FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 26, 1999
Commission File Number: 0-23400
DT INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 44-0537828
- ------------------------------------------ -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1949 E. Sunshine, Suite 2-300, Springfield, Missouri 65804
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(Address of principal executive offices) (Zip Code)
(417) 890-0102
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock, $0.01 par
value, of the registrant outstanding as of
October 29, 1999 was 10,107,274.
<PAGE>
DT INDUSTRIES, INC.
Index
Page 1
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Page
Number
Part I Financial Information
Item 1. Financial Statements (Unaudited, except as noted)
Consolidated Balance Sheets at September 26, 1999
and June 27, 1999 (Audited) 2
Consolidated Statement of Operations for the three
months ended September 26, 1999 and September
27, 1998 3
Consolidated Statement of Changes in Stockholders'
Equity for the three months ended September 26,
1999 4
Consolidated Statement of Cash Flows for the three
months ended September 26, 1999 and September
27, 1998 5-6
Notes to Consolidated Financial Statements 7-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-20
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 20
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 21
Signature
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Balance Sheets
(Dollars in Thousands Except Per Share Data)
Page 2
<TABLE>
<CAPTION>
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September 26, June 27,
1999 1999
(Unaudited)
--------------- ----------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 8,367 $ 10,487
Accounts receivable, net 50,751 50,691
Costs and estimated earnings in excess of amounts
billed on uncompleted contracts 75,121 64,894
Inventories, net 64,990 56,876
Prepaid expenses and other 10,683 12,320
------ ------
Total current assets 209,912 195,268
Property, plant and equipment, net 76,692 77,402
Goodwill, net 180,428 180,066
Other assets, net 4,447 4,051
----- -----
$471,479 $456,787
======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 685 $ 384
Accounts payable 29,239 37,507
Customer advances 24,570 21,903
Accrued liabilities 36,379 32,418
------ ------
Total current liabilities 90,873 92,212
------ ------
Long-term debt 119,897 103,659
Deferred income taxes 8,380 8,376
Other long-term liabilities 3,382 3,400
----- -----
Total long-term obligations 131,659 115,435
------- -------
Commitments and contingencies (See Note 12)
Company-obligated, mandatorily redeemable
convertible preferred securities of
subsidiary DT Capital Trust holding solely
convertible junior subordinated debentures of
the Company 70,000 70,000
------ ------
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; 10,107,274 shares outstanding at
September 26, 1999 and June 27, 1999, respectively 113 113
Additional paid-in capital 133,348 133,348
Retained earnings 77,646 77,984
Cumulative translation adjustment (1,382) (1,527)
Less -
Treasury stock (1,268,488 shares at September 26, 1999
and June 27, 1999, respectively), at cost (30,778) (30,778)
------- -------
Total stockholders' equity 178,947 179,140
------- -------
$471,479 $456,787
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Operations
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 3
<TABLE>
<CAPTION>
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Three Months Ended
September 26, September 27,
1999 1998
-------------- --------------
<S> <C> <C>
Net sales $ 100,969 $ 112,907
Cost of sales 78,086 84,682
------------ ------------
Gross profit 22,883 28,225
Selling, general and administrative expenses 19,846 18,781
------------ ------------
Operating income 3,037 9,444
Interest expense 1,798 2,036
Dividends on Company-obligated, mandatorily redeemable
convertible preferred securities of subsidiary
DT Capital Trust holding solely convertible junior
subordinated debentures of the Company, at 7.16% per annum 1,253 1,253
------------ ------------
Income (loss) before provision for income taxes (14) 6,155
Provision for income taxes 324 2,370
------------ ------------
Net income (loss) $ (338) $ 3,785
============ ============
Net earnings (loss) per common share:
Basic $ (0.03) $ 0.37
Diluted $ (0.03) $ 0.37
============ ============
Weighted average common shares outstanding:
Basic 10,107,274 10,318,053
Diluted 10,107,274 12,413,389
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Changes in Stockholders' Equity
For the Three Months Ended September 26, 1999
(Dollars in Thousands Except Per Share Data)
Page 4
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulative
other Additional
comprehensive Common paid-in Treasury
Retained income stock capital stock Total
---------- ------------------ --------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 27, 1999 $ 77,984 $ (1,527) $ 113 $133,348 $(30,778) $179,140
Comprehensive income:
Net loss (unaudited) (338)
Foreign currency translation (unaudited) 145
Total comprehensive income (unaudited) (193)
-------- -------- -------- -------- -------- --------
Balance, September 26, 1999
(unaudited) $ 77,646 $ (1,382) $ 113 $133,348 $(30,778) $178,947
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Cash Flows
(Dollars in Thousands)
(Unaudited)
Page 5
<TABLE>
<CAPTION>
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Three Months Ended
September 26, September 27,
1999 1998
--------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (338) $ 3,785
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation 2,780 2,456
Amortization 1,395 1,325
Deferred income tax provision -- 20
(Increase) decrease in current assets, excluding the effect of acquisitions:
Accounts receivable (60) (4,335)
Costs and earnings in excess of amounts billed (10,227) (6,329)
Inventories (6,425) (3,236)
Prepaid expenses and other 1,680 980
Increase (decrease) in current liabilities, excluding the effect of
acquisitions:
Accounts payable (8,239) (895)
Customer advances 2,535 6,365
Accrued liabilities 3,447 (2,133)
Other 102 125
-------- --------
Net cash used by operating activities (13,350) (1,872)
-------- --------
Cash flows from investing activities:
Capital expenditures (1,750) (5,047)
Acquisition of C. E. King net assets (2,088) --
Acquisition of Scheu & Kniss net assets -- (10,352)
Other (377) --
-------- --------
Net cash used by investing activities (4,215) (15,399)
-------- --------
</TABLE>
(continued)
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Cash Flows
(Dollars in Thousands)
(Unaudited)
(continued)
Page 6
<TABLE>
<CAPTION>
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Three Months Ended
September 26, September 27,
1999 1998
--------------------------------
<S> <C> <C>
Cash flows from financing activities:
Net borrowings from revolving loans $ 15,644 $ 20,356
Proceeds from issuance of debt -- 4,075
Payments on borrowings (559) (12)
Financing costs (140) --
Exercise of stock options -- 44
Payments for repurchase of stock -- (9,690)
Dividends -- (208)
-------- --------
Net cash provided by financing activities 14,945 14,565
-------- --------
Effect of exchange rate changes 500 402
-------- --------
Net decrease in cash (2,120) (2,304)
Cash and cash equivalents at beginning of period 10,487 6,915
-------- --------
Cash and cash equivalents at end of period $ 8,367 $ 4,611
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 7
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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, the
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
included in the Company's Form 10-K Annual Report for the fiscal
year ended June 27, 1999.
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.
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 in
accordance with generally accepted accounting principles.
3. Acquisitions
In August 1999, the Company completed the acquisition of certain net assets
of C. E. King, Ltd. (King), a manufacturer of tablet counting, liquid
filling and capping equipment located in Chertsey, England. The purchase
price of $2.1 million was primarily financed by borrowings under the
Company's revolving credit facility. 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 C. E. King from the date of acquisition.
In August 1998, the Company completed the acquisition of certain net assets
of Scheu & Kniss, Inc. (S&K). See the consolidated financial statements and
notes thereto included in the Company's Form 10-K Annual Report for the
fiscal year ended June 27, 1999 for additional information relating to this
acquisition.
The pro forma effects of the above acquisitions are not material to the
Company's financial results for the three months ended September 26, 1999
and September 27, 1998.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 8
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4. Financing
As of September 26, 1999 and June 27, 1999, long-term debt consisted of the
following:
September 26, June 27,
1999 1999
(Unaudited)
-------- --------
Term loan $ 10,000 $ 10,000
Revolving loans 102,863 85,765
Other long-term debt and capital lease obligations 7,719 8,278
-------- --------
120,582 104,043
Less-current portion of long-term debt 685 384
-------- --------
$119,897 $103,659
======== ========
In September 1999, the Company completed an amendment to its $175,000
credit facility. The credit facility, as amended, is $135,000, including a
$125,000 revolving credit facility and a $10,000 term credit facility. The
revolving credit facility will be increased to $140,000 if the Company
meets certain operating cash flow targets during the first six months of
fiscal 2000. Borrowings under the amended credit facility bear interest at
floating rates based on the prime rate plus 1 7/8% or LIBOR plus 3% (at the
option of DTI). The amended credit facility matures April 2, 2001.
