products from the Components segment are sold to
customers primarily in the transportation, agricultural equipment and textile
industries. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral, although many customers of the Special
Machines segment pay deposits to the Company prior to shipment of its products.
The Company maintains reserves for potential credit losses and historically such
losses have been within management's expectations. At June 30, 1996, the Company
had no significant concentration of credit risk.
F-19
<PAGE> 68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
For purposes of financial reporting, the Company has determined that the
fair value of financial instruments approximates book value at June 30, 1996,
based on terms currently available to the Company in financial markets.
Inventories
Domestic inventories are stated at the lower of cost, determined using the
last-in, first-out (LIFO) method, or market, with the exception of raw material
inventories and the material component of work in process inventories at Detroit
Tool and Engineering, Inc. (DTE), Sencorp, Stokes, Peer, Lakso, Armac and AMI
totaling approximately $13,620, which are accounted for using the first-in,
first-out method (FIFO). For various tax and statutory reasons, inventories of
the Company's foreign subsidiaries are stated at FIFO costs. The effects on
financial position and results of operations from applying the FIFO method for
such material inventories and inventories of foreign subsidiaries are
immaterial. For other inventories maintained on a LIFO basis, cost under the
LIFO method approximates the FIFO method. Inventories include the cost of
materials, direct labor and manufacturing overhead.
Obsolete or unsalable inventories are reflected at their estimated
realizable values.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost and is depreciated using
the straight-line method over the estimated useful lives of the assets which
range from 3 to 39.5 years. Properties held under capital leases are recorded at
the present value of the non-cancelable lease payments over the term of the
lease and are amortized over the shorter of the lease term or the estimated
useful lives of the assets.
Expenditures for repairs, maintenance and renewals are charged to income as
incurred. Expenditures which improve an asset or extend its estimated useful
life are capitalized. When properties are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the accounts and any
gain or loss is included in income.
Goodwill
The excess of the purchase price over the fair value of net assets acquired
in business combinations (goodwill) is capitalized and amortized on a
straight-line basis over periods ranging from 15 to 40 years. Goodwill
amortization charged to income for the years ended June 30, 1996, June 25, 1995
and June 26, 1994 was approximately $2,386, $1,660 and $1,008 respectively.
Accumulated amortization at June 30, 1996, and June 25, 1995 was approximately
$5,574 and $3,188, respectively. Including the full year effect of the
acquisitions of Kalish, Arrow, Swiftpack and AMI, the Company estimates annual
amortization of goodwill to be approximately $2,733.
The carrying value of goodwill is assessed for recoverability by management
based on an analysis of future expected cash flows from the underlying
operations of the Company. Management believes that there has been no impairment
at June 30, 1996.
Environmental Liabilities
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and that do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Generally, the timing of these
F-20
<PAGE> 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accruals coincides with completion of a feasibility study or the Company's
commitment to a formal plan of action.
Postretirement Benefits
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (OPEB or SFAS 106). This standard requires recognition of the cost of
providing postretirement benefits during an employee's period of service. As
part of adopting the standard as of the acquisition of DTG, the Company recorded
an accrual of approximately $1,584 in other long-term liabilities in its balance
sheet representing the discounted present value of expected future retiree
benefits attributed to employees' service rendered in periods prior to DTI's
acquisition (see Note 9).
Income Taxes
The Company files a consolidated federal income tax return which includes
its subsidiaries. The Company has adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Under SFAS 109, the
current or deferred tax consequences of a transaction are measured by applying
the provisions of enacted laws to determine the amount of taxes payable
currently or in future years. Deferred income taxes are provided for temporary
differences between the income tax bases of assets and liabilities, and their
carrying amounts for financial reporting purposes.
Earnings Per Share
Earnings per share is based upon the weighted average number of common
shares outstanding during the period, after giving effect to the stock split
described in Note 1.
Options under the Company's Employee Stock Option Plan and the Director's
Non-Qualified Stock Option Plan are not included as common stock equivalents for
earnings per share purposes since they do not have a material dilutive effect.
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), which addresses accounting for stock option, purchase
and award plans. SFAS 123 specifies that companies utilize either the "fair
value based method" or the "intrinsic value based method" for valuing stock
options granted. The Company will adopt SFAS 123 in fiscal 1997 and expects to
utilize the "intrinsic value based method" for valuing stock options granted.
The Company anticipates that, when adopted, SFAS 123 will have no material
effect on its financial position or results of operations.
Interest Rate Swap Agreement
The Company is a party to an interest rate swap agreement used to hedge
interest rate fluctuations on a portion of its floating rate revolving credit
facility and term loans. This agreement is accounted for on the accrual basis of
accounting. Net cash payments or receipts under the agreement are recorded as an
adjustment to interest expense when such amounts become due or receivable.
F-21
<PAGE> 70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fiscal Year
Beginning with fiscal 1994, the Company implemented a 52-53 week fiscal
year that ends on the last Sunday in June. Fiscal 1996 and 1995 included 53 and
52 weeks, respectively.
NOTE 4. FINANCING
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 25,
1996 1995
-------- --------
<S> <C> <C>
Notes payable to bank under a term loan and revolving credit facility
agreement, as amended November 22, 1995, secured by virtually all
assets:
Term loan -- Principal due in quarterly installments............... $41,550 $23,750
Revolving credit facility -- Principal due in full on August 16,
2000.............................................................. 14,983 13,116
Loan Notes.............................................................. 13,974
Sterling pound denominated facility, payable in quarterly
installments.......................................................... 6,367
Foreign currency denominated revolving loans to banks................... 1,766
Capital lease obligations............................................... 88 218
Other long-term debt.................................................... 599 269
------- -------
79,327 37,353
(Less) current portion of long-term debt, including $88 and $164,
respectively, of capital lease obligations............................ (8,481) (6,448)
------- -------
$70,846 $30,905
======= =======
</TABLE>
On November 22, 1995 the Company entered into an amendment to the Amended
and Restated Credit Facilities Agreement (Amended Credit Agreement) which
expires August 16, 2000. The amended facility of $90,000 is provided by six
institutions. The Amended Credit Agreement provides for a $25,000 revolving
credit facility, a $43,500 term loan and a letter of credit denominated in a
foreign currency of approximately $21,500 to secure loans to finance the
Swiftpack acquisition. Borrowings under the Amended Credit Agreement bear
interest at the bank's base rate or LIBOR (at the option of DTI) plus a
specified percentage based on the ratio of funded debt to operating cash flow.
At June 30, 1996, interest rates on these facilities ranged from 6.9% to 8.25%.
Borrowing availability for the revolver is based on percentages of the Company's
eligible accounts receivable, eligible inventory and outstanding letters of
credit. The Company had excess borrowing availability of $7,241 relating to the
revolving credit facility at June 30, 1996. The term loan requires quarterly
principal payments with the remaining balance due on August 16, 2000. The
principal payments range from $1,700 to $2,500. Borrowings under the Amended
Credit Agreement are secured by substantially all of the assets of DTI and its
subsidiaries. The Amended Credit Agreement contains certain financial and other
covenants and restrictions for which the Company was in compliance with such
covenants and restrictions at June 30, 1996.
In connection with the acquisition of Swiftpack on November 23, 1995, DT
Industries (UK) Limited (DTUK) issued five fixed rate guaranteed promissory
notes (Loan Notes) with certain of the prior shareholders. The aggregate
principal amount of the Loan Notes is $13,974. The Loan Notes bear interest at
5.3%, are redeemable by the noteholders between November 25, 1996 and December
23, 1996 and are guaranteed by a credit agreement with a foreign bank (Foreign
Credit Agreements). The Foreign Credit Agreements, entered into on November 23,
1995, provide the guarantee of the Loan Notes and provide a loan facility
denominated in a foreign currency in the aggregate principal amount of
approximately $21,000. The facility was used for the cash portion of the
purchase price of Swiftpack and will be used for funding the
F-22
<PAGE> 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 4. FINANCING (CONTINUED)
redemption of the Loan Notes. As such, the Loan Notes are presented as long term
debt on the consolidated balance sheet. The Foreign Credit Agreements bear
interest at LIBOR plus a specified percentage (approximately 8.0% including
letter of credit fees at June 30, 1996). Principal payments thereunder ranging
from $155 to $400 are due quarterly with the remaining principal due August 16,
2000.
In connection with the issuance of the Loan Notes, the Company entered into
a foreign exchange forward contract to offset exchange gains and losses related
to the Loan Notes recorded by the foreign subsidiary. The contract matures
November 26, 1996 and provides the purchase of the equivalent of $13,974 of
Pounds Sterling at a rate of $1.5457 per Pound Sterling.
In addition, the Company has revolving credit facilities through its
foreign subsidiaries of approximately $3,000, of which approximately $1,766 was
outstanding at June 30, 1996.
To manage its exposure to fluctuations in interest rates, the Company
entered into an interest rate swap agreement in June 1995 for a notional
principal amount of $30,000, 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 when such amount becomes payable or receivable. The swap agreement
requires the Company to pay a fixed rate of 6.06% in exchange for a floating
rate payment equal to the three month LIBOR determined on a quarterly basis with
settlement occurring on specific dates. Amounts accruing under the swap
agreement did not result in a material amount of additional interest expense for
fiscal 1996. Management believes that the Company's exposure to credit loss in
the event of nonperformance by the counterparty to this agreement is not
material.
In conjunction with the repayment of a term loan from the net proceeds of
the Offering as described in Note 1, the Company recognized a loss of $179
attributable to the write-off of $314 unamortized deferred financing fees, net
of related $135 tax benefit, which is reported as an extraordinary item in the
Consolidated Statement of Operations in fiscal 1994.
At June 30, 1996, the minimum principal payments of long-term debt,
excluding capital lease obligations, for the five subsequent fiscal years are as
follows:
<TABLE>
<CAPTION>
FOREIGN REVOLVING
CREDIT CREDIT
TERM LOAN FACILITY FACILITIES OTHER DEBT TOTAL
--------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
1997.......................................... $ 7,050 $ 1,319 $ -- $ 24 $ 8,393
1998.......................................... 8,600 1,319 104 10,023
1999.......................................... 9,800 1,242 113 11,155
2000.......................................... 10,000 1,474 115 11,589
2001 and thereafter........................... 6,100 14,987 16,749 243 38,079
------- ------- -------- ------- -------
$41,550 $20,341 $ 16,749 $599 $79,239
======= ======= ======== ======= =======
</TABLE>
See Note 16 for further amendment to the Amended Credit Agreement pursuant to
the acquisition of Mid-West Automation Enterprises Inc. in July 1996.
NOTE 5. LEASE OBLIGATIONS
The Company leases certain of its machinery, equipment, computer systems
and related software under noncancelable lease agreements that extend for terms
of up to five years. The leases are reflected in the financial statements as
capitalized leases in accordance with the requirements of Statement of Financial
F-23
<PAGE> 72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 5. LEASE OBLIGATIONS (CONTINUED)
Accounting Standards No. 13, "Accounting for Leases". In addition, certain
facilities and equipment are leased under noncancelable operating leases having
terms up to 20 years.
Minimum lease payments under noncancelable leases at June 30, 1996 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR CAPITAL OPERATING
- --------------------------------------------------------------------------- -------- ---------
<S> <C> <C>
1997..................................................................... $ 95 $ 3,322
1998..................................................................... 2,296
1999..................................................................... 1,656
2000..................................................................... 1,395
2001 and thereafter...................................................... 13,142
--- -------
Total minimum lease payments............................................... 95 $21,811
=======
Less amount representing interest.......................................... (7)
---
Present value of net minimum lease payments................................ $ 88
====
</TABLE>
Rental expense for operating leases for the fiscal years ended June 30,
1996, June 25, 1995, and June 26, 1994, was approximately $3,103, $2,098 and
$1,288, respectively.
NOTE 6. INCOME TAXES
Income before provision for income taxes and extraordinary loss was taxed
under the following jurisdictions:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------
JUNE 30, JUNE 25, JUNE 26,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Domestic........................................................ $20,539 $14,414 $10,563
Foreign......................................................... 2,595
------- ------- -------
$23,134 $14,414 $10,563
======= ======= =======
</TABLE>
The provision for income taxes charged to operations was as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------
JUNE 30, JUNE 25, JUNE 26,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current:
U.S. Federal............................................... $6,474 $1,641 $3,074
State...................................................... 1,373 402 535
Foreign.................................................... 815
------- ------- -------
Total current.............................................. 8,662 2,043 3,609
------- ------- -------
Deferred:
U.S. Federal............................................... 734 3,203 727
State...................................................... 125 718 99
Foreign.................................................... 122
------- ------- -------
Total deferred............................................. 981 3,921 826
------- ------- -------
Total provision................................................. $9,643 $5,964 $4,435
======= ======= =======
</TABLE>
F-24
<PAGE> 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 6. INCOME TAXES (CONTINUED)
The provision for income taxes for the fiscal year ended June 26, 1994 is
net of income tax benefits of $135 related to the extraordinary loss as
described in Note 4 and $565 related to the utilization of an operating loss
carryforward.
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 25,
1996 1995
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Depreciation....................................................... $ 3,995 $ 3,606
LIFO inventory and costing capitalization, net..................... 759 862
Earnings recognized under percentage of completion................. 1,249 754
Goodwill and intangibles amortization.............................. 1,440 656
Other.............................................................. 347 154
-------- --------
Total deferred tax liabilities.......................................... 7,790 6,032
======= =======
Deferred tax assets:
Postretirement benefit accrual..................................... (701) (666)
Inventory reserves................................................. (795) (658)
Product liability reserves......................................... (750) (881)
Bad debt reserves.................................................. (521) (328)
Other accruals..................................................... (2,863) (1,272)
Other.............................................................. (1,394) (1,056)
-------- --------
Total deferred tax assets............................................... (7,024) (4,861)
-------- --------
Deferred tax assets valuation allowance................................. 1,029 1,029
-------- --------
Total net deferred tax liability........................................ 1,795 2,200
Less: current portion included in prepaid expenses and other............ 2,961 1,556
-------- --------
Long-term deferred tax liability........................................ $ 4,756 $ 3,756
======= =======
</TABLE>
The deferred tax assets valuation allowance has been recorded to reflect
the potential non-realization of certain deductible temporary differences.
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate to
pre-tax income as a result of the following differences.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------
JUNE 30, JUNE 25, JUNE 26,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
U.S. statutory rate............................................. $8,097 $4,901 $3,485
Increase in rate resulting from:
Non-deductible goodwill amortization....................... 410 304 240
State taxes, net........................................... 974 739 418
Other...................................................... 162 20 292
-------- -------- --------
$9,643 $5,964 $4,435
======= ======= =======
</TABLE>
F-25
<PAGE> 74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 7. RETIREMENT PLANS
The Company offers substantially all of its domestic employees a retirement
savings plan under Section 401(k) of the Internal Revenue Code. Each employee
may elect to enter a written salary deferral agreement under which a maximum of
15% of their salary, subject to aggregate limits required under the Internal
Revenue Code, may be contributed to the plan. The Company will match a
percentage of the employee's contribution up to a specified maximum percentage
of their salary. In addition, the Company generally is required to make a
mandatory contribution and may make a discretionary contribution from profits.
During the fiscal years ended June 30, 1996, June 25, 1995 and June 26, 1994,
the Company made contributions of approximately $1,596, $1,224 and $906,
respectively.
NOTE 8. RELATED PARTIES
Under the terms of a management consulting and advisory services agreement,
the Company paid affiliates of Investments, L.P. fees totaling $783, $459 and
$500 in fiscal 1996, 1995 and 1994, respectively, related to corporate
development services provided in identifying, negotiating and consummating the
Company's acquisitions. Fees paid to affiliates of Investments, L.P. related to
corporate development services were included in the costs of the related
acquisitions.
Under terms of management consulting and advisory services agreements,
Harbour Group Ltd. and Harbour Group Industries, Inc., charge the Company for
direct management and administrative services provided to the Company based on
actual, direct costs of such services. The charges, which are included in
selling, general and administrative expenses in the financial statements,
totaled approximately $285, $372 and $466 for the fiscal years ended June 30,
1996, June 25, 1995 and June 26, 1994, respectively.
Interest expense incurred with respect to a subordinated note payable to
Investments L.P. was $1,908 for the fiscal year ended June 26, 1994. The note
was repaid in full in April 1994 with proceeds from the Offering.
The Company issued 443,250 shares of the Company's common stock at prices
which approximated estimated fair value ranging from $1.26 to $2.57 per share to
members of management under agreements which allow management to pay for the
stock with cash and/or recourse notes receivable to the Company. The recourse
notes receivable were issued with interest rates ranging from 5.84% to 6.28% and
become due between September 2003 and January 2004. The notes are reflected as a
reduction to additional paid-in capital in the accompanying consolidated
financial statements.
NOTE 9. POSTRETIREMENT BENEFITS
DTI provides health care and life insurance benefits for former DTG
employees who retired prior to September 1, 1992 (less than 100 retirees at June
30, 1996). Management plans to fund the premiums as incurred, net of
reimbursements received by plan participants.
The following table sets forth the status of the postretirement plans,
reconciled to the postretirement benefit obligation included in the accompanying
consolidated balance sheets:
<TABLE>
<CAPTION>
JUNE 30, JUNE 25,
1996 1995
-------- --------
<S> <C> <C>
Accrued postretirement benefit obligation................................ $1,025 $1,097
Unrecognized net gain from changes in past experience and assumptions.... 639 523
-------- --------
Accrued postretirement benefit obligation recognized in the consolidated
balance sheet.......................................................... $1,664 $1,620
======= =======
</TABLE>
For measurement purposes, an 11% annual rate of increase in health care
premiums was assumed for 1997; this rate was assumed to decrease 1% per year to
6% by 2002 and remain at that level thereafter. An
F-26
<PAGE> 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 9. POSTRETIREMENT BENEFITS (CONTINUED)
increase in the assumed health care cost trend rates of 1% in each year would
increase the accumulated postretirement benefit obligations as of June 30, 1996,
by approximately $58 and the interest cost comprising the periodic
postretirement benefit cost for the period then ended by approximately $5.