Borrowings under the amended credit facility are now secured by
substantially all of the assets of DTI and its domestic subsidiaries. The
amendment to the credit facility established a revised set of financial and
other covenants and restrictions, including prohibitions of acquisitions
and payment of dividends without the consent of the lenders. The Company
was in compliance with the amended credit facility at September 26, 1999.
Total borrowing availability under the amended credit facility as of
September 26, 1999 was $19,200.
On July 27, 1998, the Company's wholly-owned subsidiary, Sencorp Systems,
Inc., issued $7,000 of Massachusetts Industrial Finance Agency Multi-Mode
Industrial Development Revenue Bonds 1998 Series A (Bonds) to fund the
expansion of the Company's facility in Hyannis, Massachusetts. The Bonds
mature July 1, 2023 and require an annual sinking fund payment to be made
each July 1. The bonds bear interest at a floating rate determined weekly
by Bank Boston, the bond remarketing agent. The weekly rate is the lowest
per annum rate which would allow the bonds to be sold at a price equal to
100% of the outstanding principal plus accrued interest. The interest rate,
which is not permitted to rise above 12%, was 3.90% as of September 26,
1999. The proceeds from the Bonds are held in trust until needed for the
expansion. Approximately $5,300 has been received from the Bonds as of
September 26, 1999.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 9
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5. Company-Obligated, Mandatorily Redeemable Convertible Preferred Securities
of Subsidiary DT Capital Trust Holding Solely Convertible Junior
Subordinated Debentures of the Company (Convertible Preferred Securities)
On June 12, 1997, the Company completed a private placement to
institutional investors of 1,400,000 7.16% Convertible Preferred Securities
(liquidation preference of $50 per Convertible Preferred Security). The
placement was made through the Company's wholly owned subsidiary, DT
Capital Trust (Trust), a newly-formed Delaware business trust. The
securities represent undivided beneficial ownership interests in the Trust.
The sole asset of the Trust is the $72,165 aggregate principal amount of
the 7.16% Convertible Junior Subordinated Deferrable Interest Debentures
Due 2012 of the Company, which were acquired by the Trust with the proceeds
from the offering as well as the sale of Common Securities of the Trust to
the Company. The Company's obligations under the Convertible Junior
Subordinated Debentures, the Indenture pursuant to which they were issued,
the Amended and Restated Declaration of Trust of the Trust and the
Guarantee of DTI, taken together, constitute a full and unconditional
guarantee by DTI of amounts due on the Convertible Preferred Securities.
The Convertible Preferred Securities are convertible at the option of the
holders at any time into the common stock of DTI at an effective conversion
price of $38.75 per share, are redeemable at DTI's option after June 1,
2000 and are mandatorily redeemable in 2012. The net proceeds of the
offering of approximately $67,750 were used by DTI to retire indebtedness.
A registration statement relating to resales of the Convertible Preferred
Securities was declared effective by the Securities and Exchange Commission
on September 2, 1997. In conjunction with the amendment of the credit
facility, the Company elected to defer interest payments on the Convertible
Junior Subordinated Debentures. As a result, quarterly distributions on the
Convertible Preferred Securities have also been deferred and DTI will not
declare or pay dividends on its common stock.
6. Earnings (loss) per share
The following represents reconciliations of net income (loss) and weighted
average shares outstanding between basic and diluted earnings (loss) per
share for the three months ended September 26, 1999 and September 27, 1998.
The convertible preferred securities were antidilutive for the three months
ended September 26, 1999 and have been excluded from the computation of
diluted earnings (loss) per share (share data in thousands).
<TABLE>
<CAPTION>
Three Months Ended
September 26, 1999 September 27, 1998
------------------------- ---------------------
Shares (in Shares
Net loss 000s) Net income (in 000s)
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Basic $ (338) 10,107 $3,785 10,318
Effect of dilutive securities:
Mandatorily redeemable
convertible preferred securities 771 1,806
Stock options 166
Contingent issuable shares 123
------ ------ ------ ------
Diluted $ (338) 10,107 $4,556 12,413
====== ====== ====== ======
</TABLE>
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 10
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7. Business Segments.
The Company adopted Statement of Financial Accounting Standards No. 131
(SFAS 131), "Disclosures about Segments of an Enterprise and Related
Information", effective June 27, 1999. SFAS 131 requires disclosure of
segment information on the basis that it is used internally for evaluating
segment performance and deciding how to allocate resources to segments.
Accordingly, segment information for the three months ended September 27,
1998 has been restated to conform with the requirements of SFAS 131.
Financial information for the Company's reportable segments consisted of
the following (in thousands):
Three Months Ended
September 26, 1999 September 27, 1998
------------------ -------------------
Net sales
Automation $ 60,793 $ 82,895
Packaging 31,709 21,105
Other 8,467 8,907
-------- --------
Consolidated total $ 100,969 $112,907
-------- --------
The reconciliation of segment operating income to consolidated income
(loss) before income taxes consisted of the following:
Three Months Ended
September 26, 1999 September 27, 1998
------------------ -------------------
Automation $ 157 $ 9,427
Packaging 5,025 2,118
-------- --------
Operating income for reportable segments 5,182 11,545
Operating income for immaterial business 223 400
Corporate (2,368) (2,501)
Interest expense, net 1,798 2,036
Dividends on Company-obligated, mandatorily
redeemable convertible preferred securities
of subsidiary DT Capital Trust holding
solely convertible junior subordinated
debentures of the Company 1,253 1,253
-------- --------
Consolidated income (loss) before
income taxes $ (14) $ 6,155
======== ========
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 11
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8. Restructuring reserve
In fiscal 1999, the Company recorded a restructuring charge of
$2,500 associated with management changes and workforce reductions,
idle facility costs and non-cash asset writedowns. The breakdown of
the restructuring reserve as of September 26, 1999 and June 27, 1999
was as follows:
June 27, Charges to September 26,
1999 Reserve 1999
------- ------- -------
Severance costs $ 1,493 $ (649) $ 844
Idle facility costs 264 (131) 133
Asset writedowns and other 361 (117) 244
------- ------- -------
$ 2,118 $ (897) $ 1,221
======= ======= =======
The balance of the restructuring reserve is expected to be fully utilized
during fiscal 2000.
9. Supplemental balance sheet information
September 26, June 27, 1999
1999
(Unaudited)
-------------- ------------
Inventories, net:
Raw materials $21,723 $21,835
Work in process 33,745 25,418
Finished goods 9,522 9,623
------- -------
$64,990 $56,876
======= =======
Accrued liabilities:
Accrued employee compensation $12,381 $12,291
and benefits
Accrued warranty 4,603 4,409
Other 19,395 15,718
------- -------
$36,379 $32,418
======= =======
The Company has 1,268,488 shares of treasury stock at a total cost of
$30,778, as reflected in the stockholders' equity section of the
consolidated balance sheet. The repurchased shares are being used primarily
for employee stock option programs. In conjunction with the negotiation of
the amendment to the credit facility, the Company has agreed that it will
make no further repurchases of its common stock.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 12
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10. Stock option plans
A summary of stock option transactions pursuant to the 1994 Employee
Stock Option Plan, the 1994 Directors Non-Qualified Stock Option
Plan and the 1996 Long-Term Incentive Plan follows:
AVERAGE SHARES SUBJECT
PRICE TO OPTION
---------- --------------
Options outstanding at June 27, 1999 $ 17.43 1,011,938
Options granted $ 6.25 246,000
Options exercised -- --
Options forfeited -- --
---------
Options outstanding at September 26, 1999 $ 15.24 1,257,938
---------
Exercisable at September 26, 1999 $ 16.19 528,287
=========
11. Comprehensive income
Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income", establishes standards for the reporting and display
of comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income represents net income plus
certain items that are charged directly to stockholders' equity. The only
component of other comprehensive income for the Company relates to foreign
currency translation adjustments.