The weighted average discount rate used to determine the accumulated
postretirement benefit obligation was 8% at June 30, 1996 and June 25, 1995.
The periodic postretirement benefit cost for fiscal 1996, 1995 and 1994
charged to income was approximately $41, $41 and $65, respectively.
NOTE 10. STOCK OPTION PLANS
In conjunction with the Offering, the Company adopted the 1994 Executive
Stock Option Plan (Executive Plan) pursuant to which non-qualified stock options
were granted to certain existing shareholders as of the date the registration
statement relating to the Offering became effective to acquire an aggregate
379,134 shares of the Company's common stock, subject to adjustment, by
tendering existing common stock in payment therefor. The options were exercised
immediately after the Offering. The exercise price of all options was the
current market price on the date of exercise and all options were exercised by
exchanging shares of previously owned common stock. The grant and exercise of
options under the Executive Plan did not result in any increase in the
beneficial ownership of common stock by the plan participants from the number of
shares owned at the time of the Offering. Under the terms of the Executive Plan,
the shares of common stock issued pursuant to the exercise of the options became
freely transferable, subject to the restrictions of the Stockholder Agreements
with each of the Executive Stockholders, on the last day of the sixth full month
following the date of exercise of such options. The provisions of the
Stockholder Agreements, which are subject to modification or waiver by the
Company, generally prohibited the sale of 157,500 of such shares for a period of
two years after exercise of the options, an aggregate 223,997 of such shares for
a period of eighteen months after exercise and an aggregate 268,322 of such
shares for a period of one year after exercise of the options. The shares
tendered in exercise of options granted under the Executive Plan were issued
under promissory notes due in September 2003 through January 2004 as discussed
in Note 8.
In connection with the Offering, the Company established a 1994 Employee
Stock Option Plan (Employee Plan). The Employee Plan provides for the granting
of options to the Company's executive officers and key employees to purchase
shares of common stock at prices equal to the fair market value of the stock on
the date of grant. Options to purchase up to 900,000 shares of common stock may
be granted under the Employee Plan. Options outstanding at June 30, 1996 entitle
the holders to purchase common stock at prices ranging between $10.25 and
$20.75. Options shall become exercisable with respect to one-fourth of the
shares covered thereby on each anniversary of the date of grant, commencing on
the second anniversary of the date granted. The right to exercise the options
expires ten years from the date of grant or earlier if an option holder ceases
to be employed by the Company.
Also in connection with the Offering, the Company established a 1994
Directors Non-Qualified Stock Option Plan (Directors Plan) which provides for
the granting of options to the Company's directors, who are not employees of the
Company, to purchase shares of common stock at prices equal to the fair market
value of the stock on the date of grant. Options to purchase up to 100,000
shares of common stock may be granted under the Directors Plan. Options
aggregating 75,000 shares currently outstanding entitle the holders to purchase
common stock at prices ranging between $13.50 and $16.00 per share. Options
shall become exercisable with respect to one-fourth of the shares covered,
thereby on each anniversary of the date of grant, commencing on the second
anniversary of such date. All options granted under the Directors Plan expire
ten years from the date of grant.
F-27
<PAGE> 76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 10. STOCK OPTION PLANS (CONTINUED)
A summary of stock option transactions pursuant to the Employee Plan and
Directors Plan follows.
<TABLE>
<CAPTION>
SHARES
AVERAGE SUBJECT
PRICE TO OPTION
------- ---------
<S> <C> <C>
Summary of Stock Options
Beginning of year.................................................... $ 13.71 465,750
Options granted...................................................... 14.06 239,000
Options exercised.................................................... 13.50 (1,250)
Options canceled..................................................... 13.36 (41,250)
---------
End of year.......................................................... 13.36 662,250
=======
Exercisable at June 30, 1996......................................... 88,250
=======
</TABLE>
NOTE 11. COMMITMENTS AND CONTINGENCIES
The Company is a party to certain lawsuits. Management and legal counsel do
not expect the outcome of any litigation to have a material adverse effect on
the Company's financial position, results of operations or liquidity.
The fiscal 1990, 1991, 1992 and 1993 federal income tax returns for DTG and
DTI 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. There are no other material audits underway or notification of audits
for DTI or any of its subsidiaries.
NOTE 12. DEPENDENCE ON SIGNIFICANT CUSTOMERS
Total net sales to a customer in the tire industry were $23,653 in fiscal
1996 and $26,829 in fiscal 1994 from the Special Machines segment. Total net
sales to a customer in the transportation industry were $14,754 and $12,172 in
fiscal 1995 and 1994, respectively, from the Components segment. Trade
receivables recorded for significant customers at June 30, 1996 and June 25,
1995 were $381 and $1,909, respectively. No other customers accounted for 10% or
more of consolidated sales in fiscal 1996, 1995 and 1994.
F-28
<PAGE> 77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 13. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
JUNE 30, JUNE 25,
1996 1995
-------- --------
<S> <C> <C>
Accounts Receivable
Trade receivables................................................... $33,336 $29,687
(Less) allowance for doubtful accounts.............................. (1,244) (751)
-------- --------
$32,092 $28,936
======= =======
Inventories, Net
Raw materials....................................................... $14,814 $ 6,419
Work in process..................................................... 12,145 15,546
Finished goods...................................................... 4,444 1,857
-------- --------
$31,403 $23,822
======= =======
Property, Plant and Equipment
Machinery and equipment............................................. $26,963 $18,145
Buildings and improvements.......................................... 14,282 7,029
Land and improvements............................................... 2,147 1,849
Property held under capital lease................................... 1,270 1,270
Construction-in-progress............................................ 1,759 5,169
-------- --------
46,421 33,462
(Less) accumulated depreciation (including $497 and $405,
respectively, related to property held under capital leases)....... (9,708) (6,406)
-------- --------
$36,713 $27,056
======= =======
Accrued Liabilities
Accrued employee compensation and benefits.......................... $ 6,030 $ 5,160
Taxes payable and related reserves.................................. 5,120 2,827
Product liability................................................... 1,711 1,725
Other............................................................... 9,663 5,476
-------- --------
$22,524 $15,188
======= =======
</TABLE>
NOTE 14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for fiscal 1996, 1995 and 1994 appears
below.
<TABLE>
<CAPTION>
NET SALES GROSS PROFIT
-------------------------------- -----------------------------
1996 1995 1994 1996 1995 1994
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
First quarter............................... $ 44,788 $ 25,054 $ 17,196 $11,241 $ 6,733 $ 3,796
Second quarter.............................. 60,143 34,470 26,939 15,157 8,937 6,199
Third quarter............................... 59,866 40,461 31,361 16,434 9,351 8,022
Fourth quarter.............................. 71,149 47,384 32,003 20,546 12,670 9,927
-------- -------- -------- ------- ------- -------
$235,946 $147,369 $107,499 $63,378 $37,691 $27,944
========= ========= ========= ======== ======== ========
</TABLE>
F-29
<PAGE> 78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 14. QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
NET INCOME EARNINGS PER SHARE
--------------------------- --------------------
1996 1995 1994 1996 1995 1994
------- ------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First quarter............................................. $ 2,226 $1,263 $ 406 $.25 $.14 $.09
Second quarter............................................ 3,072 1,590 1,117 .34 .18 .24
Third quarter............................................. 3,396 1,977 1,690 .38 .22 .36
Fourth quarter............................................ 4,797 3,620 2,601 .53 .40 .32
------- ------ ------
$13,491 $8,450 $5,814
======== ====== ======
</TABLE>
The net income and earnings per share for the fourth quarters of fiscal 1994
includes the effect of the extraordinary loss on the early extinguishment of
debt as described in Note 4.
NOTE 15. SEGMENT INFORMATION
Worldwide operations data, as required by Statement of Financial Accounting
Standards No. 14, "Financial Reporting for Segments of a Business Enterprise,"
are listed below. Profitability of the Company's foreign operations by
geographic area was determined based on ultimate sales to unaffiliated
customers. Total Company profit was included in the geographic area of the
entity transacting the final sale. Transfers between geographic areas are at
prices established by agreement between the affected parties. The Company's
foreign operations, as discussed in Notes 1 and 2, were acquired in fiscal 1996
and are located in Canada and the United Kingdom.
<TABLE>
<CAPTION>
DOMESTIC FOREIGN ELIMINATIONS CONSOLIDATED
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers................... $217,380 $18,566 $ -- $235,946
Transfers between geographic areas................ 10,723 (10,723)
-------- ------- ------------ ------------
Total revenue..................................... $217,380 $29,289 $(10,723) $235,946
======== ======= ========= =========
Earnings from operations.......................... $ 24,327 $ 3,819 $ (213) $ 27,933
======== ======= ========= =========
Identifiable assets............................... $192,383 $41,673 $ (213) $233,843
======== ======= ========= =========
</TABLE>
The Company operates in two business segments, Special Machines (including
the Automation Group and the Packaging Group) 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.
F-30
<PAGE> 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 15. SEGMENT INFORMATION (CONTINUED)
Financial information by business segment is as follows:
<TABLE>
<CAPTION>
DEPRECIATION
NET REVENUES EARNINGS AND
UNAFFILIATED FROM IDENTIFIABLE CAPITAL AMORTIZATION
CUSTOMERS OPERATIONS ASSETS EXPENDITURES EXPENSE
------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Fiscal Year Ended June 30, 1996
Special machines....................... $193,884 $ 26,557 $203,210 $ 6,145 $4,683
Components............................. 42,062 6,934 28,528 2,138 1,038
Corporate.............................. (5,558) 2,105 1,966 395
----------- --------- ---------- ----------- -----------
$235,946 $ 27,933 $233,843 $ 10,249 $6,116
=========== ========= ========== =========== ===========
Fiscal Year Ended June 25, 1995
Special machines....................... $112,170 $ 13,857 $135,328 $ 4,127 $3,452
Components............................. 35,199 6,676 23,061 3,043 837
Corporate.............................. (4,270) 874 548 272
----------- --------- ---------- ----------- -----------
$147,369 $ 16,263 $159,263 $ 7,718 $4,561
=========== ========= ========== =========== ===========
Fiscal Year Ended June 26, 1994
Special machines....................... $ 76,778 $ 11,506 $ 74,376 $ 750 $2,299
Components............................. 30,721 5,789 22,251 1,392 771
Corporate.............................. (3,226) 1,001 130 287
----------- --------- ---------- ----------- -----------
$107,499 $ 14,069 $ 97,628 $ 2,272 $3,357
=========== ========= ========== =========== ===========
</TABLE>
Export revenues included in domestic net revenues to unaffiliated customers
were approximately $34,083, $14,905 and $8,562 in fiscal 1996, 1995 and 1994,
respectively.
NOTE 16. SUBSEQUENT EVENTS
During July 1996, the Company entered into a Second Amended and Restated
Credit Facilities Agreement which replaced the Amended Credit Agreement. The
amended facility of $200,000 is provided by two institutions. The agreement
provides for a $55,000 revolving credit facility, a $104,000 term loan, a
$20,000 acquisition facility and a $21,000 foreign currency denominated letter
of credit. The term loan requires quarterly principal payments ranging from
$4,750 to $5,500 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. In conjunction with entering into the new credit facility,
the Company recognized an extraordinary loss in July 1996 of $324 attributable
to the write-off of $540 unamortized deferred financing fees, net of related
$216 tax benefit.
On July 19, 1996, DTI purchased the outstanding stock of Mid-West
Automation Enterprises Inc. (Mid-West), a Chicago-area designer and manufacturer
of integrated precision assembly systems, in a transaction accounted for under
the purchase method of accounting. The purchase price of approximately $75,000,
net of cash acquired, was financed by borrowings under the Second Amended and
Restated Credit Facilities Agreement. As the transaction occurred subsequent to
the end of fiscal 1996, Mid-West's balance sheet and results of operations are
excluded from the consolidated balance sheet and results of operations of DTI.
F-31
<PAGE> 80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
NOTE 16. SUBSEQUENT EVENTS (CONTINUED)
The unaudited pro forma combined condensed balance sheet of the Company and
Mid-West as of June 30, 1996 after giving effect to certain pro forma
adjustments is as follows:
<TABLE>
<S> <C>
Assets
Current assets............................................................... $124,599
Property, plant and equipment, net........................................... 43,086
Goodwill, net................................................................ 159,249
Other assets, net............................................................ 4,366
--------
$331,300
========
Liabilities and Shareholders' Equity
Current liabilities.......................................................... $ 88,038
Long-term debt............................................................... 147,246
Other long-term liabilities.................................................. 8,132
Shareholders' equity......................................................... 87,884
--------
$331,300
========
</TABLE>
The pro forma combined results of operations of the Company and Mid-West
for the fiscal year ended June 30, 1996 after giving effect to certain pro forma
adjustments is shown below. This information is unaudited and does not purport
to represent actual revenue, net income and earnings per share had the
acquisition occurred on June 26, 1995.
<TABLE>
<S> <C>
Net Sales......................................................................... $324,098
Income before extraordinary loss.................................................. $ 18,532
Earnings per common share before extraordinary loss............................... $ 2.06
</TABLE>
F-32
<PAGE> 81
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Cautionary Statement Regarding
Forward-Looking Statements.......... 6
Risk Factors.......................... 6
Recent Developments................... 8
Use of Proceeds....................... 9
Price Range of Common Stock and
Dividend Information................ 9
Capitalization........................ 10
Selected Historical Consolidated
Financial Data...................... 11
Pro Forma Financial Information....... 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 26
Principal and Selling Stockholders.... 36
Certain Transactions.................. 38
Certain United States Tax Consequences
to Non-United States Holders........ 40
Underwriting.......................... 43
Notice to Canadian Residents.......... 45
Available Information................. 45
Legal Matters......................... 46
Experts............................... 46
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
[DT INDUSTRIES LOGO]
5,085,000 Shares
Common Stock
($0.01 par value)
PROSPECTUS
CS First Boston
Morgan Stanley & Co.
Incorporated
Schroder Wertheim & Co.
- ------------------------------------------------------
<PAGE> 82
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED NOVEMBER 1, 1996
5,085,000 Shares
[DT INDUSTRIES LOGO]
Common Stock
($0.01 par value)
------------------
Of the shares of common stock, $0.01 par value (the "Common Stock"), of DT
Industries, Inc. ("DTI" or the "Company") offered hereby (the "Offering"),
2,250,000 shares are being sold by the Company and 2,835,000 shares are
being sold by the Selling Stockholders named herein. See "Principal and
Selling Stockholders." Of the 5,085,000 shares of Common Stock being
offered, 1,017,000 shares are initially being offered outside the
United States and Canada (the "International Shares") by the
Managers (the "International Offering") and 4,068,000 shares are
initially being concurrently offered in the United States and
Canada (the "U.S. Shares") by the U.S. Underwriters (the "U.S.
Offering" and, together with the International Offering, the
"Offering"). The offering price and underwriting discounts
and commissions of the International Offering and the U.S.
Offering are identical. On October 30, 1996, the
reported last sale price of the Common Stock on the
Nasdaq Stock Market's National Market ("NNM") was
$39 1/2 per share.
------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN
INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" ON PAGE 6 HEREIN.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Discounts Proceeds to
Price to and Proceeds to Selling
Public Commissions Company(1) Stockholders
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share.................................... $ $ $ $
Total(2)..................................... $ $ $ $
</TABLE>
(1) Before deduction of expenses payable by the Company, estimated at $500,000.
(2) The Company and the Selling Stockholders have granted the Managers and the
U.S. Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase a maximum of 312,500 additional shares of Common
Stock from the Company and a maximum of 450,250 additional outstanding
shares from the Selling Stockholders to cover over-allotments of shares. If
the option is exercised in full, the total Price to Public will be $ ,
Underwriting Discounts and Commissions will be $ , Proceeds to Company
will be $ and Proceeds to Selling Stockholders will be $ .
------------------
The International Shares are offered by the several Managers when, as and
if delivered to and accepted by the Managers, and subject to their right to
reject orders in whole or in part. It is expected that the International Shares
will be ready for delivery on or about , 1996, against payment in
immediately available funds.
CS First Boston
Morgan Stanley & Co.
International
Schroders
The date of this Prospectus is , 1996
<PAGE> 83
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY MANAGER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
In this Prospectus, references to "$" and "dollars" are to United States
dollars.
IN CONNECTION WITH THIS OFFERING, CS FIRST BOSTON CORPORATION ON BEHALF OF
THE MANAGERS AND THE U.S. UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NNM OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN MANAGERS AND U.S. UNDERWRITERS
(AND SELLING GROUP MEMBERS) AND THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NNM IN ACCORDANCE
WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................... 3
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS.......... 6
RISK FACTORS.......................... 6
RECENT DEVELOPMENTS................... 8
USE OF PROCEEDS....................... 9
PRICE RANGE OF COMMON STOCK AND
DIVIDEND INFORMATION................ 9
CAPITALIZATION........................ 10
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA...................... 11
PRO FORMA FINANCIAL INFORMATION....... 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 16
BUSINESS.............................. 26
PRINCIPAL AND SELLING
STOCKHOLDERS........................ 36
CERTAIN TRANSACTIONS.................. 38
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS........ 40
SUBSCRIPTION AND SALE................. 43
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE........................... 45
AVAILABLE INFORMATION................. 45
LEGAL MATTERS......................... 46
EXPERTS............................... 46
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS.......................... F-1
</TABLE>
------------------
2
<PAGE> 84
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBSCRIPTION AND SALE
The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated November , 1996 (the "Subscription Agreement"),
severally and not jointly, agreed with the Company and the Selling Stockholders
to purchase the following respective numbers of International Shares as set
forth opposite their names:
<TABLE>
<CAPTION>
NUMBER OF
MANAGER INTERNATIONAL SHARES
----------------------------------------------------------- --------------------
<S> <C>
CS First Boston Limited....................................