12. Commitments and contingencies
The Company is a party to certain lawsuits involving employee matters,
product liability and other matters. Management does not expect the
outcome of any litigation to have a material adverse effect on the
Company's financial position, results of operations or liquidity.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 13
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GENERAL OVERVIEW
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of DT Industries, Inc.
(DTI or the Company) for the three months ended September 26, 1999 compared to
the three months ended September 27, 1998. This discussion should be read in
conjunction with the consolidated financial statements and notes to the
consolidated financial statements included in the Company's Form 10-K
for the fiscal year ended June 27, 1999.
The Company primarily operates in two business segments, Automation and
Packaging. The Automation segment designs and builds integrated systems for the
assembly, test and handling of discrete products. The Packaging segment
manufactures tablet processing, counting and liquid filling systems and plastics
processing equipment including thermoforming, blister packaging, heat-sealing
and foam extrusion.
The percentage of completion method of accounting is used by the Company 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.
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.
Gross margins may vary in a given period as a result of the variations in
profitability of contracts for large orders of automated production systems or
special machines. In addition, changes in the product mix in a given period
affect gross margins.
In the fourth quarter of fiscal 1999, the Company recorded $10.5 million of
special charges related to cost, performance and collection issues on a few
automation projects. Although there has been no significant developments with
these projects, the Company remains comfortable with the project-related charges
and does not anticipate any additional charges related to these projects.
Certain information contained in this report, particularly the information
appearing under the headings "Results of Operations", "Liquidity and Capital
Resources", "Backlog", "Market Risk" and "Year 2000 Compliance" includes
forward-looking statements. These statements, comprising all statements which
are not historical, are based upon the Company's interpretation of what it
believes are significant factors affecting its businesses, including many
assumptions regarding future events, and are made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. References to "opportunities", "growth
potential", "objectives" and "goals", the words "anticipate", "believe",
"estimate", "expect", and similar expressions used herein indicate
forward-looking statements. Actual results could differ materially from those
anticipated in any forward-looking statements as a result of various factors,
including economic downturns in industries or markets served, delays or
cancellations of customer orders, delays in shipping dates of products, excess
product warranty expenses, collectability of past due customer receivables,
significant cost overruns on certain projects, significant restructuring or
other special, non-recurring charges, foreign currency exchange rate
fluctuations, delays in achieving anticipated cost savings or in fully
implementing project and information management systems, availability of
financing at acceptable terms, possible future acquisitions that may not be
complementary or additive, changes in interest rates, increased inflation and
availability of skilled labor. Additional information regarding important
factors that could cause actual results of operations or outcomes of other
events to differ materially from any forward-looking statement also appears
elsewhere in this report, including under the heading "Seasonality and
Fluctuations in Quarterly Results".
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 14
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
consolidated net sales represented by certain items reflected in the Company's
consolidated statement of operations:
Three Months Ended
September 26, September 27,
1999 1998
---------------- -----------------
Net sales 100.0% 100.0%
Cost of sales 77.3 75.0
---- ----
Gross profit 22.7 25.0
Selling, general and administrative expenses 19.7 16.6
---- ----
Operating income 3.0 8.4
Interest expense 1.8 1.8
Dividends on Company-obligated, mandatorily
redeemable convertible preferred
securities of subsidiary DT Capital Trust 1.2 1.1
--- ---
Income before provision for income taxes -- 5.5
Provision for income taxes 0.3 2.1
--- ---
Net income (loss) (0.3)% 3.4%
==== ===
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 15
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THREE MONTHS ENDED SEPTEMBER 26, 1999
COMPARED TO THREE MONTHS ENDED SEPTEMBER 27, 1998
Consolidated net sales for the three months ended September 26, 1999 were $101.0
million, a decrease of $11.9 million, or 10.6%, from $112.9 million for the
three months ended September 27, 1998. Net sales by segment were as follows (in
millions):
Three Months Ended Three Months Ended Increase
September 26, 1999 September 27, 1998 (Decrease)
-------------------- ------------------ ----------
Automation $ 60.8 $ 82.9 $ (22.1)
Packaging 31.7 21.1 10.6
Other 8.5 8.9 (0.4)
--- --- ----
$ 101.0 $ 112.9 $ (11.9)
======== ======== =======
Automation segment sales decreased primarily as a result of lower sales to the
automotive and electronics industries. Soft order activity resulting from
deferral of capital spending programs with automotive customers during the
second half of fiscal 1999 resulted in revenues from the automotive industry
that were significantly below those recorded during the first quarter of fiscal
1999. Sales to a significant electronics customer were also down compared to the
prior year quarter primarily due to its reduction in capital spending.
Additionally, sales to other industries were below prior year levels due to a
general reduction in capital spending for automation systems. These decreases
were partially offset by a substantial increase in revenues from build-to-print
machinery for a significant tire manufacturer.
Increased Packaging segment sales reflect a combination of significantly higher
sales of plastics processing equipment, strong sales of tablet filling systems
primarily to nutritional customers and the incremental increase in sales as a
result of the acquisitions of C.E. King in July 1999 and Scheu & Kniss in August
1998. The increased sales from plastics processing equipment resulted primarily
from increased sales of extrusion systems and the unusually low revenues in the
first quarter of fiscal 1999.
Gross profit decreased $5.3 million, or 18.9%, to $22.9 million for the three
months ended September 26, 1999 from $28.2 million for the three months ended
September 27, 1998. The gross margin decreased to 22.7% from 25.0%. The decrease
reflects lower margins in the Automation segment as a result of the lower
margins being achieved on new business and inefficiencies related to the lower
utilization of manufacturing resources. The increase in the Packaging segment's
gross margin primarily reflects a significant increase in margins on plastics
processing equipment as several factors adversely affected margins for this
equipment in the first half of fiscal 1999. This increase was partially offset
by lower margins on other packaging machinery sales primarily reflecting greater
integration of lower-margin third-party equipment on certain tablet-filling
lines.
SG&A expenses increased $1.1 million, or 5.7%, to $19.8 million for the three
months ended September 26, 1999 from $18.8 million for the three months ended
September 27, 1998. The increase was due primarily to the recently acquired
businesses and the costs associated with the establishment of a start-up
business, consisting of an advanced automation engineering group targeting the
electronics and medical device markets. The Automation segment's operating costs
excluding the start-up business were flat with the prior year quarter. Packaging
segment operating costs increased over the same period in the prior year
primarily from the timing of trade shows and other marketing activities.
Corporate operating costs were down compared to the same period in the prior
year as a result of cost cutting measures implemented, primarily headcount
reductions, in response to the lower level of sales. Due to the lower sales and
higher expenses as compared to the prior year, SG&A expenses as a percentage of
consolidated net sales increased to 19.7% from 16.6%.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 16
- --------------------------------------------------------------------------------
Operating income decreased $6.4 million, or 67.8%, to $3.0 million for the three
months ended September 26,1999 from $9.4 million for the three months ended
September 27, 1998, as a result of the factors noted above. The operating margin
decreased to 3.0% from 8.4% in the prior year.
Interest expense decreased $0.2, or 11.7%, to $1.8 million for the three months
ended September 26, 1999.
Net income decreased $4.1 million for the three months ended September 26, 1999
from $3.8 million for the three months ended September 27, 1998 resulting in a
loss of $(0.3) million. Basic and diluted loss per share were $(0.03) for the
three months ended September 26, 1999 compared to basic and diluted earnings per
share of $0.37 for the three months ended September 27, 1998. Basic weighted
average shares outstanding for the three months ended September 26, 1999 was
10.1 million versus 10.3 million for the three months ended September 27, 1998.
Diluted weighted average shares outstanding for the three months ended September
26, 1999 was 10.1 million versus 12.4 million for the three months ended
September 27, 1998. The decrease is primarily due to the exclusion of the
antidilutive convertible securities.
LIQUIDITY AND CAPITAL RESOURCES
Net income plus non-cash operating charges provided $3.8 million of operating
cash flow for the quarter ended September 26, 1999. Net increases in working
capital balances used operating cash of $17.2 million, resulting in net cash
used by operating activities of $13.4 million for the quarter ended September
26, 1999. The higher working capital balances reflect: (1) increased inventory
and costs and earnings in excess of amounts billed, largely in the Automation
segment, primarily due to costs being accumulated on a few large projects and
the continued delays on certain assembly system contracts and (2) decreased
trade accounts payable levels resulting from the timing of purchases and the
lower volume of manufacturing activity as compared to the prior year quarter.
These unfavorable changes were partially offset by moderate increases in
customer advances related to higher order activity in the first quarter.
During the three months ended September 26, 1999, the Company borrowed $15.6
million on its revolving credit facility. The funds were used for working
capital requirements, the acquisition of C. E. King for $2.1 million and capital
expenditures of $1.8 million.
During the three months ended September 27, 1998, net cash used by operating
activities was $1.9 million. Net income plus non-cash operating charges provided
$7.6 million of operating cash flow. A net unfavorable change in working capital
balances resulted in cash used of $9.5 million. The increased working capital
resulted in unfavorable changes in trade receivables, inventories, costs and
earnings in excess of amounts billed and accrued liabilities. Trade receivables
increased due primarily to special terms negotiated on a large automotive
project. Inventories increased as a result of the reduced plastics processing
equipment shipments and substantial advance purchases of parts for multiple
tablet presses. The increase in costs and earnings in excess of amounts billed
reflects the costs built up as Automation segment projects were delayed. The
decrease in accrued liabilities was caused primarily by the payment of year-end
bonuses. These increases were partially offset by a favorable change in customer
advances which increased as payments were received on a few large special
machines projects.
Cash provided by financing activities of $14.6 million during the three months
ended September 27, 1998 was used to fund the acquisition of Scheu & Kniss for
$10.4 million, repurchases of the Company's stock of $9.7 million, finance
capital expenditures of $5.0 million and fund working capital requirements.
Working capital balances can fluctuate significantly between periods as a result
of the significant costs incurred on individual contracts and the relatively
large amounts invoiced and collected by the Company for a number of large
contracts, and the amounts and timing of customer advances or progress payments
associated with certain contracts.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 17
- -------------------------------------------------------------------------------
On July 27, 1998, the Company's wholly-owned subsidiary, Sencorp Systems, Inc.,
issued $7.0 million of Massachusetts Industrial Finance Agency Multi-Mode
Industrial Development Revenue Bonds 1998 Series A (Bonds) to fund the expansion
of the Company's facility in Hyannis, Massachusetts. The Bonds mature July 1,
2023 and require an annual sinking fund payment to be made each July 1. The
bonds bear interest at a floating rate determined weekly by Bank Boston, the
bond remarketing agent. The weekly rate is the lowest per annum rate which would
allow the bonds to be sold at price equal to 100% of the outstanding principal
plus accrued interest. The interest rate, which is not permitted to rise above
12%, was 3.90% as of September 26, 1999. The proceeds from the Bonds are held in
trust until needed for the expansion. Approximately $5.3 million has been
received from the Bonds as of September 26, 1999.
In September 1999, the Company completed an amendment to its $175 million credit
facility. The total credit facility, as amended, is $135 million, including a
$125 million revolving credit facility and a $10 million term credit facility.
The revolving credit facility will be increased to $140 million if the Company
meets certain operating cash flow targets during the first six months of fiscal
2000. Borrowings under the amended credit facility bear interest at floating
rates based on the prime rate plus 1 7/8% or LIBOR plus 3% (at the option of
DTI). The amended credit facility matures on April 2, 2001. Borrowings under the
amended credit facility are now secured by substantially all of the assets of
DTI and its domestic subsidiaries. The amendment to the credit facility
established a revised set of financial and other covenants and restrictions,
including prohibitions of acquisitions and payment of dividends without the
consent of the lenders. The Company was in compliance with the amended credit
facility at September 26, 1999. Total borrowing availability under the amended
credit facility as of September 26, 1999 was $19.2 million.
In conjunction with the negotiation of the amended credit facility, the Company
elected to defer interest payments on the Convertible Junior Subordinated
Debentures. The amended credit facility requires that the deferral continue
until the maturity of the credit facility. As a result, quarterly distributions
on the Convertible Preferred Securities will also be deferred and DTI will not
declare and pay any dividends on its common stock.
Management anticipates that capital expenditures in the current fiscal year will
be approximately $10 million to $12 million. This includes recurring replacement
or refurbishment of machinery and equipment, and purchases to improve production
methods or processes or to expand manufacturing capabilities. Funding for
capital expenditures is expected to be provided by cash from operating
activities and through the Company's credit facilities.
In July 1999, the Company completed the acquisition of certain net assets of C.
E. King, Ltd., a manufacturer of tablet counting, liquid filling and capping
equipment located in Chertsey, England. The purchase price of $2.1 million was
primarily financed by borrowings under the Company's revolving credit facility.
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 C. E. King from the date of
acquisition.
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.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 18
- --------------------------------------------------------------------------------
BACKLOG
The Company's backlog is based upon customer purchase orders that the Company
believes are firm. As of September 26, 1999, the Company had $206.3 million of
orders in backlog, which compares to a backlog of approximately $206.2 million
as of September 27, 1998.
The backlog for the Automation segment at September 26, 1999 was $161.1 million,
which decreased $0.4 million from a year ago. A significant increase in backlog
with a customer in the tire industry was offset by the general reduction and
deferral of capital spending by customers in the major industries served by the
Company. Backlog for the Packaging segment was $39.6 million, an increase of
$0.2 million over the comparable period in fiscal 1999.
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 that most of the orders in the backlog will
be recognized as sales during the current fiscal year.
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, 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 may vary between comparable periods as a result of the variations
in profitability of contracts for large orders of special machines as well as
product mix between the various types of custom and proprietary equipment
manufactured by the Company. Accordingly, results of operations of the Company
for any particular quarter are not necessarily indicative of results that may be
expected for any subsequent quarter or related fiscal year.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities", establishes accounting and
reporting standards for derivative instruments and for hedging activities and
requires recognition of all derivatives on the balance sheet at fair value. SFAS
133 is effective for all fiscal quarters beginning after June 15, 2000. The
Company is continuing to evaluate the provisions of SFAS 133 to determine its
impact on financial position and results of operations. The Company holds no
material derivative financial instruments at September 26, 1999.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 19
- --------------------------------------------------------------------------------
YEAR 2000 COMPLIANCE
The costs of the planned year 2000 modifications and the dates by which the
Company expects to complete its plans are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third-party modification plans
and other factors. Specific factors that may cause differences between these
estimated and actual results include, without limitation, the availability and
cost of personnel trained in these areas, the ability to locate and correct all
relevant computer codes, changes in consulting fees and costs to remediate or
replace hardware and software, non-incremental costs resulting from deployment
of internal resources, timely responses to and corrections by third parties such
as significant customers and suppliers, and similar uncertainties.
The Company utilizes software and related computer technologies essential to its
operations and to certain products that use two digits rather than four to
specify the year, which could result in a date recognition problem with the
transition to the year 2000. The Company has established and is implementing a
plan, primarily utilizing internal resources, to assess the potential impact of
the year 2000 on the Company's systems and operations and to implement solutions
to address this issue. The Company has completed the assessment and remediation
phases of its year 2000 plan, including a combination of repair and replacement
of affected systems. The Company is presently developing contingency plans for
various aspects of operations.