Morgan Stanley & Co. International Limited.................
J. Henry Schroder & Co. Limited............................
--------------------
Total............................................ 1,017,000
==============
</TABLE>
The Subscription Agreement provides that the obligations of the Managers
are subject to certain conditions precedent and the Managers will be obligated
to purchase all the International Shares offered hereby (other than those shares
covered by the over-allotment option described below) if any are purchased. The
Subscription Agreement provides that, in the event of a default by a Manager, in
certain circumstances the purchase commitments of non-defaulting Managers may be
increased or the Subscription Agreement may be terminated.
The Company and the Selling Stockholders have entered into an Underwriting
Agreement with the U.S. Underwriters of the U.S. Offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of the U.S. Shares in
the United States and Canada. The closing of the U.S. Offering is a condition to
the closing of the International Offering and vice versa.
The Company and the Selling Stockholders have granted to the Managers and
the U.S. Underwriters an option, exercisable by CS First Boston Corporation, the
representative of the U.S. Underwriters, expiring at the close of business on
the 30th day after the date of this Prospectus to purchase, first, up to a
maximum of 312,500 additional shares from the Company and then a maximum of
450,250 additional outstanding shares from the Selling Stockholders at the
initial public offering price, less the underwriting discounts and commissions,
all as set forth on the cover page of this Prospectus. Such option may be
exercised only to cover over-allotments in the sale of the shares of Common
Stock offered hereby. To the extent that this option to purchase is exercised,
each Manager and each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of additional shares
being sold to the Managers and the U.S. Underwriters as the number of
International Shares set forth next to such Manager's name in the preceding
table and as the number set forth next to such U.S. Underwriter's name in the
corresponding table in the prospectus relating to the U.S. Offering bears to the
sum of the total number of shares of Common Stock in such tables.
The Company has been advised by CS First Boston Limited, on behalf of the
Managers, that the Managers propose to offer the International Shares outside
the United States and Canada initially at the public offering price set forth on
the cover page of this Prospectus and, through the Managers, to certain dealers
at such price less a commission of $ per share and that the Managers and
such dealers may reallow a commission of $ per share on sales to certain
other dealers. After the initial public offering, the public offering price and
commission and reallowance may be changed by the Managers.
The offering price and the aggregate underwriting discounts and commissions
per share and per share commission and reallowance to dealers for the
International Offering and the concurrent U.S. Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and Managers (the
"Intersyndicate Agreement") relating to the Offering, changes in the offering
price, the aggregate underwriting discounts and commissions per share and per
share commission and reallowance to dealers will be made only upon the
43
<PAGE> 85
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
mutual agreement of CS First Boston Limited, on behalf of the Managers, and CS
First Boston Corporation, as representative of the U.S. Underwriters.
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed
that, as part of the distribution of International Shares and subject to certain
exceptions, it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares of Common Stock or distribute any prospectus relating to
the Common Stock in the United States or Canada or to any other dealer who does
not so agree. Each of the U.S. Underwriters has agreed that, as part of the
distribution of the U.S. Shares and subject to certain exceptions, it has not
offered or sold and will not offer or sell, directly or indirectly, any shares
of Common Stock or distribute any prospectus relating to the Common Stock to any
person outside the United States and Canada or to any other dealer who does not
so agree. The foregoing limitations do not apply to stabilization transactions
or to transactions between the Managers and the U.S. Underwriters pursuant to
the Intersyndicate Agreement. As used herein "United States" means the United
States of America (including the States and the District of Columbia), its
territories, possessions and other areas subject to its jurisdiction, "Canada"
means Canada, its provinces, territories, possessions and other areas subject to
its jurisdiction, and an offer or sale shall be in the United States or Canada
if it is made to (i) any individual resident in the United States or Canada or
(ii) any corporation, partnership, pension, profit-sharing or other trust or
other entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the public
offering price less such amount agreed upon by CS First Boston Limited, on
behalf of the Managers, and CS First Boston Corporation, as representative of
the U.S. Underwriters, but not exceeding the selling concession applicable to
such shares. To the extent that there are sales between the Managers and the
U.S. Underwriters pursuant to the Intersyndicate Agreement, the number of shares
of Common Stock initially available for sale by the Managers or by the U.S.
Underwriters may be more or less than the amount appearing on the cover page of
this Prospectus. Neither the Managers nor the U.S. Underwriters are obligated to
purchase from the other any unsold shares of Common Stock.
Each of the Managers and the U.S. Underwriters severally represents and
agrees that: (i) it has not offered or sold and prior to the date six months
after the date of issue of the Common Stock will not offer or sell any Common
Stock to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to any shares of Common Stock in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue or pass on in the United Kingdom any document received by
it in connection with the issue of any shares of Common Stock to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.
The Company and its directors, executive officers and certain affiliated
stockholders have agreed that, for a period of 90 days after the date of this
Prospectus, they will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Securities and Exchange
Commission a registration statement under the Securities Act of 1933 (the
"Securities Act") relating to any additional shares of its Common Stock or any
securities convertible into, or exchangeable or exercisable for, any shares of
its Common Stock without the prior written consent of CS First Boston
Corporation, except, in the case of the Company, in certain limited
circumstances.
The Company and the Selling Stockholders have agreed to indemnify the
Managers and the U.S. Underwriters against certain liabilities, including civil
liabilities under the Securities Act, or to contribute to payments that the
Managers and U.S. Underwriters may be required to make in respect thereof. The
Managers and the U.S. Underwriters have agreed to indemnify the Company and the
Selling Stockholders
44
<PAGE> 86
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
against certain liabilities, including civil liabilities under the Securities
Act, or to contribute to payments the Company and the Selling Stockholders may
be required to make in respect thereof.
Certain of the Managers and U.S. Underwriters and their affiliates have
from time to time performed, and continue to perform, various investment banking
and commercial banking services for the Company, for which customary
compensation has been received.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company (File
No. 0-23400) with the Securities and Exchange Commission (the "Commission") are
incorporated herein by reference:
(1) Annual Report on Form 10-K for the fiscal year ended June 30,
1996, filed with the Commission on September 30, 1996, as amended by
Amendment No. 1 to Annual Report on Form 10-K/A, filed with the Commission
on October 10, 1996.
(2) Current Report on Form 8-K, filed with the Commission on August 5,
1996, as amended by Amendment No. 1 to Current Report on Form 8-K/A, filed
with the Commission on September 23, 1996.
(3) The description of the Company's Common Stock which is contained
in the Company's Registration Statement on Form 8-A, filed with the
Commission on February 11, 1994, including any amendment or reports filed
for the purpose of updating such description.
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subsequent to the date of this Prospectus and prior to the
termination of this Offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing such reports and
documents. Any statement contained in a document, all or a portion of which is
incorporated by reference herein, shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained or
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Upon oral or written request, the Company will provide without charge to
each person to whom this Prospectus is delivered a copy of any or all of such
documents which are incorporated herein by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into the documents that this Prospectus incorporates). Requests for such copies
should be directed to the attention of Bruce P. Erdel, Vice President -- Finance
and Chief Financial Officer, DT Industries, Inc., Corporate Centre, Suite 2-300,
1949 E. Sunshine, Springfield, Missouri 65804, telephone: (417) 890-0102.
Unless the context otherwise requires, "DTI" or the "Company" refers to DT
Industries, Inc. and its subsidiaries. Unless otherwise indicated, all
references to any "fiscal year" shall mean the fiscal year of the Company which
is a 52-53 week period that ends on the last Sunday in June.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company pursuant to the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and
at the Commission's regional offices located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. The Commission
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Copies of
45
<PAGE> 87
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
such information may also be inspected at the reading room of the library of the
National Association of Securities Dealers, Inc., 1735 K Street N.W., 2nd Floor,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus, which constitutes part of the Registration
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
Common Stock offered hereby will be passed upon for the Company by Dickstein
Shapiro Morin & Oshinsky LLP, Washington, D.C. Dickstein Shapiro Morin &
Oshinsky LLP has in the past represented, and continues to represent, Peer L.P.,
Peer II L.P., Investments L.P., Harbour Group, the Fox Family Foundation and
their respective affiliates with respect to various matters unrelated to the
Company as well as in connection with their ownership of capital stock of the
Company. Certain legal matters in connection with the Offering will be passed
upon for the U.S. Underwriters and the Managers by Katten Muchin & Zavis,
Chicago, Illinois.
EXPERTS
The Consolidated Financial Statements of the Company included in this
Prospectus as of June 30, 1996 and June 25, 1995 and for each of the three years
in the period ended June 30, 1996, have been so included in reliance on the
reports of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The consolidated financial statements of Mid-West, incorporated by
reference in this Prospectus as of May 26, 1996 and May 28, 1995 and for each of
the three years in the period ended May 26, 1996, have been so incorporated by
reference in reliance on the reports of Altschuler, Melvoin and Glasser LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
46
<PAGE> 88
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Company in connection with the
Offering (other than underwriting discounts) are set forth in the following
table (all amounts except the Commission registration fee, the NASD filing fee
and the Nasdaq listing fee are estimated):
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 67,582
NASD filing fee................................................... 22,802
Nasdaq listing fees............................................... 17,500
Accounting fees and expenses...................................... 75,000
Legal fees and expenses........................................... 150,000
Printing.......................................................... 100,000
Miscellaneous..................................................... 67,116
--------
Total................................................... $500,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware permits
the Company, subject to the standards set forth therein, to indemnify any person
in connection with any action, suit or proceeding brought or threatened by
reason of the fact that such person is or was a director, officer, employee or
agent of the Company or is or was serving as such with respect to another
corporation or entity at the request of the Company. Article VII, Section 8 of
the Company's By-laws provides for full indemnification of its officers,
directors and employees to the extent permitted by the General Corporation Law
of the State of Delaware.
Pursuant to the Underwriting Agreement and the Subscription Agreement filed
hereto as Exhibit Nos. 1.1 and 1.2, respectively, the U.S. Underwriters and the
Managers will agree to indemnify the Company's officers, directors and
controlling persons against, or contribute to, certain liabilities which might
arise under the Securities Act of 1933, as amended, in connection with the
Offering.
Pursuant to an Indemnification Agreement among the Company and Peer
Investors L.P., Peer Investors II L.P., Harbour Group Investments II, L.P. and
Harbour Group II Management Co. (the "Selling Stockholders"), the Company and
the Selling Stockholders will agree to indemnify each other against, or
contribute to, certain liabilities which might arise under the Securities Act of
1933, as amended, in connection with the Offering.
Directors and officers of the Company are insured against certain
liabilities including liabilities arising under the Securities Act of 1933, as
amended.
ITEM 16. EXHIBITS.
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement
1.2 -- Form of Subscription Agreement
5 -- Opinion of Dickstein Shapiro Morin & Oshinsky LLP, regarding legality of Common Stock
23.1 -- Consent of Dickstein Shapiro Morin & Oshinsky LLP (included in Exhibit 5)
23.2 -- Consent of Price Waterhouse LLP
23.3 -- Consent of Altschuler, Melvoin & Glasser LLP
24 -- Powers of Attorney*
27 -- Financial Data Schedule*
</TABLE>
- ---------------
* Previously filed.
II-1
<PAGE> 89
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Springfield, State of Missouri, on November 1, 1996.
DT INDUSTRIES, INC.
(Registrant)
By: /s/ Bruce P. Erdel
--------------------------------------
Bruce P. Erdel
Vice President -- Finance, Treasurer
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities indicated on November 1, 1996.
<TABLE>
<C> <S>
* President, Chief Executive Officer and
- --------------------------------------------- Director
Stephen J. Gore (Principal Executive Officer)
/s/ Bruce P. Erdel Vice President -- Finance, Treasurer and
- --------------------------------------------- Secretary
Bruce P. Erdel (Principal Financial Officer and Principal
Accounting Officer)
* Chairman of the Board
- ---------------------------------------------
James C. Janning
* Director
- ---------------------------------------------
William H.T. Bush
* Director
- ---------------------------------------------
Gregory A. Fox
* Director
- ---------------------------------------------
Samuel A. Hamacher
* Director
- ---------------------------------------------
James J. Kerley
* Director
- ---------------------------------------------
Lee M. Liberman
* Director
- ---------------------------------------------
Donald E. Nickelson
* Director
- ---------------------------------------------
Charles F. Pollnow
*By: /s/ Bruce P. Erdel
- ---------------------------------------------
Bruce P. Erdel
Attorney-in-Fact
</TABLE>
- ---------------
* Such signature has been affixed pursuant to the following Power of Attorney:
II-3
<PAGE> 91
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each officer or director of DT
Industries, Inc. (the "Corporation") whose signature appears below constitutes
and appoints Stephen J. Gore and Bruce P. Erdel, and each of them, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him and
in his name, place and stead, in any and all capacities, to sign the
Corporation's Registration Statement on Form S-3 relating to the proposed public
offering of the Corporation's Common Stock and to sign any and all amendments
(including post-effective amendments and any registration statement or
amendments thereto filed pursuant to Rule 462 as promulgated under the
Securities Act of 1933, as amended) and supplements thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as such attorney-in-fact might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
II-4
<PAGE> 92
INDEX TO EXHIBITS
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement
1.2 -- Form of Subscription Agreement
5 -- Opinion of Dickstein Shapiro Morin & Oshinsky LLP, regarding legality of Common Stock
23.1 -- Consent of Dickstein Shapiro Morin & Oshinsky LLP (included in Exhibit 5)
23.2 -- Consent of Price Waterhouse LLP
23.3 -- Consent of Altschuler, Melvoin & Glasser LLP
24 -- Powers of Attorney*
27 -- Financial Data Schedule*
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 1.1
4,068,000 SHARES
DT INDUSTRIES, INC.
COMMON STOCK, $.01 PAR VALUE
UNDERWRITING AGREEMENT
, 1996
CS FIRST BOSTON CORPORATION
MORGAN STANLEY & CO. INCORPORATED
SCHRODER WERTHEIM & CO. INCORPORATED
As Representatives of the Several Underwriters,
c/o CS First Boston Corporation
Park Avenue Plaza,
New York, N.Y. 10055
Dear Sirs:
1. Introductory. DT Industries, Inc., a Delaware corporation
("Company"), proposes to issue and sell 1,800,000 shares, and the stockholders
listed in Schedule A attached hereto ("Selling Stockholders") propose severally
to sell an aggregate of 2,268,000 outstanding shares (collectively, the "U.S.
Offering") of the Company's Common Stock, $.01 par value (the "Securities")
(such 4,068,000 shares of Securities being hereinafter referred to as the "U.S.
Firm Securities").
It is understood that the Company and the Selling Stockholders are
concurrently entering into a Subscription Agreement, dated the date hereof
("Subscription Agreement"), with CS First Boston Limited ("CSFBL"), Morgan
Stanley & Co. International Limited and J. Henry Schroder & Co. Limited, and
the other managers named therein (the "Managers") relating to the concurrent
offering and sale of 1,017,000 shares of Securities ("International Firm
Securities") outside the United States and Canada ("International Offering"),
of which 450,000 Shares will be offered by the Company and 567,000 Shares will
be offered by the Selling Stockholders.
In addition, as set forth below (i) the Company proposes to issue and
sell to the Underwriters, at the option of CS First Boston Corporation
("CSFBC"), an aggregate of not more than 250,000 additional shares of
Securities and the Selling Stockholders also propose to sell to the
Underwriters, at the option of CSFBC, an aggregate of not more than 360,200
additional outstanding shares of Securities (such 610,200 additional shares of
Securities being hereinafter referred to as the "U.S. Optional Securities") and
(ii) the Company proposes to issue and sell to the Managers, at the option of
CSFBL, an aggregate of not more than 62,500 additional shares of Securities and
the Selling
1
<PAGE> 2
Stockholders also propose to sell to the Managers, at the option of CSFBL, an
aggregate of not more than 90,050 additional outstanding shares of Securities
(such 152,550 additional shares of Securities being hereinafter referred to as
the "International Optional Securities"). The U.S. Firm Securities and the
U.S. Optional Securities are hereinafter called the "U.S. Securities"; the
International Firm Securities and the International Optional Securities are
hereinafter called the "International Securities"; the U.S. Firm Securities and
the International Firm Securities are hereinafter called the "Firm Securities";
the U.S. Optional Securities and the International Optional Securities are
hereinafter called the "Optional Securities." The U.S. Securities and the
International Securities are collectively referred to as the "Offered
Securities." To provide for the coordination of their activities, the
Underwriters and the Managers have entered into an Agreement Between U.S.
Underwriters and Managers which permits them, among other things, to sell the
Offered Securities to each other for purposes of resale.
The Company and the Selling Stockholders hereby agree with the several
Underwriters as follows:
2. Representations and Warranties of the Company and the Selling
Stockholders. (a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(i) A registration statement (No. 333-14955) relating to the
Offered Securities, including a form of prospectus relating to the
U.S. Securities and a form of prospectus relating to the International
Securities being offered in the International Offering, has been filed
with the Securities and Exchange Commission ("Commission") and either
(A) has been declared effective under the Securities Act of 1933
("Act") and is not proposed to be amended or (B) is proposed to be
amended by amendment or post-effective amendment. If such registration
statement (the "initial registration statement") has been declared
effective, either (A) an additional registration statement (the
"additional registration statement") relating to the Offered
Securities may have been filed with the Commission pursuant to Rule
462(b) ("Rule 462(b)") under the Act and, if so filed, has become
effective upon filing pursuant to such Rule and the Offered Securities
all have been duly registered under the Act pursuant to the initial
registration statement and, if applicable, the additional registration
statement or (B) such an additional registration statement is proposed
to be filed with the Commission pursuant to Rule 462(b) and will
become effective upon filing pursuant to such Rule and upon such
filing the Offered Securities will all have been duly registered under
the Act pursuant to the initial registration statement and such
additional registration statement. If the Company does not propose to
amend the initial registration statement or if an additional
registration statement has been filed and the Company does not propose
to amend it, and if any post-effective amendment to either such
registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent amendment
(if any) to each such registration statement has been declared
effective by the Commission or has become effective upon filing
pursuant to Rule 462(c) ("Rule 462(c)") under the Act or, in the case
of the
2
<PAGE> 3
additional registration statement, Rule 462(b). For purposes of this
Agreement, "Effective Time" with respect to the initial registration
statement or, if filed prior to the execution and delivery of this
Agreement, the additional registration statement means (A) if the
Company has advised the Representatives that it does not propose to
amend such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (B) if the Company
has advised the Representatives that it proposes to file an amendment
or post-effective amendment to such registration statement, the date
and time as of which such registration statement, as amended by such
amendment or post-effective amendment, as the case may be, is declared
effective by the Commission. If an additional registration statement
has not been filed prior to the execution and delivery of this
Agreement but the Company has advised the Representatives that it
proposes to file one, "Effective Time" with respect to such additional
registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule
462(b). "Effective Date" with respect to the initial registration
statement or the additional registration statement (if any) means the
date of the Effective Time thereof. The initial registration
statement, as amended at its Effective Time, including all material
incorporated by reference therein, including all information contained
in the additional registration statement (if any) and deemed to be a
part of the initial registration statement as of the Effective Time of
the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("Rule
430A(b)") under the Act, is hereinafter referred to as the "Initial
Registration Statement". The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional Registration
Statement". The Initial Registration Statement and the Additional
Registration are hereinafter referred to collectively as the
"Registration Statements" and individually as a "Registration
Statement". The form of prospectus relating to the U.S. Securities and
the form of prospectus relating to the International Securities, each
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, including all
material incorporated by reference in each such prospectus, are
hereinafter referred to as the "U.S. Prospectus" and the
"International Prospectus," respectively, and collectively as the
"Prospectuses." No document has been or will be prepared or
distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects
3
<PAGE> 4
to the requirements of the Act and the rules and regulations of the
Commission ("Rules and Regulations") and did not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, (B) on the Effective Date of the Additional
Registration Statement (if any), each Registration Statement conformed
or will conform, in all respects to the requirements of the Act and
the Rules and Regulations and did not include, or will not include,
any untrue statement of a material fact and did not omit, or will not
omit, to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (C) on
the date of this Agreement, the Initial Registration Statement and, if
the Effective Time of the Additional Registration Statement is prior
to the execution and delivery of this Agreement, the Additional
Registration Statement each conforms, and at the time of filing of
each of the Prospectuses pursuant to Rule 424(b) or (if no such filing
is required) at the Effective Date of the Additional Registration
Statement in which the Prospectuses are included, each Registration
Statement and each of the Prospectuses will conform, in all respects
to the requirements of the Act and the Rules and Regulations, and none
of such documents includes, or will include, any untrue statement of a
material fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of
this Agreement: on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and each of the
Prospectuses will conform in all respects to the requirements of the
Act and the Rules and Regulations, none of such documents will include
any untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do
not apply to statements in or omissions from a Registration Statement
or either of the Prospectuses based upon written information furnished
to the Company by any Underwriter through the Representatives or by
any Manager through CSFBL specifically for use therein, it being
understood and agreed that the only such information is that described
as such in Section 7(c) hereof.
(iii) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectuses; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification.
(iv) Each subsidiary of the Company has been duly incorporated and
is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Prospectuses; and each subsidiary of the Company is duly
qualified to do business as a foreign
4
<PAGE> 5
corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business
requires such qualification; all of the issued and outstanding capital
stock of each subsidiary of the Company has been duly authorized and
validly issued and is fully paid and nonassessable; and the capital
stock of each subsidiary owned by the Company, directly or through
subsidiaries, is owned free from liens, encumbrances and defects.
(v) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized; all
outstanding shares of capital stock of the Company are, and, when the
Offered Securities have been delivered and paid for in accordance with
this Agreement and the Subscription Agreement on each Closing Date (as
defined below), such Offered Securities will have been validly issued,
fully paid and nonassessable and will conform to the description
thereof contained in the Prospectuses; and the stockholders of the
Company have no preemptive rights with respect to the Securities.
(vi) Except as disclosed in the Prospectuses, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or
any Underwriter or Manager for a brokerage commission, finder's fee or
other like payment.
(vii) Except as disclosed in the Prospectuses, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to a Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.
(viii) The Securities are listed on The Nasdaq Stock Market's
National Market.
(ix) No consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement or the
Subscription Agreement in connection with the issuance and sale of the
Offered Securities by the Company, except such as have been obtained
and made under the Act and such as may be required under state
securities laws.
(x) The execution, delivery and performance of this Agreement and
the Subscription Agreement, and the issuance and sale of the Offered
Securities by the Company will not result in a breach or violation of
any of the terms and provisions of, or constitute a default under, any
statute, any rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over the
Company or any subsidiary of the Company or any of their properties,
or any agreement or instrument to which the Company or any
5
<PAGE> 6
such subsidiary is a party or by which the Company or any such
subsidiary is bound or to which any of the properties of the Company
or any such subsidiary is subject, or the charter or by-laws of the
Company or any such subsidiary, and the Company has full power and
authority to authorize, issue and sell the Offered Securities as
contemplated by this Agreement and the Subscription Agreement,
respectively.
(xi) This Agreement and the Subscription Agreement have been duly
authorized, executed and delivered by the Company.
(xii) Except as disclosed in the Prospectuses, the Company and its
subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from
liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made
thereof by them; and except as disclosed in the Prospectuses, the
Company and its subsidiaries hold any leased real or personal property
under valid and enforceable leases with no exceptions that would
materially interfere with the use made or to be made thereof by them.
(xiii) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now
operated by them and have not received any notice of proceedings
relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a
material adverse effect on the Company and its subsidiaries taken as a
whole.
(xiv) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent
that might have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(xv) The Company and its subsidiaries own, possess or can acquire
on reasonable terms, adequate trademarks, trade names and other rights
to inventions, know-how, patents, copyrights, confidential information
and other intellectual property (collectively, "intellectual property
rights") necessary to conduct the business now operated by them, or
presently employed by them, and have not received any notice of
infringement of or conflict with asserted rights of others with
respect to any intellectual property rights that, if determined
adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(xvi) Except as disclosed in the Prospectuses, neither the Company
nor any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or
any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection
or restoration of the environment or human exposure to
6
<PAGE> 7
hazardous or toxic substances (collectively, "environmental laws"),
owns or operates any real property contaminated with any substance
that is subject to any environmental laws, is liable for any off-site
disposal or contamination pursuant to any environmental laws, or is
subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim would individually or in
the aggregate have a material adverse effect on the Company and its
subsidiaries taken as a whole; and the Company is not aware of any
pending investigation which might lead to such a claim.
(xvii) Except as disclosed in the Prospectuses, there are no
pending actions, suits or proceedings against or affecting the
Company, any of its subsidiaries or any of their respective properties
that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its
subsidiaries taken as a whole, or would materially and adversely
affect the ability of the Company to perform its obligations under
this Agreement or the Subscription Agreement, or which are otherwise
material in the context of the sale of the Offered Securities; and no
such actions, suits or proceedings are threatened or, to the Company's
knowledge, contemplated.
(xviii) The financial statements included in each Registration
Statement and the Prospectuses present fairly the financial position
of the Company and its consolidated subsidiaries as of the dates shown
and their results of operations and cash flows for the periods shown,
and such financial statements have been prepared in conformity with
the generally accepted accounting principles in the United States
applied on a consistent basis; the schedules included in each
Registration Statement present fairly the information required to be
stated therein; and the assumptions used in preparing the pro forma
financial statements included in each Registration Statement and the
Prospectus provide a reasonable basis for presenting the significant
effects directly attributable to the transactions or events described
therein, the related pro forma adjustments give appropriate effect to
those assumptions, and the pro forma columns therein reflect the
proper application of those adjustments to the corresponding
historical financial statement amounts.
(xix) Except as disclosed in the Prospectuses, since the date of
the latest audited financial statements included in the Prospectuses
there has been no material adverse change, nor any development or
event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole, and,
except as disclosed in or contemplated by the Prospectuses, there has
been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock.
(xx) The Company is not and, after giving effect to the offering
and sale of the Offered Securities and the application of the proceeds
thereof as described in
7
<PAGE> 8
the Prospectuses, will not be an "investment company" as defined in
the Investment Company Act of 1940.
(xxi) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes, and the
Company agrees to comply with such Section if prior to the completion
of the distribution of the Offered Securities it commences doing such
business.
(b) Each Selling Stockholder severally represents and warrants
to, and agrees with, the several Underwriters that:
(i) Such Selling Stockholder has and on each Closing Date
hereinafter mentioned will have valid and unencumbered title to
the Offered Securities to be delivered by such Selling
Stockholder on such Closing Date and full right, power and
authority to enter into this Agreement and the Subscription
Agreement and to sell, assign, transfer and deliver the Offered
Securities to be delivered by such Selling Stockholder on such
Closing Date hereunder; and upon the delivery of and payment for
the Offered Securities on each Closing Date hereunder the several
Underwriters and Managers will acquire valid and unencumbered
title to the Offered Securities to be delivered by such Selling
Stockholder on such Closing Date.
(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this
Agreement: (A) on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement conformed in all
respects to the requirements of the Act and the Rules and
Regulations and did not include any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, (B) on the Effective Date of the Additional
Registration Statement (if any), each Registration Statement
conformed, or will conform, in all respects to the requirements of
the Act and the Rules and Regulations did not include, or will not
include, any untrue statement of a material fact and did not omit,
or will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and (C) on the date of this Agreement, the Initial
Registration Statement and, if the Effective Time of the
Additional Registration Statement is prior to the execution and
delivery of this Agreement, the Additional Registration Statement
each conforms, and at the time of filing of each of the
Prospectuses pursuant to Rule 424(b) or (if no such filing is
required) at the Effective Date of the Additional Registration
Statement in which the Prospectuses are included, each
Registration Statement and each of the Prospectuses will conform,
in all respects to the requirements of the Act and the Rules and
Regulations, and none of such documents includes, or will include,
any untrue statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein or necessary
to make the statements therein not misleading. If the Effective
Time of the Initial
8
<PAGE> 9
Registration Statement is subsequent to the execution and delivery
of this Agreement: on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement and
each of the Prospectuses will conform in all respects to the
requirements of the Act and the Rules and Regulations, none of
such documents will include any untrue statement of a material
fact or will omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading. The two preceding sentences apply only to the extent
that any statements in or omissions from a Registration Statement
or Prospectus are based on written information furnished to the
Company by such Selling Stockholder specifically for use therein.
3. Purchase, Sale and Delivery of Offered Securities. On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the Company and each Selling
Stockholder agree, severally and not jointly, to sell to each Underwriter, and
each Underwriter agrees, severally and not jointly, to purchase from the
Company and each Selling Stockholder, at a purchase price of U.S. $
per share, that number of U.S. Firm Securities (rounded up or down, as
determined by CSFBC in its discretion, in order to avoid fractions) obtained by
multiplying 1,800,000 U.S. Firm Securities in the case of the Company and the
number of U.S. Firm Securities set forth opposite the name of such Selling
Stockholder in Schedule A hereto, in the case of a Selling Stockholder, in each
case by a fraction the numerator of which is the number of U.S. Firm Securities
set forth opposite the name of such Underwriter in Schedule B hereto and the
denominator of which is the total number of U.S. Firm Securities.
Certificates in negotiable form for the Offered Securities to be sold
by the Selling Stockholders have been placed in custody, for delivery under
this Agreement and the Subscription Agreement, under Custody Agreements made
with , as custodian ("Custodian"). Each Selling Stockholder
agrees that the shares represented by the certificates held in custody for the
Selling Stockholders under such Custody Agreements are subject to the interests
of the Underwriters hereunder and the Managers under the Subscription
Agreement, that the arrangements made by the Selling Stockholders for such
custody are to that extent irrevocable, and that the obligations of the Selling
Stockholders hereunder and thereunder shall not terminate by operation of law,
whether by the death of any individual Stockholder or the occurrence of any
other event, or in the case of a trust, by the death of any trustee or trustees
or the termination of such trust. If any individual Selling Stockholder or any
such trustee or trustees should die, of if any other such event should occur,
or if any of such trusts should terminate, before the delivery of the Offered
Securities under this Agreement and the Subscription Agreement, certificates
for such Offered Securities shall be delivered by the Custodian in accordance
with the terms and conditions of this Agreement and the Subscription Agreement
as if such death or other event or termination had not occurred, regardless of
whether or not the custodian shall have received notice of such death or other
event or termination.
9
<PAGE> 10
The Company and the Custodian will deliver the U.S. Firm Securities to
the Representatives for the accounts of the Underwriters, against payment of
the purchase price by [wire transfer] of immediately available funds to the
Company in the case of 1,800,000 Firm Securities and in the case of
2,268,000 Firm Securities, at the office of
, at A.M., New York time, on ),
or at such other time not later than seven full business days thereafter as
CSFBC and the Company determine, such time being herein referred to as the
"First Closing Date". For purposes of Rule 15c6-1 under the Securities Exchange
Act of 1934, the First Closing Date (if later than the otherwise applicable
settlement date) shall be the settlement date for payment of funds and delivery
of securities for all the Offered Securities sold pursuant to the U.S. Offering
and the International Offering. The certificates for the U.S. Firm Securities
so to be delivered will be in definitive form, in such denominations and
registered in such names as CSFBC requests and will be made available for
checking and packaging at the above office of at
least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company and
the Selling Stockholders from time to time not more than 30 days subsequent to
the date of the Prospectuses, the Underwriters and the Managers may purchase
all or less than all of the Optional Securities at the purchase price per
Security to be paid for the Firm Securities. The Company and the Selling
Stockholders agree, severally and not jointly, to sell the respective number of
Optional Securities determined as follows: first, the Company shall sell the
number of Optional Securities specified in such notice, or such lesser number
of Securities as shall bring the total number of U.S. Optional Securities sold
by the Company to 250,000 and then, after the Company has sold all of such
250,000 U.S. Optional Securities, the respective numbers of Optional Securities
obtained by multiplying (a)(i) the number of U.S. Optional Securities specified
in such notice, less (ii) the number of U.S. Optional Securities sold by the
Company pursuant to such notice by (b) a fraction the numerator of which is the
number of shares set forth opposite the names of such Selling Stockholders in
Schedule A hereto under the caption "Number of U.S. Optional Securities to be
Sold" and the denominator of which is the total number of U.S. Optional
Securities to be sold by the Selling Stockholders (subject to adjustment by
CSFBC to eliminate fractions). Such U.S. Optional Securities shall be
purchased from the Company and each Selling Stockholder for the account of each
Underwriter in the same proportion as the number of U.S. Firm Securities set
forth opposite such Underwriter's name bears to the total number of U.S. Firm
Securities (subject to adjustment by CSFBC to eliminate fractions) and may be
purchased by the Underwriters only for the purpose of covering over-allotments
made in connection with the sale of the U.S. Firm Securities. No Optional
Securities shall be sold or delivered unless the Firm Securities previously
have been, or simultaneously are, sold and delivered. The right to purchase the
Optional Securities or any portion thereof may be exercised from time to time
and to the extent not previously exercised may be surrendered and terminated at
any time upon notice by CSFBC, on behalf of the Underwriters and the Managers,
to the Company and the Selling Stockholders. It is understood that CSFBC is
authorized to make payment for and accept delivery of such Optional Securities
on behalf of the Underwriters and Managers pursuant to the terms of CSFBC's
instructions to the Company.
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<PAGE> 11
Each time for the delivery of and payment for the U.S. Optional
Securities, being herein referred to as an "Optional Closing Date," which may
be the First Closing Date (the First Closing Date and each Optional Closing
Date, if any, being sometimes referred to as a "Closing Date"), shall be
determined by CSFBC but shall be not later than five full business days after
written notice of election to purchase Optional Securities is given. The
Company and the Custodian will deliver the U.S. Optional Securities being
purchased on each Optional Closing Date to the Representatives for the accounts
of the several Underwriters, against payment of the purchase price therefor by
[wire transfer] of immediately available funds to The Company in the case of
Optional Securities sold by the Company and in the case of Optional
Securities sold by the Selling Stockholders, at the above office of
. The certificates for the U.S. Optional Securities being
purchased on each Optional Closing Date will be in definitive form, in such
denominations and registered in such names as CSFBC requests upon reasonable
notice prior to such Optional Closing Date and will be made available for
checking and packaging at the above office of at a reasonable time in advance
of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the U.S. Securities for sale to the public as set
forth in the U.S. Prospectus.
5. Certain Agreements of the Company and the Selling Stockholders.
The Company agrees with the several Underwriters and the Selling Stockholders
that:
(a) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement, the Company
will file each of the Prospectuses with the Commission pursuant to
and in accordance with subparagraph (1) (or, if applicable and if
consented to by CSFBC, subparagraph (4)) of Rule 424(b) not later than
the earlier of (A) the second business day following the execution and
delivery of this Agreement or (B) the fifteenth business day after the
Effective Date of the Initial Registration Statement.
(b) The Company will advise CSFBC promptly of any such filing
pursuant to Rule 424(b). If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement and an additional registration statement is necessary to
register a portion of the Offered Securities under the Act but the
Effective Time thereof has not occurred as of such execution and
delivery, the Company will file the additional registration statement
or, if filed, will file a post-effective amendment thereto with the
Commission pursuant to and in accordance with Rule 462(b) on or prior
to 10:00 P.M., New York time, on the date of this Agreement or, if
earlier, on or prior to the time either Prospectus is printed and
distributed to any Underwriter or Manager, or will make such filing at
such later date as shall have been consented to by CSFBC.