For substantially all of the Company's internal systems, this remediation was an
incidental consequence of the ongoing implementation of a new integrated core
business system. Critical systems have been tested to be compliant.
The total incremental cost of this project, comprised primarily of the costs of
the implementation of a new integrated core business system includes costs of
approximately $3.5 million incurred in fiscal year 1998 and expenditures in
fiscal year 1999 of approximately $4.0 million which were included in the
Company's capital expenditures plan.
The Company's most likely worst case year 2000 scenario would be an interruption
in work or cash flow resulting from unanticipated problems encountered with the
information systems of the Company or of any of the significant third parties
with whom the Company does business. The Company believes that the risk of
significant business interruption due to unanticipated problems with its own
systems is low based on the progress of the Company's year 2000 plan to date.
The Company is developing contingency plans, which are anticipated to be
completed by November 30, 1999, in the event unforeseen internal disruptions
occur.
The Company believes its highest risk relates to significant suppliers or
customers failing to remediate their year 2000 issues in a timely manner.
Relating to its suppliers, the Company has identified and will continue to
identify alternative sources of supply of necessary materials. The risk relating
to the Company's customers includes delays in receipt of payment due to a
customer's unresolved year 2000 issues and to customer product migration due to
the Company's unresolved year 2000 issues. The Company's year 2000 plan and
contingency plans will help to mitigate the impact of customer product
migration. However, there can be no assurance that the Company will not
experience unanticipated costs and/or business interruptions due to year 2000
problems in its internal systems, its supply chain or from customer payment and
product migration issues, or that such costs and/or interruptions will not have
a material adverse effect on the Company's consolidated financial condition or
results of operation.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 20
- --------------------------------------------------------------------------------
MARKET RISK
In the ordinary course of business, the Company is exposed to foreign currency
and interest rate risks. These exposures primarily relate to having investments
in assets denominated in foreign currencies and to changes in interest rates.
Fluctuations in currency exchange rates can impact operating results, including
net sales and operating expenses. The Company hedges certain of its foreign
currency exposure by borrowing in the local functional currency in countries
where the Company has significant assets denominated in foreign currencies. Such
borrowings include Pounds Sterling, Canadian dollars and Deutsche Marks in the
United Kingdom, Canada and Germany, respectively (see Liquidity and Capital
Resources). The Company may utilize derivative financial instruments, including
forward exchange contracts and swap agreements to manage certain of its foreign
currency and interest rate risks that it considers practical to do so. The
Company holds no material derivative financial instruments at September 26,
1999. The Company does not enter into derivative financial instruments for
trading purposes. Market risks that the Company currently has elected not to
hedge primarily relate to its floating-rate debt.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------------------
See Management's Discussion and Analysis of Financial Condition and Results of
Operations - Market Risk.
<PAGE>
DT INDUSTRIES, INC.
PART II. Other Information
- --------------------------------------------------------------------------------
Page 21
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10 - Fourth Amendment to Fourth Amended and Restated Credit
Facilities Agreement, dated as of September 24, 1999, among Bank of
America, N.A., formerly NationsBank, N.A., as Administrative Agent, and
Bank of America, N.A. and the other Lenders listed therein and DT
Industries, Inc. and the other Borrowers listed therein
Exhibit 11 - Statement Regarding Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
On July 23, 1999, a Current Report on Form 8-K was filed to report,
pursuant to Item 5 thereof, the release by the Company of its expectations
of earnings for the three and twelve months ended June 27, 1999.
On September 29, 1999, a Current Report on Form 8-K was filed to report,
pursuant to Item 5 thereof, the release of the Company's earnings for the
three and twelve months ended June 27, 1999.
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10 Fourth Amendment to Fourth Amended and Restated Credit Facilities
Agreement, dated as of September 24, 1999, among Bank of America, N.A.,
formerly NationsBank, N.A., as Administrative Agent, and Bank of America,
N.A. and the other Lenders listed therein and DT Industries, Inc. and the
other Borrowers listed therein
11 Statement Regarding Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
<PAGE>
DT INDUSTRIES, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DT INDUSTRIES, INC.
Date: November 9, 1999 /s/ Bruce P. Erdel
--------------------------------
(Signature)
Bruce P. Erdel
Senior Vice President - Finance
and Administration
(Principal Financial and Accounting
Officer)
FOURTH AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT FACILITIES AGREEMENT
THIS FOURTH AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT FACILITIES
AGREEMENT (this "Amendment") is entered into as of September 24, 1999, by and
among DT INDUSTRIES, INC., a Delaware corporation ("Domestic Borrower"), DT
INDUSTRIES (UK) II LIMITED, ASSEMBLY TECHNOLOGIE & AUTOMATION GMBH, KALISH INC.,
formerly Kalish Canada Inc., and DT CANADA INC. (together with Domestic
Borrower, separately and collectively, "Borrower"), BANK OF AMERICA, N.A.,
formerly NationsBank, N.A., as administrative agent ("Administrative Agent"),
and the other lenders listed on the signature pages hereof (the "Lenders").
RECITALS
(a) Borrower, Administrative Agent and the Lenders are parties
to that certain Fourth Amended and Restated Credit Facilities Agreement
dated as of July 21,1997 (as amended through the date hereof, the
"Credit Agreement"; terms defined in the Credit Agreement and not
otherwise defined herein shall be used herein as defined in the Credit
Agreement).
(b) Borrower has requested that the Lenders waive certain
Events of Default, and the Lenders have agreed to waive such Events of
Default, subject to the terms and conditions contained herein.
(c) Borrower, Administrative Agent, and the Lenders desire to
amend the Credit Agreement to provide for, among other things, (i) a
reduction in the Revolving Loan Commitment, (ii) modification to
certain pricing terms, (iii) a new maturity date, (iv) modifications to
certain financial reporting requirements, (v) additional financial
covenants and revisions to existing financial covenants, (vi)
additional collateral security, and (vii) other modifications described
below, all subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the parties
hereto covenant and agree as follows:
1. WAIVER. Subject to the satisfaction of the conditions of
effectiveness set forth in Section 11 of this Amendment and the other conditions
contained herein, the Lenders hereby waive any Event of Default under Section
16.1. of the Credit Agreement which may have occurred as a result, directly or
indirectly, of the failure of the Borrower to comply with Sections 15.2., 15.3.,
15.4., and 15.5. or any of them for any fiscal quarter ending on or before the
date hereof, including, without limitation, any Event of Default arising from
the Borrower's requests for Advances of the Revolving Loan while not in
compliance with the financial covenants in the foregoing sections (the "Existing
Events of Default"). The waiver provided in this Section 1 shall not be and
shall not be deemed to be a waiver of any Defaults or Events of Default under
the Credit Agreement other than the Existing Events of Default.
<PAGE>
2. AMENDMENTS TO THE CREDIT AGREEMENT. The Credit Agreement is hereby
amended as follows:
(a) The first sentence of Section 3.1. is entirely amended, as
follows:
Subject to the applicable limitations in Section 3.2
and elsewhere herein, each Lender commits to make available to
Domestic Borrower, from the Effective Date to the Revolving
Loan Maturity Date, such Lender's prorata share of an
Aggregate Revolving Loan Commitment in the Dollar Equivalent
Amount of (a) $165,000,000 from the date of this Agreement
through but excluding September 24, 1999, and (b) $130,000,000
at all times thereafter (the "Aggregate Revolving Loan
Commitment") by funding such Lender's prorata share (as listed
on Exhibit 3 hereto) of Revolving Loan Advances denominated in
Dollars, Pounds Sterling or Deutsche Marks and made from time
to time as provided herein.