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<PAGE> 12
(c) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or either of the related prospectuses or the
Initial Registration Statement, the Additional Registration Statement
(if any) or either of the Prospectuses and will not effect such
amendment or supplementation without CSFBC's consent; and the Company
will also advise CSFBC promptly of the effectiveness of each
Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or either of the
Prospectuses and of the institution by the Commission of any stop
order proceedings in respect of a Registration Statement and will use
its best efforts to prevent the issuance of any such stop order and to
obtain as soon as possible its lifting, if issued.
(d) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection
with sales by any Underwriter, Manager or dealer, any event occurs as
a result of which either or both of the Prospectuses as then amended
or supplemented would include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend
either or both of the Prospectuses to comply with the Act, the Company
will promptly notify CSFBC of such event and will promptly prepare and
file with the Commission, at its own expense, an amendment or
supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's prior
consent to, nor the Underwriters' delivery of, any such amendment or
supplement shall constitute a waiver of any of the conditions set
forth in Section 6.
(e) As soon as practicable, but not later than the Availability
Date (as defined below), the Company will make generally available to
its security holders an earnings statement covering a period of at
least 12 months beginning after the Effective Date of the Initial
Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions
of Section 11(a) of the Act. For the purpose of the preceding
sentence, "Availability Date" means the 45th day after the end of the
fourth fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "Availability Date" means the
90th day after the end of such fourth fiscal quarter.
(f) The Company will furnish to the Representatives copies of
each Registration Statement (four of which will be signed and will
include all exhibits), each related preliminary prospectus relating to
the U.S. Securities, and, so long as a prospectus relating to the
Offered Securities is required to be delivered under the Act in
connection with sales by any Underwriter or dealer, the U.S.
Prospectus and all amendments and supplements to such documents, in
each case in such quantities as CSFBC requests. The U.S. Prospectus
shall be so furnished on or prior to 3:00 P.M., New York time, on the
business day
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<PAGE> 13
following the later of the execution and delivery of this Agreement or
the Effective Time of the Initial Registration Statement. All other
such documents shall be so furnished as soon as available. The Company
and the Selling Stockholders will pay the expenses of printing and
distributing to the Underwriters all such documents.
(g) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions in the United
States as CSFBC designates and will continue such qualifications in
effect so long as required for the distribution.
(h) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and
the Company will furnish to the Representatives (i) as soon as
available, a copy of each report and any definitive proxy statement of
the Company filed with the Commission under the Securities Exchange
Act of 1934 or mailed to stockholders, and (ii) from time to time,
such other information concerning the Company as CSFBC may reasonably
request.
(i) For a period of 90 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC, except grants of employee stock options
pursuant to the terms of a plan in effect on the date hereof,
issuances of Securities pursuant to the exercise of such options or
the exercise of any other employee stock options outstanding on the
date hereof.
(j) The Company will pay all expenses incident to the performance
of the obligations of the Company and the Selling Stockholders under
this Agreement for any filing fees and other expenses (including fees
and disbursements of counsel) incurred in connection with
qualification of the Offered Securities for sale under the laws of
such jurisdictions in the United States as CSFBC designates and the
printing of memoranda relating thereto, for the filing fee incident
to, and the reasonable fees and disbursements of counsel to the
Underwriters in connection with, the review by the National
Association of Securities Dealers, Inc. of the Offered Securities, for
any travel expenses of the Company's officers and employees and any
other expenses of the Company in connection with attending or hosting
meetings with prospective purchasers of the Offered Securities, for
any transfer taxes on the sale by the Selling Stockholders of the
Offered Securities to the Underwriters and for expenses incurred in
distributing preliminary prospectuses and the Prospectuses (including
any amendments and supplements thereto) to the Underwriters.
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<PAGE> 14
(k) Each Selling Stockholder agrees to deliver to CSFBC,
attention: Transactions Advisory Group on or prior to the First
Closing Date a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified
by Treasury Department regulations in lieu thereof).
(l) Each Selling Stockholder, other than the Fox Family
Foundation, agrees, for a period of 90 days after the date of the
initial public offering of the Offered Securities, not to offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, any additional shares of the Securities of the Company or
securities convertible into or exchangeable or exercisable for any
shares of Securities, or publicly disclose the intention to make any
such offer, sale, pledge or disposition, without the prior written
consent of CSFBC.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the U.S. Firm Securities on
the First Closing Date and the U.S. Optional Securities to be purchased on each
Optional Closing Date will be subject to the accuracy of the representations
and warranties on the part of the Company and the Selling Stockholders herein,
to the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Stockholders of their obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if
the Effective Time of the Initial Registration Statement is subsequent
to the execution and delivery of this Agreement, shall be prior to the
filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective
Time), of Price Waterhouse LLP confirming that they are independent
public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating to the effect
that:
(i) in their opinion the financial statements and
schedules examined by them and included or incorporated by
reference in the Registration Statements comply as to form in
all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations;
(ii) they have performed the procedures specified by
the American Institute of Certified Public Accountants for a
review of interim financial information as described in
Statement of Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements included in
the Registration Statements;
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<PAGE> 15
(iii) on the basis of the review referred to in
clause (ii) above, a reading of the latest available interim
financial statements of the Company, inquiries of officials of
the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing
came to their attention that caused them to believe that:
(A) the unaudited financial statements
included in the Registration Statements do not comply
as to form in all material respects with the
applicable accounting requirements of the Act and the
related published Rules and Regulations or any
material modifications should be made to such
unaudited financial statements for them to be in
conformity with generally accepted accounting
principles;
(B) at the date of the latest available
balance sheet read by such accountants, or at a
subsequent specified date not more than three
business days prior to the date of this Agreement,
there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt
of the Company and its consolidated subsidiaries or,
at the date of the latest available balance sheet
read by such accountants, there was any decrease in
consolidated net current assets or net assets, as
compared with amounts shown on the latest balance
sheet included in the Prospectuses; or
(C) for the period from the closing date of
the latest income statement included in the
Prospectuses to the closing date of the latest
available income statement read by such accountants
there were any decreases, as compared with the
corresponding period of the previous year and with
the period of corresponding length ended the date of
the latest income statement included in the
Prospectuses, in consolidated net sales or net
operating income in the total or per share amounts of
consolidated income before extraordinary items or net
income;
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter;
(v) on the basis of a reading of the unaudited pro
forma financial statements included in the Registration
Statement, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other
specified procedures, nothing came to their attention that
caused them to believe that the unaudited pro forma financial
statements included in the Registration Statement do not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published
Rules and Regulations, or that the pro forma adjustments
15
<PAGE> 16
have not been properly applied to the historical amounts in
the compilation of those statements; and
(vi) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statements
(in each case to the extent that such dollar amounts,
percentages and other financial information are derived from
the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from
inquiries, a reading of such general accounting records and
other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to
be in agreement with such results, except as otherwise
specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statements is subsequent to the execution and
delivery of this Agreement, "Registration Statements" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statements is prior to the execution and delivery of this Agreement
but the Effective Time of the Additional Registration Statement is
subsequent to such execution and delivery, "Registration Statements"
shall mean the Initial Registration Statement and the additional
registration statement as proposed to be filed or as proposed to be
amended by the post-effective amendment to be filed shortly prior to
its Effective Time, and (iii) "Prospectuses" shall mean the
prospectuses included in the Registration Statements. All financial
statements and schedules included in material incorporated by
reference into the Prospectuses shall be deemed included in the
Registration Statements for purposes of this subsection.
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this
Agreement, such Effective Time shall have occurred not later than
10:00 P.M., New York time, on the date of this Agreement or such later
date as shall have been consented to by CSFBC. If the Effective Time
of the Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time either Prospectus is printed
and distributed to any Underwriter or Manager, or shall have occurred
at such later date as shall have been consented to by CSFBC. If the
Effective Time of the Initial Registration Statement is prior to the
execution and delivery of this Agreement, each of the Prospectuses
shall have been filed with the Commission in accordance with the Rules
and Regulations and Section 5(a) of this Agreement. Prior to such
Closing Date, no stop order suspending the effectiveness of a
Registration Statement shall have been issued and no proceedings for
that purpose shall have
16
<PAGE> 17
been instituted or, to the knowledge of any Selling Stockholder, the
Company or the Representatives, shall be contemplated by the
Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Company or its subsidiaries which, in the judgment of a majority
in interest of the Underwriters including the Representatives, is
material and adverse and makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and
payment for the U.S. Securities; (ii) any downgrading in the rating of
any debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule
436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt
securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or limitation of
trading in securities generally on the New York Stock Exchange, or any
setting of minimum prices for trading on such exchange, or any
suspension of trading of any securities of the Company on any exchange
or in the over-the-counter market; (iv) any banking moratorium
declared by U.S. Federal or, New York authorities; or (v) any outbreak
or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial
national or international calamity or emergency if, in the judgment of
a majority in interest of the Underwriters including the
Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable
to proceed with completion of the public offering or the sale of and
payment for the U.S. Securities.
(d) The Representatives shall have received an opinion, dated
such Closing Date, of Dickstein Shapiro Morin & Oshinsky L.L.P.,
counsel for the Company, to the effect that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own
its properties and conduct its business as described in the
Prospectuses; and the Company is duly qualified to do business
as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification;
(ii) The Offered Securities delivered on such
Closing Date and all other outstanding shares of the Common
Stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the
description thereof contained in the Prospectuses; and the
stockholders of the Company have no preemptive rights with
respect to the Securities;
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<PAGE> 18
(iii) Except as disclosed in the Prospectuses, there
are no contracts, agreements or understandings known to such
counsel between the Company and any person granting such
person the right to require the Company to file a registration
statement under the Act with respect to any securities of the
Company owned or to be owned by such person or to require the
Company to include such securities in the securities
registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Act;
(iv) The Company is not and, after giving effect to
the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the
Prospectuses, will not be an "investment company" as defined
in the Investment Company Act of 1940.
(v) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required for the consummation of the transactions
contemplated by this Agreement, the Subscription Agreement or
the Custody Agreement in connection with the issuance or sale
of the Offered Securities, except such as have been obtained
and made under the Act and such as may be required under state
securities laws;
(vi) The execution, delivery and performance of this
Agreement, the Subscription Agreement and the Custody
Agreement and the issuance and sale of the Offered Securities
by the Company will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under,
any statute, any rule, regulation or order of any governmental
agency or body or any court having jurisdiction over the
Company or any subsidiary of the Company or any of their
properties, or any agreement or instrument to which the
Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject,
or the charter or by-laws of the Company or any such
subsidiary, and the Company has full power and authority to
authorize, issue and sell the Offered Securities as
contemplated by this Agreement and the Subscription Agreement;
(vii) The Initial Registration Statement was
declared effective under the Act as of the date and time
specified in such opinion, the Additional Registration
Statement (if any) was filed and became effective under the
Act as of the date and time (if determinable) specified in
such opinion, each of the Prospectuses either were filed with
the Commission pursuant to the subparagraph of Rule 424(b)
specified in such opinion on the date specified therein or
were included in the Initial Registration Statement or the
Additional Registration Statement (as the case may be), and,
to the best of the knowledge of such counsel, no stop order
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<PAGE> 19
suspending the effectiveness of a Registration Statement or
any part thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated
under the Act, and each Registration Statement and each of the
Prospectuses, and each amendment or supplement thereto, as of
their respective effective or issue dates, complied as to form
in all material respects with the requirements of the Act and
the Rules and Regulations; such counsel have no reason to
believe that any part of a Registration Statement or any
amendment thereto, as of its effective date or as of such
Closing Date, contained any untrue statement of a material
fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading; or that either of the Prospectuses or any
amendment or supplement thereto, as of its issue date or as of
such Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; the
descriptions in the Registration Statements and Prospectuses
of statutes, legal and governmental proceedings and contracts
and other documents are accurate and fairly present the
information required to be shown; and such counsel do not know
of any legal or governmental proceedings required to be
described in a Registration Statement or the Prospectuses
which are not described as required or of any contracts or
documents of a character required to be described in a
Registration Statement or the Prospectuses or to be filed as
exhibits to a Registration Statement which are not described
and filed as required; it being understood that such counsel
need express no opinion as to the financial statements or
other financial data contained in the Registration Statements
or the Prospectuses; and
(viii) This Agreement and the Subscription Agreement
have been duly authorized, executed and delivered by the
Company.
(e) The Representatives shall have received the opinion
contemplated in the Power of Attorney executed and delivered by each
Selling Stockholder and an opinion, dated such Closing Date, of
Dickstein Shapiro Morin & Oshinsky L.L.P., counsel for the Selling
Stockholders, to the effect that:
(i) Each Selling Stockholder had valid and
unencumbered title to the Offered Securities delivered by such
Selling Stockholder on such Closing Date and had full right,
power and authority to sell, assign, transfer and deliver the
Offered Securities delivered by such Selling Stockholder on
such Closing Date hereunder; and the several Underwriters and
the Managers have acquired valid and unencumbered title to the
Offered Securities purchased by them from the Selling
Stockholders on such Closing Date under this Agreement and the
Subscription Agreement;
(ii) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required for the
19
<PAGE> 20
consummation of the transactions contemplated by the Custody
Agreement, this Agreement or the Subscription Agreement in
connection with the sale of the Offered Securities sold by the
Selling Stockholders, except such as have been obtained and
made under the Act and such as may be required under state
securities laws;
(iii) The execution, delivery and performance of this
Agreement, the Subscription Agreement and the Custody
Agreement and sale of the Offered Securities by the Selling
Stockholders will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under,
any statute, any rule, regulation or order of any governmental
agency or body or any court having jurisdiction over any
Selling Stockholder or any of their properties or any
agreement or instrument to which any Selling Stockholder is a
party or by which any Selling Stockholder is bound or to which
any of the properties of any Selling Stockholder is subject,
or charter or by-laws of any Selling Stockholder which is a
corporation, partnership agreement of any Selling Stockholder
which is a partnership, operating agreement of any Selling
Stockholder which is a limited liability company or trust
agreement of any Selling Stockholder which is a trust;
(iv) The Power of Attorney and related Custody
Agreement with respect to each Selling Stockholder have been
duly authorized, executed and delivered by such Selling
Stockholder and constitute valid and legally binding
obligations of each such Selling Stockholder enforceable in
accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
and
(v) This Agreement, the Subscription Agreement and
the Custody Agreement have been duly authorized, executed and
delivered by each Selling Stockholder.
(f) The Representatives shall have received from Katten
Muchin & Zavis, counsel for the Underwriters, such opinion or
opinions, dated such Closing Date, with respect to the incorporation
of the Company, the validity of the Offered Securities delivered on
such Closing Date, the Registration Statements, the Prospectuses and
other related matters as the Representatives may require, and the
Selling Stockholders and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling
them to pass upon such matters.
(g) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and
20
<PAGE> 21
warranties of the Company in this Agreement are true and correct; the
Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at or prior to such
Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission;
the Additional Registration Statement (if any) satisfying the
requirements of subparagraphs (1) and (3) of Rule 462(b) was filed
pursuant to Rule 462(b), including payment of the applicable filing
fee in accordance with Rule 111(a) or (b) under the Act, prior to the
time either Prospectus was printed and distributed to any Underwriter
or Manager; and, subsequent to the respective date of the most recent
financial statements in the Prospectuses, there has been no material
adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole except as set forth in or contemplated
by the Prospectuses or as described in such certificate.
(h) The Representatives shall have received a letter, dated
such Closing Date, of Price Waterhouse LLP which meets the
requirements of subsection (a) of this Section, except that the
specified date referred to in such subsection will be a date not more
than three business days prior to such Closing Date for the purposes
of this subsection.
(i) On such Closing Date, the Managers shall have purchased
the International Firm Securities or the International Optional
Securities, as the case may be, pursuant to the Subscription
Agreement.
The Selling Stockholders and the Company will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents as
the Representatives reasonably request. CSFBC may in its sole discretion waive
on behalf of the Underwriters compliance with any conditions to the obligations
of the Underwriters hereunder, whether in respect of an Optional Closing Date
or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, either of the Prospectuses, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
21
<PAGE> 22
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described as such in
subsection (c) below.
(b) Each Selling Stockholder, severally and not jointly, will
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, either of the Prospectuses, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by such Selling Stockholder specifically for use therein, and
will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Selling Stockholders will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by an Underwriter
through the Representatives specifically for use therein, it being understood
and agreed that the only such information furnished by any Underwriter consists
of the information described as such in subsection (c) below.
(c) Each Underwriter will severally and not jointly indemnify and
hold harmless the Company and each Selling Stockholder against any losses,
claims, damages or liabilities to which the Company or such Selling Stockholder
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement, either of the Prospectuses, or
any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Company and each Selling Stockholder
in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by any Underwriter consists of
the
22
<PAGE> 23
following information in the U.S. Prospectus furnished on behalf of each
Underwriter: the last paragraph at the bottom of the cover page concerning the
terms of the offering by the Underwriters, the legends concerning
over-allotments, stabilizing and passive market making on the inside front
cover page and the concession and reallowance figures appearing in the fifth
paragraph under the caption "Underwriting."
(d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a), (b) or (c) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a), (b) or (c) above. In case any such action
is brought against any indemnified party and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action.
(e) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a), (b) or
(c) above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other from the offering of the U.S. Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering of the U.S. Securities (before deducting expenses)
received by the Company and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Underwriters. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
23
<PAGE> 24
alleged omission to state a material fact relates to information supplied by
the Company, the Selling Stockholders or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (e) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of
this subsection (e). Notwithstanding the provisions of this subsection (e), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the U.S. Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under
this Section shall be in addition to any liability which the Company and the
Selling Stockholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed a
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters
default in their obligations to purchase U.S. Securities hereunder on either
the First or any Optional Closing Date and the aggregate number of shares of
U.S. Securities that such defaulting Underwriter or Underwriters agreed but
failed to purchase does not exceed 10% of the total number of shares of U.S.
Securities that the Underwriters are obligated to purchase on such Closing
Date, CSFBC may make arrangements satisfactory to the Company and the Selling
Stockholders for the purchase of such U.S. Securities by other persons,
including any of the Underwriters, but if no such arrangements are made by such
Closing Date, the non-defaulting Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the U.S.
Securities that such defaulting Underwriters agreed but failed to purchase on
such Closing Date. If any Underwriter or Underwriters so default and the
aggregate number of shares of U.S. Securities with respect to which such
default or defaults occur exceeds 10% of the total number of shares of U.S.
Securities that the Underwriters are obligated to purchase on such Closing Date
and arrangements satisfactory to CSFBC, the Company and the Selling
Stockholders for the purchase of such U.S. Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter, the Company or the
Selling Stockholders, except as provided in Section 9 (provided that if such
default occurs with respect to U.S. Securities after the
24
<PAGE> 25
First Closing Date, this Agreement will not terminate as to the U.S. Firm
Securities or any U.S. Optional Securities purchased prior to such
termination). As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. Nothing herein will
relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Selling Stockholders, of the Company or its officers and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter, any Selling
Stockholder, the Company or any of their respective representatives, officers
or directors or any controlling person, and will survive delivery of and
payment for the U.S. Securities. If this Agreement is terminated pursuant to
Section 8 or if for any reason the purchase of the U.S. Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the
respective obligations of the Company, the Selling Stockholders, and the
Underwriters pursuant to Section 7 shall remain in effect, and if any U.S.
Securities have been purchased hereunder the representations and warranties in
Section 2 and all obligations under Section 5 shall also remain in effect. If
the purchase of the U.S. Securities by the Underwriters is not consummated for
any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or the occurrence of any event specified in clause (iii),
(iv) or (v) of Section 6(c), the Company and the Selling Stockholders will,
jointly and severally, reimburse the Underwriters for all out-of-pocket
expenses (including fees and disbursements of counsel) reasonably incurred by
them in connection with the offering of the U.S. Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to the Representatives, c/o CS First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department - Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at Corporate Centre, Suite
2-300, 1949 E. Sunshine, Springfield, Missouri 65804, Attention: Stephen J.
Gore, or, if sent to the Selling Stockholders or any of them, will be mailed,
delivered or telegraphed and confirmed to Samuel A. Hamacher at ;
provided, however, that any notice to an Underwriter pursuant to Section 7 will
be mailed, delivered or telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 7, and no
other person will have any right or obligation hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with this financing, and any action under this
Agreement taken by the Representatives joint or by CSFBC will be binding upon
all the Underwriters. Samuel
25
<PAGE> 26
A. Hamacher and James A. Cooper will act for the Selling Stockholders in
connection with such transactions, and any action under or in respect of this
Agreement taken by Samuel A. Hamacher or James A. Cooper will be binding upon
all the Selling Stockholders.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
26
<PAGE> 27
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of
the counterparts hereof, whereupon it will become a binding agreement among the
Selling Stockholders, the Company and the several Underwriters in accordance
with its terms.
Very truly yours,
DT INDUSTRIES, INC.
By
------------------------------------------
THE SELLING STOCKHOLDERS NAMED IN
SCHEDULE A ATTACHED HERETO, ACTING SEVERALLY
By
------------------------------------------
Attorney-in-fact
The foregoing Underwriting Agreement is hereby confirmed
and accepted as of the date first above written.
CS FIRST BOSTON CORPORATION
MORGAN STANLEY & CO. INCORPORATED
SCHRODER WERTHEIM & CO. INCORPORATED
Acting on behalf of themselves and
as the Representatives of the several
Underwriters
By CS FIRST BOSTON CORPORATION
By
------------------------------------------------
[Insert title]
27
<PAGE> 28
SCHEDULE A
<TABLE>
<CAPTION>
Number of U.S. Firm Number of U.S. Optional
Selling Stockholder Securities to be Sold Securities to be Sold
<S> <C> <C>
---------------------- ----------------------
Total................................ 2,268,000 360,200
====================== ======================
</TABLE>
28
<PAGE> 29
SCHEDULE B
<TABLE>
<CAPTION>
Number of
U.S. Firm Securities
Underwriter to be Purchased
----------- ---------------
<S> <C>
CS First Boston Corporation.......................
Morgan Stanley & Co. Incorporated.................
Schroder Wertheim & Co. Incorporated..............
---------
Total.................... 4,068,000
=========
</TABLE>
29
<PAGE> 1
EXHIBIT 1.2
1,017,000 SHARES
DT INDUSTRIES, INC.
COMMON STOCK, $.01 PAR VALUE
SUBSCRIPTION AGREEMENT
London, England
, 1996
To: CS FIRST BOSTON LIMITED
MORGAN STANLEY & CO. INTERNATIONAL
J. HENRY SCHRODER & CO. LIMITED
c/o: CS FIRST BOSTON LIMITED ("CSFBL")
One Cabot Square
London, England E14 4QJ
Dear Sirs:
1. Introductory. DT Industries, Inc., a Delaware corporation
("Company"), proposes to issue and sell 450,000 shares, and the stockholders
listed in Schedule A attached hereto ("Selling Stockholders") propose severally
to sell an aggregate of 567,000 outstanding shares (collectively, the
"International Offering") to the several Managers named in Schedule B hereto
("Managers") of the Company's Common Stock, $.01 par value ("Securities") (such
1,017,000 shares of Securities hereinafter referred to as the "International
Firm Securities").
It is understood that the Company and the Selling Stockholders are
concurrently entering into an Underwriting Agreement, dated the date hereof
("Underwriting Agreement"), with certain United States underwriters listed in
Schedule B thereto (the "U.S. Underwriters"), for whom CS First Boston
Corporation ("CSFBC"), Morgan Stanley & Co. Incorporated and Schroder Wertheim
& Co. are acting as representatives (the "U.S. Representatives"), relating to
the concurrent offering and sale of 4,068,000 shares of Securities (" U.S. Firm
Securities") in the United States and Canada ("U.S. Offering"), of which
1,800,000 shares will be offered by the Company and 2,268,000 shares will be
offered by the Selling Stockholders.
In addition, as set forth below, (i) the Company proposes to issue and
sell to the Underwriters, at the option of CSFBC, an aggregate of not more than
250,000 additional shares of Securities ("U.S. Optional Securities") and the
Selling Stockholders also propose to sell to the Underwriters, at the option of
CSFBC, an aggregate of not more than 360,200 additional outstanding shares of
Securities (such 610,200 additional shares of Securities being hereinafter
referred to as the "U.S. Optional Securities") and (ii) the Company proposes to
issue and sell to the Managers, at the option of CSFBL, an aggregate of not
more than 62,500 additional shares of Securities and the Selling Stockholders
also propose to sell to the Managers, at the
<PAGE> 2
option of CSFBL, an aggregate of not more than 90,050 additional outstanding
shares of Securities (such 152,550 additional shares of Securities being
hereinafter referred to as the "International Optional Securities"). The U.S.
Firm Securities and the U.S. Optional Securities are hereinafter called the
"U.S. Securities"; the International Firm Securities and the International
Optional Securities are hereinafter called the "International Securities"; the
U.S. Firm Securities and the International Firm Securities are hereinafter
called the "Firm Securities"; the U.S. Optional Securities and the
International Optional Securities are hereinafter called the "Optional
Securities." The U.S. Securities and the International Securities are
collectively referred to as the "Offered Securities." To provide for the
coordination of their activities, the U.S. Underwriters and the Managers have
entered into an Agreement Between U.S. Underwriters and Managers which permits
them, among other things, to sell the Offered Securities to each other for
purposes of resale.
The Company and the Selling Stockholders hereby agree with the several
Managers as follows:
2. Representations and Warranties of the Company and the Selling
Stockholders.
(a) The Company represents and warrants to, and agrees
with, the several Managers that:
(i) A registration statement (No. 333-14955)
relating to the Offered Securities, including a form of
prospectus relating to the U.S. Securities and a form of
prospectus relating to the International Securities being
offered in the International Offering, has been filed with the
Securities and Exchange Commission ("Commission") and either
(A) has been declared effective under the Securities Act of
1933 ("Act") and is not proposed to be amended or (B) is
proposed to be amended by amendment or post-effective
amendment. If such registration statement (the "initial
registration statement") has been declared effective, either
(A) an additional registration statement (the "additional
registration statement") relating to the Offered Securities
may have been filed with the Commission pursuant to Rule
462(b) ("Rule 462(b)") under the Act and, if so filed, has
become effective upon filing pursuant to such Rule and the
Offered Securities all have been duly registered under the Act
pursuant to the initial registration statement and, if
applicable, the additional registration statement or (B) such
an additional registration statement is proposed to be filed
with the Commission pursuant to Rule 462(b) and will become
effective upon filing pursuant to such Rule and upon such
filing the Offered Securities will all have been duly
registered under the Act pursuant to the initial registration
statement and such additional registration statement. If the
Company does not propose to amend the initial registration
statement or, if an additional registration statement has been
filed and the Company does not propose to amend it, and if any
post-effective amendment to either such registration statement
has been filed with the Commission prior to the execution and
delivery of this Agreement, the most recent amendment (if any)
to each such registration statement has been declared
effective by the Commission or has become effective upon
filing
-2-
<PAGE> 3
pursuant to Rule 462(c) ("Rule 462(c)") under the Act
or, in the case of the additional registration statement, Rule
462(b). For purposes of this Agreement, "Effective Time" with
respect to the initial registration statement or, if filed
prior to the execution and delivery of this Agreement, the
additional registration statement means (A) if the Company has
advised CSFBL that it does not propose to amend such
registration statement, the date and time as of which such
registration statement, or the most recent post-effective
amendment thereto (if any) filed prior to the execution and
delivery of this Agreement, was declared effective by the
Commission or has become effective upon filing pursuant to
Rule 462(c), or (B) if the Company has advised CSFBL that it
proposes to file an amendment or post-effective amendment to
such registration statement, the date and time as of which
such registration statement, as amended by such amendment or
post-effective amendment, as the case may be, is declared
effective by the Commission. If an additional registration
statement has not been filed prior to the execution and
delivery of this Agreement but the Company has advised CSFBL
that it proposes to file one, "Effective Time" with respect to
such additional registration statement means the date and time
as of which such registration statement is filed and becomes
effective pursuant to Rule 462(b). "Effective Date" with
respect to the initial registration statement or the
additional registration statement (if any) means the date of
the Effective Time thereof. The initial registration
statement, as amended at its Effective Time, including all
material incorporated by reference therein, including all
information contained in the additional registration statement
(if any) and deemed to be a part of the initial registration
statement as of the Effective Time of the additional
registration statement pursuant to the General Instructions of
the Form on which it is filed and including all information
(if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b)
("Rule 430A(b)") under the Act, is hereinafter referred to as
the "Initial Registration Statement." The additional
registration statement, as amended at its Effective Time,
including the contents of the initial registration statement
incorporated by reference therein and including all
information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to
Rule 430A(b), is hereinafter referred to as the "Additional
Registration Statement." The Initial Registration Statement
and the Additional Registration Statement are hereinafter
referred to collectively as the "Registration Statements" and
individually as a "Registration Statement." The form of
prospectus relating to the U.S. Securities and the form of
prospectus relating to the International Securities, each as
first filed with the Commission pursuant to and in accordance
with Rule 424(b) ("Rule 424(b)") under the Act or (if no such
filing is required) as included in a Registration Statement,
including all material incorporated by reference in each such
prospectus, are hereinafter referred to as the "U.S.
Prospectus" and the "International Prospectus", respectively,
and collectively as the "Prospectuses." No document has been
or will be prepared or distributed in reliance on Rule 434
under the Act.
-3-
<PAGE> 4
(ii) If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery
of this Agreement: (A) on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement
conformed in all respects to the requirements of the Act and
the rules and regulations of the Commission ("Rules and
Regulations") and did not include any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading, (B) on the Effective Date of the Additional
Registration Statement (if any), each Registration Statement
conformed, or will conform, in all respects to the
requirements of the Act and the Rules and Regulations and did
not include, or will not include, any untrue statement of a
material fact and did not omit, or will not omit, to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, and (C) on the
date of this Agreement, the Initial Registration Statement
and, if the Effective Time of the Additional Registration
Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each
conforms, and at the time of filing of each of the
Prospectuses pursuant to Rule 424(b) or (if no such filing is
required) at the Effective Date of the Additional Registration
Statement in which the Prospectuses are included, each
Registration Statement and each of the Prospectuses will
conform, in all respects to the requirements of the Act and
the Rules and Regulations, and none of such documents
includes, or will include, any untrue statement of a material
fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading. If the Effective Time of
the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement: on the Effective
Date of the Initial Registration Statement, the Initial
Registration Statement and each of the Prospectuses will
conform in all respects to the requirements of the Act and the
Rules and Regulations, none of such documents will include any
untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, and no Additional
Registration Statement has been or will be filed. The two
preceding sentences do not apply to statements in or omissions
from a Registration Statement or either of the Prospectuses
based upon written information furnished to the Company by any
Manager through CSFBL or by any U.S. Underwriter through the
U.S. Representatives specifically for use therein, it being
understood and agreed that the only such information is that
described as such in Section 7(c) hereof.
(iii) The Company has been duly incorporated and is
an existing corporation in good standing under the laws of the
State of Delaware, with power and authority (corporate and
other) to own its properties and conduct its business as
described in the Prospectuses; and the Company is duly
qualified to do business as a foreign corporation in good
standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification.
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<PAGE> 5
(iv) Each subsidiary of the Company has been duly
incorporated and is an existing corporation in good standing
under the laws of the jurisdiction of its incorporation, with
power and authority (corporate and other) to own its
properties and conduct its business as described in the
Prospectuses; and each subsidiary of the Company is duly
qualified to do business as a foreign corporation in good
standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification; all of the issued and outstanding capital stock
of each subsidiary of the Company has been duly authorized and
validly issued and is fully paid and nonassessable; and the
capital stock of each subsidiary owned by the Company,
directly or through subsidiaries, is owned free from liens,
encumbrances and defects.
(v) The Offered Securities and all other
outstanding shares of capital stock of the Company have been
duly authorized; all outstanding shares of capital stock of
the Company are, and, when the Offered Securities have been
delivered and paid for in accordance with this Agreement and
the Underwriting Agreement on each Closing Date (as defined
below), such Offered Securities will have been validly issued,
fully paid and nonassessable and will conform to the
description thereof contained in the Prospectuses; and the
stockholders of the Company have no preemptive rights with
respect to the Securities.
(vi) Except as disclosed in the Prospectuses,
there are no contracts, agreements or understandings between
the Company and any person that would give rise to a valid
claim against the Company or any Manager or U.S. Underwriter
for a brokerage commission, finder's fee or other like
payment.
(vii) Except as disclosed in the Prospectuses,
there are no contracts, agreements or understandings between
the Company and any person granting such person the right to
require the Company to file a registration statement under the
Act with respect to any securities of the Company owned or to
be owned by such person or to require the Company to include
such securities in the securities registered pursuant to a
Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the
Company under the Act.
(viii) The Securities are listed on The Nasdaq
Stock Market's National Market.
(ix) No consent, approval, authorization, or order
of, or filing with, any governmental agency or body or any
court is required for the consummation of the transactions
contemplated by this Agreement or the Underwriting Agreement
in connection with the issuance and sale of the Offered
Securities by the Company, except such as have been obtained
and made under the Act and such as may be required under state
securities laws.
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<PAGE> 6
(x) The execution, delivery and performance of
this Agreement and the Underwriting Agreement, and the
issuance and sale of the Offered Securities by the Company
will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, any statute,
any rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction
over the Company or any subsidiary of the Company or any of
their properties, or any agreement or instrument to which the
Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject,
or the charter or by-laws of the Company or any such
subsidiary, and the Company has full power and authority to
authorize, issue and sell the Offered Securities as
contemplated by this Agreement and the Underwriting Agreement,
respectively.
(xi) This Agreement and the Underwriting Agreement
have been duly authorized, executed and delivered by the
Company.
(xii) Except as disclosed in the Prospectuses, the
Company and its subsidiaries have good and marketable title to
all real properties and all other properties and assets owned
by them, in each case free from liens, encumbrances and
defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof
by them; and except as disclosed in the Prospectuses, the
Company and its subsidiaries hold any leased real or personal
property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or to be
made thereof by them.
(xiii) The Company and its subsidiaries possess
adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to
conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation
or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the Company and its subsidiaries
taken as a whole.
(xiv) No labor dispute with the employees of the
Company or any subsidiary exists or, to the knowledge of the
Company, is imminent that might have a material adverse effect
on the Company and its subsidiaries taken as a whole.
(xv) The Company and its subsidiaries own, possess
or can acquire on reasonable terms, adequate trademarks, trade
names and other rights to inventions, know-how, patents,
copyrights, confidential information and other intellectual
property (collectively, "intellectual property rights")
necessary to conduct the business now operated by them, or
presently employed by them, and have not received any notice
of infringement of or conflict with asserted rights of others
with respect to any intellectual property rights that, if
determined
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<PAGE> 7
adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse
effect on the Company and its subsidiaries taken as a whole.