(b) A new Section 3.2.6. is added immediately following
Section 3.2.5., as follows:
3.2.6. Minimum Availability. No Revolving Loan Advance will be
made which would result in the Unused Revolving Loan
Commitment equaling less than $5,000,000 unless and until
Administrative Agent and Lenders shall have received from
Domestic Borrower (a) the financial statements required under
Section 13.13.2. for the fiscal quarter of Borrower ending in
December 1999, reflecting that EBITDA for the two quarter
period then ended met or exceeded $16,064,000, and (b) a
certificate of the Chief Financial Officer of Domestic
Borrower that no Default or Event of Default exists at the
time such financial statements are delivered. If the above
conditions are not met and Domestic Borrower shall voluntarily
reduce the Aggregate Revolving Loan Commitment by an aggregate
amount of $5,000,000 or more, then the minimum availability
requirement described above shall no longer be applicable.
(c) The introductory language in Section 4.3. is entirely
amended, as follows:
The "Adjusted Eurodollar Rate" for any Eurodollar Loan is the
lesser of (a) the Eurodollar Rate plus the applicable
Eurodollar Increment, and (b) the Maximum Rate, and the
"Adjusted Base Rate" for any Base Rate Loan shall be the
lesser of (a) the Prime Rate plus the applicable Base Rate
Increment, and (b) the Maximum Rate. Beginning September 24,
1999, and continuing at all times thereafter, the Eurodollar
Increment shall be 3.00%, and the Base Rate Increment shall be
1.875%. At all times before such date, the Eurodollar
Increment and the Base Rate Increment shall be as prescribed
for the applicable Level in the following table:
(d) The first sentence of Section 4.7. is entirely amended, as
follows:
Interest on all Eurodollar Loans will be calculated on the
basis of actual number of days elapsed but computed as if each
calendar year consisted of 360 days, and
2
<PAGE>
interest on all Base Rate Loans will be calculated on the
basis of actual number of days elapsed on the basis of a year
of 365 or 366 days, as the case may be.
(e) Section 4.15. is entirely amended, as follows:
4.15. Usury. Regardless of any provision contained in any Loan
Document, Lenders are not entitled to contract for, charge,
take, reserve, receive, or apply, as interest on all or any
part of the Loan Obligation, any amount in excess of the
Maximum Rate, and, if Lenders ever do so, then any excess
shall be treated as a partial prepayment of principal and any
remaining excess shall be refunded to Borrower. In determining
if the interest paid or payable exceeds the Maximum Rate,
Borrower and Lenders shall, to the maximum extent permitted
under applicable Law, (a) treat all Advances as but a single
extension of credit (and Lenders and Borrower agree that this
is the case and that provision in this Agreement for multiple
Advances is for convenience only), (b) characterize any
nonprincipal payment as an expense, fee, or premium rather
than as interest, (c) exclude voluntary prepayments and their
effects, and (d) amortize, prorate, allocate, and spread the
total amount of interest throughout the entire contemplated
term of the Loan Obligations. However, if the Loan Obligations
are paid in full before the end of their full contemplated
term, and if the interest received for its actual period of
existence exceeds the Maximum Amount, Lenders shall refund any
excess (and Lenders may not, to the extent permitted by Law,
be subject to any penalties provided by any Laws for
contracting for, charging, taking, reserving, or receiving
interest in excess of the Maximum Amount). If Texas laws are
applicable for purposes of determining the "Maximum Rate" or
the "Maximum Amount," then those terms mean the "weekly
ceiling" from time to time in effect under Chapter 303 of the
Texas Finance Code, as amended. Borrower agrees that Chapter
346 of the Texas Finance Code, as amended (which regulates
certain revolving credit loan accounts and revolving triparty
accounts), does not apply to the Loan Documents.
(f) A new paragraph is added to Section 5.1. immediately
following the table therein, as follows:
Notwithstanding any of the above to the contrary, beginning
September 24, 1999, and continuing at all times thereafter,
(a) the "Commitment Fee Rate" shall be 0.50% per annum, and
(b) the "Unused Revolving Loan Commitment" on any day shall be
the difference between (i) the amount of the Aggregate
Revolving Loan Commitment and (ii) the sum of (A) the
Aggregate Revolving Loan, and (B) the Letter of Credit
Exposure as of the close of business on such day.
(g) The second sentence of Section 5.2. is entirely amended,
as follows:
The "Letter of Credit Fee" for any Letter of Credit shall be
equal to 3.00% per annum of the Dollar Equivalent Amount of
the aggregate undrawn amount of such Letter of Credit, payable
quarterly in advance on the day of its issuance and as of the
first day of each calendar quarter thereafter.
3
<PAGE>
(h) Section 6.1.2. is entirely amended, as follows:
6.1.2. Principal. Borrower shall repay the entire amount of
the Aggregate Revolving Loan as then outstanding on April 2,
2001. Canadian Borrowers shall repay the entire amount of the
Canadian Term Loan on April 2, 2001.
(i) A new Section 6.2.3. is added immediately following
Section 6.2.2., as follows:
6.2.3. Mandatory Prepayment from Asset Sale Proceeds. Promptly
upon receipt of the proceeds from any sale, transfer,
exchange, lease, or other dispositions of any of its assets on
or after September 24, 1999 (except for sales in the ordinary
course of business, sales of worn out or obsolete assets to be
immediately replaced by assets of equal or greater value or
quality, and sales or other dispositions of other assets
(excluding stock of any Subsidiaries) for which the book value
does not exceed $1,000,000 in the aggregate), Borrower shall
prepay the Loans in a principal amount equal to 100% of the
Net Proceeds of such transaction. For purposes hereof, "Net
Proceeds" means the aggregate amount of cash and cash
equivalents received by Borrower or any Subsidiary of Borrower
in connection with any transaction described in this Section
6.2.3. minus fees, costs and expenses and related taxes paid
or payable as a result of such transaction. Any such
prepayment shall be applied to the Aggregate Canadian Term
Loan and the Aggregate Revolving Loan, pro rata based upon the
respective principal amounts of the Aggregate Canadian Term
Loan and the Aggregate Revolving Loan Commitment at the time
of such prepayment. Notwithstanding anything herein to the
contrary, the Revolving Loan Commitment shall be permanently
reduced by the amount of any such prepayment applied to the
Aggregate Revolving Loan. Nothing in this Section 6.2.3.
permits any violation of Section 14.6. of this Agreement.
(j) The first sentence of Section 11.18 is entirely amended as
follows:
To Borrower's knowledge, all Pension Benefit Plans maintained
by each Covered Person or an ERISA Affiliate of such Covered
Person qualify under Section 401 of the Code (other than plans
intended to be non-qualified) and are in compliance with the
provisions of ERISA in all material respects.
(k) Section 13.1. is entirely amended, as follows:
13.1. Use of Proceeds. Subject to the terms and conditions
hereof, the proceeds of any Revolving Loan Advances made after
September, 1999, shall be used only for working capital and
capital expenditures, as the source for payment of Borrower's
reimbursement obligations with respect to Letters of Credit,
and for general corporate purposes.
(l) Section 13.13.1. is hereby amended by (i) deleting the
text, "120 days," and replacing it with the text, "90 days, and (ii)
deleting the text, "(on a group basis)," and replacing it with the
text, "(on a company by company basis)."
4
<PAGE>
(m) Section 13.13.2. is entirely amended, as follows:
13.13.2. Quarterly Financial Statements. Within 45 days after
the end of each fiscal quarter of Domestic Borrower, unaudited
consolidated and consolidating (on a company by company basis)
financial statements of Domestic Borrower and its Subsidiaries
for the fiscal quarter then ended, in each case containing a
balance sheet, income statement, and statement of cash flows
and accompanied by (a) a report comparing actual consolidated
results of operations of Domestic Borrower and its
Subsidiaries for such fiscal quarter compared to budgeted
performance, and (b) a Compliance Certificate of the Chief
Financial Officer of Domestic Borrower.
(n) A new Section 13.13.3. is added immediately following
Section 13.13.2., as follows:
13.13.3. Monthly Financial Statements and Information. Within
45 days after the end of each March, June, September and
December beginning with September 1999, and within 30 days
after the end of each other month beginning with October 1999,
unaudited consolidated and consolidating (on a company by
company basis) financial statements of Domestic Borrower and
its Subsidiaries for the month then ended, in each case
containing a balance sheet, income statement, and statement of
cash flows and accompanied by (a) a report comparing actual
consolidated results of operations of Domestic Borrower and
its subsidiaries for such month compared to budgeted
performance, and (b) a back-log report as of the end of such
month from each Subsidiary of Domestic Borrower.