(xvi) Except as disclosed in the Prospectuses,
neither the Company nor any of its subsidiaries is in
violation of any statute, any rule, regulation, decision or
order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release
of hazardous or toxic substances or relating to the protection
or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, "environmental
laws"), owns or operates any real property contaminated with
any substance that is subject to any environmental laws, is
liable for any off-site disposal or contamination pursuant to
any environmental laws, or is subject to any claim relating to
any environmental laws, which violation, contamination,
liability or claim would individually or in the aggregate have
a material adverse effect on the Company and its subsidiaries
taken as a whole; and the Company is not aware of any pending
investigation which might lead to such a claim.
(xvii) Except as disclosed in the Prospectuses,
there are no pending actions, suits or proceedings against or
affecting the Company, any of its subsidiaries or any of their
respective properties that, if determined adversely to the
Company or any of its subsidiaries, would individually or in
the aggregate have a material adverse effect on the condition
(financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a
whole, or would materially and adversely affect the ability of
the Company to perform its obligations under this Agreement or
the Underwriting Agreement, or which are otherwise material in
the context of the sale of the Offered Securities; and no such
actions, suits or proceedings are threatened or, to the
Company's knowledge, contemplated.
(xviii) The financial statements included in each
Registration Statement and the Prospectuses present fairly the
financial position of the Company and its consolidated
subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and such
financial statements have been prepared in conformity with
the generally accepted accounting principles in the United
States applied on a consistent basis and the schedules
included in each Registration Statement present fairly the
information required to be stated therein; and the assumptions
used in preparing the pro forma financial statements included
in each Registration Statement and the Prospectus provide a
reasonable basis for presenting the significant effects
directly attributable to the transactions or events described
therein, the related pro forma adjustments give appropriate
effect to those assumptions, and the pro forma columns therein
reflect the proper application of those adjustments to the
corresponding historical financial statement amounts.
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<PAGE> 8
(xix) Except as disclosed in the Prospectuses,
since the date of the latest audited financial statements
included in the Prospectuses there has been no material
adverse change, nor any development or event involving a
prospective material adverse change, in the condition
(financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a
whole, and, except as disclosed in or contemplated by the
Prospectuses, there has been no dividend or distribution of
any kind declared, paid or made by the Company on any class of
its capital stock.
(xx) The Company is not and, after giving effect
to the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the
Prospectuses, will not be an "investment company" as defined
in the Investment Company Act of 1940.
(xxi) Neither the Company nor any of its affiliates
does business with the government of Cuba or with any person
or affiliate located in Cuba within the meaning of Section
517.075, Florida Statutes and the Company agrees to comply
with such Section if prior to the completion of the
distribution of the Offered Securities it commences doing such
business.
(b) Each Selling Stockholder severally represents and
warrants to, and agrees with, the several Managers that:
(i) Such Selling Stockholder has and on each
Closing Date hereinafter mentioned will have valid and
unencumbered title to the Offered Securities to be delivered
by such Selling Stockholder on such Closing Date and full
right, power and authority to enter into this Agreement and
the Underwriting Agreement and to sell, assign, transfer and
deliver the Offered Securities to be delivered by such Selling
Stockholder on such Closing Date hereunder; and upon the
delivery of and payment for the Offered Securities on each
Closing Date hereunder the several Underwriters and Managers
will acquire valid and unencumbered title to the Offered
Securities to be delivered by such Selling Stockholder on such
Closing Date.
(ii) If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery
of this Agreement: (A) on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement
conformed in all respects to the requirements of the Act and
the Rules and Regulations and did not include any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, (B) on the Effective Date
of the Additional Registration Statement (if any), each
Registration Statement conformed, or will conform, in all
respects to the requirements of the Act and the Rules and
Regulations did not include, or will not include, any untrue
statement of a material fact and did not omit, or will not
omit, to state any material fact required to be stated therein
or necessary to make the statements therein not misleading,
and (C) on the date of this Agreement, the
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<PAGE> 9
Initial Registration Statement and, if the Effective Time of
the Additional Registration Statement is prior to the
execution and delivery of this Agreement, the Additional
Registration Statement each conforms, and at the time of
filing of each of the Prospectuses pursuant to Rule 424(b) or
(if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectuses
are included, each Registration Statement and each of the
Prospectuses will conform, in all respects to the requirements
of the Act and the Rules and Regulations, and none of such
documents includes, or will include, any untrue statement of a
material fact or omits, or will omit, to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading. If the Effective Time of
the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement: on the Effective
Date of the Initial Registration Statement, the Initial
Registration Statement and each of the Prospectuses will
conform in all respects to the requirements of the Act and the
Rules and Regulations, none of such documents will include any
untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading. The two preceding
sentences apply only to the extent that any statements in or
omissions from a Registration Statement or Prospectus are
based on written information furnished to the Company by such
Selling Stockholder specifically for use therein.
3. Purchase, Sale and Delivery of Offered Securities. On the
basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company and each
Selling Stockholder agree, severally and not jointly, to sell to the Managers,
and the Managers agree, severally and not jointly, to purchase from the Company
and each Selling Stockholder, at a purchase price of U.S. $_____ per share,
that number of International Firm Securities (rounded up or down, as determined
by CSFBL in its discretion, in order to avoid fractions) obtained by
multiplying 450,000 International Firm Securities in the case of the Company
and the number of International Firm Securities set forth opposite the name of
such Selling Stockholder in Schedule A hereto, in the case of a Selling
Stockholder, in each case by a fraction the numerator of which is the number of
International Firm Securities set forth opposite the name of such Manager in
Schedule B hereto and the denominator of which is the total number of
International Firm Securities.
Certificates in negotiable form for the Offered Securities to be sold
by the Selling Stockholders have been placed in custody, for delivery under
this Agreement and the Underwriting Agreement, under Custody Agreements made
with , as custodian ("Custodian"). Each Selling Stockholder
agrees that the shares represented by the certificates held in custody for the
Selling Stockholders under such Custody Agreements are subject to the interests
of the Managers hereunder and the Underwriters under the Underwriting
Agreement, that the arrangements made by the Selling Stockholders for such
custody are to that extent irrevocable, and that the obligations of the Selling
Stockholders hereunder and thereunder shall not terminate by operation of law,
whether by the death of any individual Stockholder or the occurrence of any
other event, or in the case of a trust, by the death of any trustee or trustees
or the termination of such trust. If any individual Selling Stockholder or any
such trustee or
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<PAGE> 10
trustees should die, of if any other such event should occur, or if any of such
trusts should terminate, before the delivery of the Offered Securities under
this Agreement and the Underwriting Agreement, certificates for such Offered
Securities shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement and the Underwriting Agreement as if such death or
other event or termination had not occurred, regardless of whether or not the
custodian shall have received notice of such death or other event or
termination.
The Company and the Custodian will deliver the International Firm
Securities to CSFBL for the accounts of the Managers against payment of the
purchase price by [wire transfer] of immediately available funds to the Company
in the case of 450,000 Firm Shares and to ____________ in the case of 567,000
Firm Shares, at the office of _________________________, at _____ A.M., New
York time, on _______________, or at such other time not later than seven full
business days thereafter as CSFBL and the Company determine, such time being
herein referred to as the "First Closing Date." For purposes of Rule 15c6-1
under the Securities Exchange Act of 1934, the First Closing Date (if later
than the otherwise applicable settlement date) shall be the settlement date for
payment of funds and delivery of securities for all the Offered Securities sold
pursuant to the U.S. Offering and the International Offering. The certificates
for the International Firm Securities so to be delivered will be in definitive
form, in such denominations and registered in such names as CSFBL requests and
will be made available for checking and packaging at the above office of
_________________________, at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company and
the Selling Stockholders from time to time not more than 30 days subsequent to
the date of the Prospectuses, the Managers and the Underwriters may purchase
all or less than all of the Optional Securities at the purchase price per
Security to be paid for the Firm Securities. The Company and the Selling
Stockholders agree, severally and not jointly, to sell the respective number of
Optional Securities determined as follows: first, the Company shall sell the
number of Optional Securities specified in such notice, or such lesser number
of Securities as shall bring the total number of International Optional
Securities sold by the Company to 62,500 and then, after the Company has sold
all of such 62,500 International Optional Securities, the respective number of
Optional Securities obtained by multiplying (a)(i) the number of International
Optional Securities specified in such notice, less (ii) the number of
International Optional Securities sold by the Company pursuant to such notice
by (b) a fraction the numerator of which is the number of shares set forth
opposite the names of such Selling Stockholders in Schedule A hereto under the
caption "Number of International Optional Securities to be Sold" and the
denominator of which is the total number of International Optional Securities
to be sold by the Selling Stockholders (subject to adjustment by CSFBC to
eliminate fractions). Such International Optional Securities shall be
purchased from the Company and each Selling Stockholder for the account of each
Manager in the same proportion as the number of International Firm Securities
set forth opposite such Manager's name bears to the total number of
International Firm Securities (subject to adjustment by CSFBC to eliminate
fractions) and may be purchased by the Managers only for the purpose of
covering over-allotments made in connection with the sale of the International
Firm Securities. No Optional Securities shall be sold or delivered unless the
Firm Securities previously have been, or simultaneously are, sold and
delivered. The right to purchase the Optional Securities or any portion thereof
may be exercised from time to time and
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<PAGE> 11
to the extent not previously exercised may be surrendered and terminated at any
time upon notice by CSFBC, on behalf of the Managers and the Underwriters, to
the Company and the Selling Stockholders. It is understood that CSFBC is
authorized to make payment for and accept delivery of such Optional Securities
on behalf of the Underwriters and Managers pursuant to the terms of CSFBC's
instructions to the Company.
Each time for the delivery of and payment for the International
Optional Securities, being herein referred to as an "Optional Closing Date",
which may be the First Closing Date (the First Closing Date and each Optional
Closing Date, if any, being sometimes referred to as a "Closing Date"), shall
be determined by CSFBC but shall be not later than five full business days
after written notice of election to purchase Optional Securities is given. The
Company and the Custodian will deliver the International Optional Securities
being purchased on each Optional Closing Date to CSFBL for the accounts of the
several Managers, against payment of the purchase price therefor by [wire
transfer] of immediately available funds to the Company in the case of Optional
Securities sold by the Company and ____________ in the case of Optional
Securities sold by the Selling Stockholders, at the above office
of_______________. The certificates for the International Optional Securities
being purchased on each Optional Closing Date will be in definitive form, in
such denominations and registered in such names as CSFBL requests upon
reasonable notice prior to such Optional Closing Date and will be made
available for checking and packaging at the above office of
_________________________, at a reasonable time in advance of such Optional
Closing Date.
The Company will pay to the Managers as aggregate compensation for
their commitments hereunder and for their services in connection with the
purchase of the International Securities and the management of the offering
thereof, if the sale and delivery of the International Securities to the
Managers provided herein is consummated, an amount equal to U.S. $__________
per International Security purchased, which may be divided among the Managers
in such proportions as they may determine. Such payment will be made on the
First Closing Date in the case of the International Firm Securities and on each
Optional Closing Date in the case of the International Optional Securities sold
to the Manager on such Closing Date, in each case by way of deduction by the
Managers of said amount from the purchase price for the International
Securities referred to above.
4. Offering by Managers. It is understood that the several
Managers propose to offer the International Securities for sale to the public
as set forth in the International Prospectus.
In connection with the distribution of the International Securities,
the Managers, through a stabilizing manager, may over-allot or effect
transactions on any exchange, in any over-the-counter market or otherwise which
stabilize or maintain the market prices of the International Securities at
levels other than those which might otherwise prevail, but in such event and
in relation thereto, the Managers will act for themselves and not as agents of
the Company, and any loss resulting from over-allotment and stabilization will
be borne, and any profit arising therefrom will be beneficially retained, by
the Managers. Such stabilizing, if commenced, may be discontinued at any time.
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<PAGE> 12
5. Certain Agreements of the Company and the Selling
Stockholders. The Company agrees with the several Managers and the Selling
Stockholders that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement,
the Company will file each of the Prospectuses with the Commission
pursuant to and in accordance with subparagraph (1) (or, if applicable
and if consented to by CSFBL, subparagraph (4)) of Rule 424(b) not
later than the earlier of (A) the second business day following the
execution and delivery of this Agreement or (B) the fifteenth business
day after the Effective Date of the Initial Registration Statement.
(b) The Company will advise CSFBL promptly of any such
filing pursuant to Rule 424(b). If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement and an additional registration statement is necessary to
register a portion of the Offered Securities under the Act but the
Effective Time thereof has not occurred as of such execution and
delivery, the Company will file the additional registration statement
or, if filed, will file a post-effective amendment thereto with the
Commission pursuant to and in accordance with Rule 462(b) on or prior
to 10:00 P.M., New York time, on the date of this Agreement or, if
earlier, on or prior to the time either Prospectus is printed and
distributed to any Manager or Underwriter, or will make such filing at
such later date as shall have been consented to by CSFBL.
(c) The Company will advise CSFBL promptly of any
proposal to amend or supplement the initial or any additional
registration statement as filed or either of the related prospectuses
or the Initial Registration Statement, the Additional Registration
Statement (if any) or either of the Prospectuses and will not effect
such amendment or supplementation without CSFBL's prior consent; and
the Company will also advise CSFBL promptly of the effectiveness of
each Registration Statement (if its Effective Time is subsequent to
the execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or either of the
Prospectuses and of the institution by the Commission of any stop
order proceedings in respect of a Registration Statement and will use
its best efforts to prevent the issuance of any such stop order and to
obtain as soon as possible its lifting, if issued.
(d) If, at any time when a prospectus relating to the
Offered Securities is required to be delivered under the Act in
connection with sales by any U.S. Underwriter, Manager or dealer, any
event occurs as a result of which either or both of the Prospectuses
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend
either or both of the Prospectuses to comply with the Act, the Company
will promptly notify CSFBL of such event and will promptly prepare and
file with the Commission, at its own expense, an amendment or
supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBL's consent
to, nor the Managers' delivery of, any such
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<PAGE> 13
amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 6.
(e) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its securityholders an earnings statement covering a
period of at least 12 months beginning after the Effective Date of the
Initial Registration Statement (or, if later, the Effective Date of
the Additional Registration Statement) which will satisfy the
provisions of Section 11(a) of the Act. For the purpose of the
preceding sentence, "Availability Date" means the 45th day after the
end of the fourth fiscal quarter following the fiscal quarter that
includes such Effective Date, except that, if such fourth fiscal
quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth
fiscal quarter.
(f) The Company will furnish to the Managers copies of
each Registration Statement (four of which will be signed and will
include all exhibits), each related preliminary prospectus relating to
the International Securities, and, until completion of the
distribution of the International Securities as determined by CSFBL,
the International Prospectus and all amendments and supplements to
such documents, in each case in such quantities as CSFBL requests.
The International Prospectus shall be so furnished on or prior to 3:00
P.M., New York time, on the business day following the later of the
execution and delivery of this Agreement or the Effective Time of the
Initial Registration Statement. All other such documents shall be so
furnished as soon as available. The Company and the Selling
Stockholders will pay the expenses of printing and distributing to the
Managers all such documents.
(g) No action has been or, prior to the completion of the
distribution of the Offered Securities, will be taken by the Company
in any jurisdiction outside the United States and Canada that would
permit a public offering of the Offered Securities, or possession or
distribution of the International Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus issued in
connection with the offering of the Offered Securities, or any other
offering material, in any country or jurisdiction where action for
that purpose is required.
(h) During the period of five years hereafter, the
Company will furnish to CSFBL and, upon request, to each of the other
Managers, as soon as practicable after the end of each fiscal year, a
copy of its annual report to stockholders for such year; and the
Company will furnish to CSFBL (i) as soon as available, a copy of each
report and any definitive proxy statement of the Company filed with
the Commission under the Securities Exchange Act of 1934 or mailed to
stockholders, and (ii) from time to time, such other information
concerning the Company as CSFBL may reasonably request.
(i) The Company will pay all expenses incident to the
performance of the obligations of the Company and the Selling
Stockholders under this Agreement and for the filing fee incident to,
and the reasonable fees and disbursements of counsel to the
Underwriters in connection with, the review by the National
Association of Securities Dealers, Inc. of the Offered Securities, for
any travel expenses of the Company's officers
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<PAGE> 14
and employees and any other expenses of the Company in connection with
attending or hosting meetings with prospective purchasers of the
Offered Securities and for expenses incurred in distributing
preliminary prospectuses and the Prospectuses (including any
amendments and supplements thereto) to the Managers.
(j) For a period of 90 days after the date of the initial
public offering of the Offered Securities, the Company will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC, except grants of employee stock options
pursuant to the terms of a plan in effect on the date hereof,
issuances of Securities pursuant to the exercise of such options or
the exercise of any other employee stock options outstanding on the
date hereof.
(k) Each Selling Stockholder agrees to deliver to CSFBC,
attention: Transactions Advisory Group on or prior to the First
Closing Date a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified
by Treasury Department regulations in lieu thereof).
(l) Each Selling Stockholder, other than the Fox Family
Foundation, agrees, for a period of 90 days after the date of the
initial public offering of the Offered Securities, not to offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, any additional shares of the Securities of the Company or
securities convertible into or exchangeable or exercisable for any
shares of Securities, or publicly disclose the intention to make any
such offer, sale, pledge or disposal, without the prior written
consent of CSFBC.
6. Conditions of the Obligations of the Managers. The
obligations of the several Managers to purchase and pay for the International
Firm Securities on the First Closing Date and the International Optional
Securities to be purchased on each Optional Closing Date will be subject to the
accuracy of the representations and warranties on the part of the Company and
the Selling Stockholders herein, to the accuracy of the statements of Company
officers made pursuant to the provisions hereof, to the performance by the
Company and the Selling Stockholders of their obligations hereunder and to the
following additional conditions precedent:
(a) The Managers shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if
the Effective Time of the Initial Registration Statement is subsequent
to the execution and delivery of this Agreement, shall be prior to the
filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective
Time), of Price Waterhouse LLP in the agreed form.