(o) Section 14.1.6. is entirely amended, as follows:
14.1.6. Indebtedness of (a) any Covered Person or any of its
wholly owned subsidiaries to any other Covered Person incurred
on or before September 24, 1999, (b) Borrower or any
Significant Subsidiary to any other Significant Subsidiary or
Borrower incurred after September 24, 1999, and (c) any
Covered Person to any Significant Subsidiary or Borrower
incurred after September 24, 1999, so long as such Covered
Person shall have, on or before the later of October 31, 1999
or the date of the initial incurrence of such Indebtedness,
execute and deliver to Administrative Agent for the benefit of
the Lenders, an unconditional guaranty of the Loan Obligations
in form and substance satisfactory to Administrative Agent and
such documents, instruments, and other agreements reasonably
required by Administrative Agent to create, grant and perfect
first priority Security Interests (subject only to Permitted
Security Interests) in all of such Covered Person's real and
personal property.
(p) Section 14.1.7. is entirely amended, as follows:
5
<PAGE>
14.1.7. Any other Investment in any Person made on or before
September 24, 1999 if, after giving effect thereto, the
aggregate Investments in all such Persons that are not
Significant Subsidiaries is less than $30,000,000.
(q) Section 14.2.4. is entirely amended, as follows:
14.2.4. Any other Indebtedness of a Covered Person (excluding
Indebtedness described in other provisions of this Section
14.2) (a) incurred on or before September 24, 1999, to the
extent such other Indebtedness of all Covered Persons does not
exceed a Dollar Equivalent Amount (as of the date incurred) of
$5,000,000 to any one Person or $10,000,000 in the aggregate;
or (b) incurred after September 24, 1999, to the extent such
other Indebtedness of all Covered Persons incurred after such
date does not exceed a Dollar Equivalent Amount (as of the
date incurred) of $1,000,000 in the aggregate and, taken
together with Indebtedness described in clause (a) of this
Section 14.2.4., does not exceed the limitations set forth in
such clause.
(r) New Sections 14.2.6., 14.2.7., and 14.2.8. are entirely
amended, as follows:
14.2.6. Indebtedness of any Covered Person, other than German
Borrower, UK Borrower, or Canadian Borrowers, incurred on or
before September 24, 1999, with respect to the proceeds of
issued bonds on which the interest is tax exempt under Section
103 of the Code, so long as the aggregate principal amount
outstanding with respect thereto does not at any time exceed
$15,000,000.
14.2.7. Indebtedness of Canadian Borrower under the revolving
credit agreement with Hong Kong Bank to the extent such
Indebtedness does not exceed a Dollar Equivalent of CND
$4,350,000.
14.2.8. Indebtedness described in Section 14.1.6.
(s) Section 14.4.5. is entirely amended, as follows:
14.4.5. Purchase money Security Interests granted on or before
September 24, 1999, securing payment of the purchase price of
capital assets acquired by Covered Persons after the Effective
Date and on or before September 24, 1999 in an amount not to
exceed $3,000,000 in the aggregate for all Covered Persons
during any fiscal year of Borrower and $10,000,000 for all
Covered Persons in the overall aggregate.
(t) Section 14.4.9. is entirely amended, as follows:
14.4.9. Security Interests granted on or before September 24,
1999 that secure Obligations of Covered Persons which, when
added to Security Interests permitted in Section 14.4.5, do
not exceed $25,000,000 for all Covered Persons.
(u) Sections 14.5.1., 14.5.2., 14.5.3, 14.5.4, and 14.5.5. are
hereby deleted, and Section 14.5. is entirely amended, as follows:
6
<PAGE>
14.5. Acquisitions. Acquire stock or any other equity interest
in a Person sufficient for such Person to become a Subsidiary
or Affiliate of a Covered Person, or acquire all or
substantially all of the assets or a division of a Person,
except Investments permitted under Section 14.1.7.
(v) Section 14.6. is entirely amended, as follows:
14.6 Disposal of Property. Sell, transfer, exchange, lease, or
otherwise dispose of any of its assets (except for sales in
the ordinary course of business and sales of worn out or
obsolete assets to be immediately replaced by assets of equal
or greater value or quality) including any shares of stock of
any Subsidiaries of Domestic Borrower or any Foreign Borrower
that are not pledged to Administrative Agent for the benefit
of Lenders, except for sales and other dispositions of assets
(excluding stock of any Subsidiaries) for which the book value
does not exceed $1,000,000 in the aggregate and sales approved
by consent of the Required Lenders.
(w) New Sections 14.11., 14.12., and 14.13. are added
immediately following Section 14.10., as follows:
14.11. Capital Expenditures. Make Capital Expenditures (for
all Covered Persons) in excess of the applicable amount in the
following table for the period indicated in the following
table:
<TABLE>
<CAPTION>
<S> <C>
----------------------------------------------- --------------------------------
During the period The applicable amount is
----------------------------------------------- --------------------------------
From June 28, 1999 through September 26, 1999 $3,800,000
----------------------------------------------- --------------------------------
From June 28, 1999 through December 26, 1999 $7,300,000
----------------------------------------------- --------------------------------
From June 28, 1999 through March 26, 2000 $11,800,000
----------------------------------------------- --------------------------------
From June 28, 1999 through June 25, 2000 $14,300,000
----------------------------------------------- --------------------------------
From June 26, 2000 through September 24, 2000 $3,500,000
----------------------------------------------- --------------------------------
From June 26, 2000 through December 31, 2000 $7,000,000
----------------------------------------------- --------------------------------
From June 26, 2000 through April 1, 2001 $10,500,000
----------------------------------------------- --------------------------------
</TABLE>
14.12. Distributions. With respect to any Covered Person that
has issued any shares of capital stock or other equity
securities, (a) retire, redeem, purchase, or otherwise
7
<PAGE>
acquire for value any of those securities, (b) declare or pay
any dividend on or with respect to those securities, except to
Domestic Borrower, the UK Borrower or their respective
wholly-owned Subsidiaries, (c) make any loan or advance to, or
other investment in, the holder of any of those securities, or
(d) make any other payment with respect to those securities,
except to Domestic Borrower, the UK Borrower or their
respective wholly-owned Subsidiaries.
14.13. Amendment to TIDES. Amend, change, or permit to be
amended or changed, those certain 7.16% Convertible Junior
Subordinated Deferrable Interest Debentures or any document,
instrument or other agreement executed in connection therewith
other than amendments or supplements to any registration
statement or prospectus relating thereto and as required in
connection with the replacement of the trustee under the
indenture.
(x) Section 15.1. is amended by adding a new sentence
immediately following the last sentence in the definition of "Net
Worth" therein, as follows:
Notwithstanding any of the above, cumulative foreign currency
translation adjustments shall not be included in the
calculation of Net Worth.
(y) Sections 15.2., 15.3., 15.4., and 15.5. are entirely
amended, as follows:
15.2. Minimum Net Worth. Domestic Borrower's Net Worth as of
the end of each fiscal quarter of Domestic Borrower shall at
no time be less than $175,000,000 plus (i) 50% of Domestic
Borrower's cumulative Net Income (but not any net loss) for
the period commencing June 28, 1999, and extending through and
including the end of the applicable fiscal quarter and (ii)
75% of the amount of the cumulative net proceeds received by
Domestic Borrower for the period commencing June 28, 1999, and
extending through and including the end of the applicable
fiscal quarter from the issuance of equity securities of any
Covered Person (other than in connection with any employee
benefit plan or employee compensation arrangement).