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<PAGE> 15
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this
Agreement, such Effective Time shall have occurred not later than
10:00 P.M., New York time, on the date of this Agreement or such later
date as shall have been consented to by CSFBL. If the Effective Time
of the Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time either Prospectus is printed
and distributed to any Manager or Underwriter, or shall have occurred
at such later date as shall have been consented to by CSFBL. If the
Effective Time of the Initial Registration Statement is prior to the
execution and delivery of this Agreement, each of the Prospectuses
shall have been filed with the Commission in accordance with the Rules
and Regulations and Section 5(a) of this Agreement. Prior to such
Closing Date, no stop order suspending the effectiveness of a
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or, to the knowledge of any
Selling Stockholder, the Company or the Managers, shall be
contemplated by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) a change in U.S. or
international financial, political or economic conditions or currency
exchange rates or exchange controls as would, in the judgment of
CSFBL, be likely to prejudice materially the success of the proposed
issue, sale or distribution of the International Securities, whether
in the primary market or in respect of dealings in the secondary
market, or (ii)(A) any change, or any development or event involving a
prospective change, in the condition (financial or other), business,
properties or results of operations of the Company or its subsidiaries
which, in the judgment of CSFBL, is material and adverse and makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the International Securities;
(B) any downgrading in the rating of any debt securities of the
Company by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Act), or any public
announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and
no implication of a possible downgrading, of such rating); (C) any
suspension or limitation of trading in securities generally on the New
York Stock Exchange, or any setting of minimum prices for trading on
such exchange, or any suspension of trading of any securities of the
Company on any exchange or in the over-the-counter market; (D) any
banking moratorium declared by U.S. Federal or, New York authorities;
or (E) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by the United States
Congress or any other substantial national or international calamity
or emergency if, in the judgment of CSFBL, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the International Securities.
-15-
<PAGE> 16
(d) The Managers shall have received an opinion, dated
such Closing Date, of Dickstein Shapiro Morin & Oshinsky L.L.P.,
counsel for the Company, in the agreed form.
(e) The Managers shall have received the opinion
contemplated in the Power of Attorney executed and delivered by each
Selling Stockholder and an opinion, dated such Closing Date, of
Dickstein Shapiro Morin & Oshinsky L.L.P., counsel for the Selling
Stockholders, in the agreed form.
(f) The Managers shall have received from Katten Muchin &
Zavis, counsel for the Managers, such opinion or opinions, dated such
Closing Date, with respect to the incorporation of the Company, the
validity of the Offered Securities delivered on such Closing Date, the
Registration Statements, the Prospectuses and other related matters as
the Managers may require, and the Selling Stockholders and the Company
shall have furnished to such counsel such documents as they request
for the purpose of enabling them to pass upon such matters.
(g) The Managers shall have received a certificate, dated
such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties of
the Company in this Agreement are true and correct; the Company has
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to such Closing
Date; no stop order suspending the effectiveness of any Registration
Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of
subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule
462(b), including payment of the applicable filing fee in accordance
with Rule 111(a) or (b) under the Act, prior to the time either
Prospectus was printed and distributed to any Manager or Underwriter;
and, subsequent to the respective date of the most recent financial
statements in the Prospectuses, there has been no material adverse
change, nor any development or event involving a prospective material
adverse change, in the condition (financial or other), business,
properties or results of operations of the Company and its
subsidiaries taken as a whole except as set forth in or contemplated
by the Prospectuses or as described in such certificate.
(h) The Managers shall have received a letter, dated such
Closing Date, of Price Waterhouse LLP which meets the requirements of
subsection (a) of this Section, except that the specified date
referred to in such subsection will be a date not more than three
business days prior to such Closing Date for the purposes of this
subsection.
(i) On such Closing Date, the Underwriters shall have
purchased the U.S. Firm Securities or the U.S. Optional Securities, as
the case may be, pursuant to the Underwriting Agreement.
-16-
<PAGE> 17
Documents described as being "in the agreed form" are documents which are in
the forms which have been initialed for the purpose of identification by Katten
Muchin & Zavis, copies of which are held by the Company and CSFBL with such
changes as CSFBL may approve. The Company and the Selling Stockholders will
furnish the Managers with such conformed copies of such opinions, certificates,
letters and documents as the Managers reasonably request. CSFBL may in its sole
discretion waive on behalf of the Managers compliance with any conditions to
the obligations of the Managers hereunder, whether in respect of an Optional
Closing Date or otherwise.
7. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each
Manager against any losses, claims, damages or liabilities, joint or
several, to which such Manager may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained
in any Registration Statement, either of the Prospectuses, or any
amendment or supplement thereto, or any related preliminary
prospectus, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and will reimburse each Manager for any legal or other expenses
reasonably incurred by such Manager in connection with investigating
or defending any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Manager through CSFBL
specifically for use therein, it being understood and agreed that the
only information furnished by any Manager consists of the information
described as such in subsection (c) below.
(b) Each Selling Stockholder, severally and not jointly,
will indemnify and hold harmless each Manager against any losses,
claims, damages or liabilities, joint or several, to which such
Manager may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
Registration Statement, either of the Prospectuses, or any amendment
or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the
Company by such Selling Stockholder specifically for use therein, and
will reimburse each Manager for any legal or other expenses reasonably
incurred by such Manager in connection with investigating or defending
any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Selling Stockholders will not be
liable in any such case to
-17-
<PAGE> 18
the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement in
or omission or alleged omission from any of such documents in reliance
upon and in conformity with written information furnished to the
Company by a Manager specifically for use therein, it being understood
and agreed that the only such information furnished by any Manager
consists of the information described as such in subsection (c) below.
(c) Each Manager will severally and not jointly indemnify
and hold harmless the Company and each Selling Stockholder against any
losses, claims, damages or liabilities to which the Company or such
Selling Stockholder may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any
Registration Statement, either of the Prospectuses, or any amendment
or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the
Company by such Manager through CSFBL specifically for use therein,
and will reimburse any legal or other expenses reasonably incurred by
the Company and each Selling Stockholder in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed
that the only such information furnished by any Manager consists of
the following information in the International Prospectus furnished on
behalf of each Manager: the last paragraph at the bottom of the cover
page concerning the terms of the offering by the Managers, the legends
concerning over-allotments, stabilizing and passive market making on
the inside front cover page and the concession and reallowance figures
appearing in the fifth paragraph under the caption "Subscription and
Sale."
(d) Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under subsection (a), (b) or (c) above,
notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise
than under subsection (a), (b) or (c) above. In case any such action
is brought against any indemnified party and it notifies an
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section for any
legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without
-18-
<PAGE> 19
the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such
settlement includes an unconditional release of such indemnified party
from all liability on any claims that are the subject matter of such
action.
(e) If the indemnification provided for in this Section
is unavailable or insufficient to hold harmless an indemnified party
under subsection (a), (b) or (c) above, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities
referred to in subsection (a), (b) or (c) above (i) in such proportion
as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Managers
on the other from the offering of the International Securities or (ii)
if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also
the relative fault of the Company and the Selling Stockholders on the
one hand and the Managers on the other in connection with the
statements or omissions which resulted in such losses, claims,
damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Selling Stockholders on the one hand and the Managers on the other
shall be deemed to be in the same proportion as the total net proceeds
from the offering of the International Securities (before deducting
expenses) received by the Company and the Selling Stockholders bear to
the total underwriting discounts and commissions received by the
Managers. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, the
Selling Stockholders or the Managers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (e) shall be
deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending
any action or claim which is the subject of this subsection (e).
Notwithstanding the provisions of this subsection (e), no Manager
shall be required to contribute any amount in excess of the amount by
which the total price at which the International Securities
underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Manager has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Managers' obligations
in this subsection (e) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling
Stockholders under this Section shall be in addition to any liability
which the Company and the Selling Stockholders may otherwise have and
shall extend, upon the same terms and conditions,
-19-
<PAGE> 20
to each person, if any, who controls any Manager within the meaning of
the Act; and the obligations of the Managers under this Section shall
be in addition to any liability which the respective Managers may
otherwise have and shall extend, upon the same terms and conditions,
to each director of the Company, to each officer of the Company who
has signed a Registration Statement and to each person, if any, who
controls the Company within the meaning of the Act.
8. Default of Managers. If any Manager or Managers default in
their obligations to purchase International Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of
International Securities that such defaulting Manager or Managers agreed but
failed to purchase does not exceed 10% of the total number of shares of
International Securities that the Managers are obligated to purchase on such
Closing Date, CSFBL may make arrangements satisfactory to the Company and the
Selling Stockholders for the purchase of such International Securities by other
persons, including any of the Managers, but if no such arrangements are made by
such Closing Date, the non-defaulting Managers shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the
International Securities that such defaulting Managers agreed but failed to
purchase on such Closing Date. If any Manager or Managers so default and the
aggregate number of shares of International Securities with respect to which
such default or defaults occur exceeds 10% of the total number of shares of
International Securities that the Managers are obligated to purchase on such
Closing Date and arrangements satisfactory to CSFBL and the Company and the
Selling Stockholders for the purchase of such International Securities by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Manager or the
Company or the Selling Stockholders, except as provided in Section 9 (provided
that if such default occurs with respect to International Optional Securities
after the First Closing Date, this Agreement will not terminate as to the
International Firm Securities or any International Optional Securities
purchased prior to such termination). As used in this Agreement, the term
"Manager" includes any person substituted for a Manager under this Section.
Nothing herein will relieve a defaulting Manager from liability for its
default.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Selling Stockholders, of the Company or its officers and of
the several Managers set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of any Manager, any Selling
Stockholder, the Company or any of their respective representatives, officers
or directors or any controlling person, and will survive delivery of and
payment for the International Securities. If this Agreement is terminated
pursuant to Section 8 or if for any reason the purchase of the International
Securities by the Managers is not consummated, the Company shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
5 and the respective obligations of the Company, the Selling Stockholders and
the Managers pursuant to Section 7 shall remain in effect, and if any
International Securities have been purchased hereunder the representations and
warranties in Section 2 and all obligations under Section 5 shall also remain
in effect. If the purchase of the International Securities by the Managers is
not consummated for any reason other than solely because of the termination of
this Agreement pursuant to Section 8 or the occurrence of any event specified
in Section 6(c)(i) or clause (C),
-20-
<PAGE> 21
(D), or (E) of Section 6(c)(ii), the Company and the Selling Stockholders will,
jointly and severally, reimburse the Managers for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by them in
connection with the offering of the International Securities.
10. Notices. All communications hereunder will be in writing and,
if sent to the Managers, will be mailed, delivered or telexed and confirmed to
CS First Boston Limited at One Cabot Square, London E14 4QJ England, Attention:
Company Secretary, or, if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at Corporate Centre, Suite 2-300, 1949 E.
Sunshine, Springfield, Missouri 65804, Attention: Stephen J. Gore; provided,
however, that any notice to a Manager pursuant to Section 7 will be mailed,
delivered or telexed and confirmed to such Manager.
11. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 7, and no
other person will have any right or obligation hereunder.
12. Representation of Managers. CSFBL will act for the several
Managers in connection with this financing, and any action under this Agreement
taken by CSFBL will be binding upon all the Managers. Samuel A. Hamacher and
James A. Cooper will act for the Selling Stockholders in connection with such
transactions, and any action under or in respect of this Agreement taken by
Samuel A. Hamacher or James A. Cooper will be binding upon all the Selling
Stockholders.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
-21-
<PAGE> 22
If the foregoing is in accordance with the Managers' understanding of
our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement among the Selling
Stockholders, the Company and the several Managers in accordance with its
terms.
Very truly yours,
DT INDUSTRIES, INC.
By:
-----------------------------------
THE SELLING STOCKHOLDERS NAMED IN
SCHEDULE A ATTACHED HERETO, ACTING
SEVERALLY
By:
-----------------------------------
Attorney-in-fact
The foregoing Subscription Agreement is hereby confirmed and accepted as
of the date first above written.
CS FIRST BOSTON LIMITED
MORGAN STANLEY & CO. INTERNATIONAL
J. HENRY SCHRODER & CO. LIMITED
Acting on behalf of themselves and as the
Representatives of the several managers
CS FIRST BOSTON LIMITED
By:
---------------------------------------
[Insert title]
-22-
<PAGE> 23
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Number of International International Optional
Selling Stockholder Firm Securities to be sold Securities to be Sold
------------------- -------------------------- ---------------------
<S> <C> <C>
-----------------------------------------------
Total.................................... 567,000 90,050
===============================================
</TABLE>
A-1
<PAGE> 24
SCHEDULE B
<TABLE>
<CAPTION>
Number of
International Firm
Securities
Manager to be Purchased
- -------------------------------------------------------------------------- ------------------
<S> <C>
CS First Boston Limited...............................................
Morgan Stanley & Co. International....................................
J. Henry Schroder & Co. Limited.......................................
----------------
Total.......................................................... 1,017,000
================
</TABLE>
A-2
<PAGE> 1
DICKSTEIN SHAPIRO MORIN & OSHINSKY LLP
2101 L Street, NW - Washington, DC 20037-1526
Tel (202) 785-9700 - Fax (202) 887-0689
Writer's Direct Dial: 202-828-2218
E-Mail Address: [email protected]
November 1, 1996
DT Industries, Inc.
Corporate Centre, Suite 2-300
1949 E. Sunshine
Springfield, MO 65804
Re: DT Industries, Inc. Amendment No. 1 to
Registration Statement on Form S-3 (File No. 333-14955)
Ladies and Gentlemen:
We have acted as counsel to DT Industries, Inc., a Delaware corporation
(the "Company"), in connection with the Company's Registration Statement on
Form S-3, as amended (the "Registration Statement") filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended,
pertaining to the registration of the sale of 5,847,750 shares of the Company's
common stock, $0.01 par value per share (the Common Stock"), in an underwritten
public offering which includes 2,250,000 shares to be sold by the Company (the
"Company Firm Shares"), 2,835,000 shares to be sold by certain Selling
Stockholders named in the Registration Statement (the "Selling Stockholder Firm
Shares") 312,500 shares to be sold by the Company if the U.S. Underwriters and
Managers exercise their over-allotment option (the "Additional Company Shares")
and up to an additional 450,250 shares to be sold by the Selling Stockholders
if the U.S. Underwriters and Managers exercise their over-allotment option in
full (the "Additional Selling Stockholder Shares"). As of the date hereof, the
Company is authorized to issue 100,000,000 shares of Common Stock, of which
9,011,875 shares are issued and outstanding and of which 1,588,125 shares are
issuable pursuant to the Company's stock option and employee benefit plans
(including 600,000 shares issuable pursuant to the Company's 1996 Long-Term
Incentive Plan approved by the Board of Directors of the Company, subject to
stockholder approval). The Company Firm Shares and the Additional Company
Shares are hereinafter referred to as the "New Shares" and the Selling
Stockholder Firm Shares and the Additional Selling Stockholder Shares are
hereinafter referred to as the "Outstanding Shares."
<PAGE> 2
DT Industries, Inc.
November 1, 1996
Page 2
We have examined and are familiar with originals or copies, certified
or otherwise identified to our satisfaction, of such documents, corporate
records and other instruments as we have deemed necessary or appropriate for
purposes of this opinion.
On the basis of the foregoing, we are of the opinion that:
(i) the Outstanding Shares have been duly authorized, and are
validly issued, fully paid and non-assessable;
(ii) the Company has taken all necessary corporate action to
authorize the issuance and sale of the New Shares;
(iii) when issued and delivered to and paid for by the U.S.
Underwriters and the Managers pursuant to the U.S.
Underwriting Agreement and the Subscription Agreement,
respectively, the New Shares will be duly authorized,
validly issued, fully paid and non-assessable.
No opinion is expressed herein as to the laws of any jurisdiction other
than the federal laws of the United States of America and, to the extent
required by the foregoing opinion, the General Corporation Law of the State of
Delaware.
Capitalized terms used in this opinion and not otherwise defined herein
shall have the meanings ascribed to them in the Registration Statement.
The foregoing opinion is delivered to you in connection with the
Registration Statement, and may not be relied upon by any other person or for
any other purpose.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to this firm under the
caption "Legal Matters" in the Prospectus contained in the Registration
Statement.
Very truly yours,
/s/ DICKSTEIN SHAPIRO MORIN & OSHINSKY LLP
MGM/kld
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion and incorporation by reference in the
Prospectus constituting part of this Registration Statement on Form S-3 of our
report dated August 9, 1996 which appears on page 24 of the 1996 Annual Report
to Stockholders of DT Industries, Inc., which is incorporated by reference in
DT Industries, Inc.'s Annual Report on Form 10-K for the year ended June 30,
1996. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page S-1 of such Annual Report
on Form 10-K. We also consent to the references to us under the headings
"Experts" and "Selected Consolidated Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Consolidated Financial Data."
/s/ PRICE WATERHOUSE LLP
- -------------------------
PRICE WATERHOUSE LLP
St. Louis, Missouri
October 30, 1996
<PAGE> 1
EXHIBIT 23.3
[ALTSCHULER, MELVOIN AND GLASSER LLP LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the DT Industries, Inc. Registration Statement on
Amendment No. 1 Form S-3 (No. 333-14955) of our report dated August 20, 1996,
related to the consolidated financial statements of Mid-West Automation
Enterprises, Inc. as of May 26, 1996 and May 28, 1995 and for each of the three
fiscal years in the period ended May 26, 1996, which appears on page 3 of the
DT Industries, Inc. Current Report on Form 8-K/A dated August 5, 1996. Such
Current Report on Form 8-K/A is incorporated by reference in the Prospectus
constituting part of the DT Industries, Inc. Registration Statement on
Amendment No. 1 Form S-3 (No. 333-14955). We also consent to the reference to
us under the heading "Experts" in such Prospectus.
/s/ ALTSCHULER, MELVOIN AND GLASSER LLP
Chicago, Illinois
October 30, 1996