15.3. Maximum Funded Debt to EBITDA Ratio. The ratio of
Domestic Borrower's Funded Debt as of the end of any fiscal
quarter of Domestic Borrower to Domestic Borrower's EBITDA for
the four consecutive fiscal quarters then ended shall not
exceed the applicable ratio in the following table:
<TABLE>
<CAPTION>
<S> <C>
--------------------------------------------- ----------------------------------
During the period The applicable ratio is
--------------------------------------------- ----------------------------------
From June 28, 1999 through December 26, 1999 7.5 to 1.0
--------------------------------------------- ----------------------------------
From December 27, 1999 through March 26, 6.25 to 1.0
2000
--------------------------------------------- ----------------------------------
After March 26, 2000 3.25 to 1.0
--------------------------------------------- ----------------------------------
8
<PAGE>
15.4 Minimum Fixed Charge Coverage. The ratio of Domestic
Borrower's Adjusted EBITDA to Domestic Borrower's Fixed
Charges, calculated at the end of each fiscal quarter of
Domestic Borrower for the four consecutive fiscal quarters
then ended, shall not be less than the applicable ratio in the
following table:
--------------------------------------------- ----------------------------------
During the period The applicable ratio is
--------------------------------------------- ----------------------------------
From June 28, 1999 through September 26, 0.30 to 1.0
1999
--------------------------------------------- ----------------------------------
From September 27, 1999 through 0.40 to 1.0
December 26, 1999
--------------------------------------------- ----------------------------------
From December 27, 1999 through March 26, 0.50 to 1.0
2000
--------------------------------------------- ----------------------------------
After March 26, 2000 1.25 to 1.0
--------------------------------------------- ----------------------------------
15.5. Minimum EBITDA to Interest Expense Ratio. The ratio of
Domestic Borrower's EBITDA to Domestic Borrower's Interest
Expense, calculated at the end of each fiscal quarter of
Domestic Borrower for the four consecutive fiscal quarters
then ended, shall not be less than the applicable ratio in the
following table:
--------------------------------------------- ----------------------------------
During the period The applicable ratio is
--------------------------------------------- ----------------------------------
From June 28, 1999 through December 26, 1999 1.20 to 1.0
--------------------------------------------- ----------------------------------
From December 27, 1999 through March 26, 1.25 to 1.0
2000
--------------------------------------------- ----------------------------------
After March 26, 2000 2.25 to 1.0
--------------------------------------------- ----------------------------------
(z) A new Section 15.6. is added immediately following Section
15.5., as follows:
15.6. Minimum EBITDA. Domestic Borrower's EBITDA, calculated
at the end of each fiscal quarter of Domestic Borrower for the
four consecutive fiscal quarters then ended, shall not be less
than the applicable amount in the following table for the
period indicated in the following table:
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
----------------------------------------------- --------------------------------
During the period The applicable amount is
----------------------------------------------- --------------------------------
From June 28, 1999 through December 26, 1999 $17,500,000
----------------------------------------------- --------------------------------
From December 27, 1999 through March 26, 2000 $22,000,000
----------------------------------------------- --------------------------------
9
<PAGE>
From March 27, 2000 through June 25, 2000 $40,000,000
----------------------------------------------- --------------------------------
After June 25, 2000 $45,000,000
----------------------------------------------- --------------------------------
</TABLE>
(aa) Section 16.1.6. is entirely amended, as follows:
16.1.6. Other Covenants. Failure of any Covered Person to
comply with of any of the terms or provisions of any of the
Loan Documents applicable to it (other than a failure which
constitutes an Event of Default under any of Sections 16.1.1
through 16.1.5) which is not remedied or waived in writing in
accordance with the terms of this Agreement within 30 days
after notice thereof from the Administrative Agent to such
Covered Person.
(bb) A new Section 16.1.17. is added immediately following
Section 16.1.16., as follows:
16.1.17. Default Under Certain Other Agreements. In respect of
any Indebtedness incurred in connection with (a) that certain
Reimbursement Agreement between Domestic Borrower and
BankBoston, N.A. ("BankBoston") dated as of July 1, 1998 (as
amended, extended, renewed or restated from time to time) and
those certain $7,000,000 Multi-Mode Industrial Revenue Bonds
(Sencorp Systems, Inc. ProjectB1998 Series A) issued by the
Massachusetts Industrial Finance Agency (collectively, the
"Bond Documents"), and (b) those certain 7.16% Convertible
Junior Subordinated Deferrable Interest Debentures, any
default or other event or condition occurs or exists at any
time beyond the applicable grace or cure period (and, solely
with respect to the Bond Documents, only after BankBoston has
obtained a Security Interest in the Collateral which is pari
passu with the Lenders), the effect of which is to cause or to
permit any holder of that Indebtedness to cause (whether or
not it elects to cause) any of that Indebtedness to become due
before its stated maturity or regularly scheduled payment
dates.
(cc) The fourth sentence of Section 19.2. is entirely amended,
as follows:
The foregoing notwithstanding, no such amendment,
modification, waiver or consent shall release any of the
Collateral or any Covered Person or any Guarantor from its
obligations under the Loan Documents (other than in connection
with sales or other dispositions of assets permitted under
Section 14.6. and upon compliance with Section 6.2.3.) unless
signed by authorized officers of Borrower and any one or more
Lenders whose shares of Lenders' Exposure at the relevant time
aggregate at least 80%, and no such amendment, modification,
waiver or consent shall, unless signed by authorized officers
of Borrower and of all the Lenders: (i) increase any Revolving
Loan Commitment of any Lender, or increase the Letter of
Credit Commitment or subject any Lender or the Letter of
Credit Issuer to a greater obligation than expressly provided
for in this Agreement, (ii) reduce or forgive the repayment of
principal of any Advance or the reimbursement of any draw on a
Letter of Credit or decrease the
10
<PAGE>
rate, or change the mechanism for determining the rate, of
interest on any Advance or any fees or other amounts payable
by Borrower hereunder, (iii) change to a later date the
regularly scheduled dates for payments of principal or
interest of any Advance or other fees or amounts payable to
any Lender under the Loan Documents (including, without
limitation, the Revolving Loan Maturity Date), (iv) change the
provisions of Section 17 to the detriment of any Lender, (v)
change the definition of Required Lenders herein, (vi) change
the provisions of this Section, (vii) change any provisions of
this Agreement requiring ratable distributions to Lender, or
(viii) subordinate the Loan Obligations to any other
Indebtedness.
(dd) The first sentence of Section 19.7. is entirely amended,
as follows:
Notwithstanding anything to the contrary in any other Loan
Document, this Agreement, the Notes and the other Loan
Documents and the rights and obligations of the parties
hereunder and thereunder shall be governed by and construed
and interpreted in accordance with the internal Laws of the
State of Texas without regard to choice or conflicts of law
principles.
(ee) The definition of "Permitted Stock Repurchase" in Exhibit
2.1 to the Credit Agreement is hereby amended by adding at the end
thereof, the following: "and which has been completed prior to June 27,
1999."
(ff) The following definitions are added to Exhibit 2.1 to the
Credit Agreement, or entirely amended, as the case may be:
AGGREGATE REVOLVING LOAN COMMITMENT - the aggregate
commitments of Lenders to fund Revolving Loan Advances as
provided in Section 3.1, as it may be reduced as stated in
Section 3.3. or Section 6.2.3.
BUSINESS DAY - a day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required to
close under the Laws of either the United States or the State
of Texas.
COLLATERAL - the stock and all other property which is pledged
as required in (a) Section 8 of this Agreement, and (b) the
Fourth Amendment.
MAXIMUM AMOUNT - the maximum non-usurious amount of interest
that, under applicable Law, Lenders are permitted to contract
for, charge, take, reserve, or receive on the Loan
Obligations.
MAXIMUM RATE - the maximum non-usurious rate of interest that,
under applicable Law, Lenders are permitted to contract for,
charge, take, reserve, or receive on the Loan Obligations.
FOURTH AMENDMENT - that certain Fourth Amendment to Fourth
Amended and Restated Credit Facilities Agreement dated as of
September 24, 1999, by and among the parties hereto.
11
<PAGE>
SECURITY DOCUMENTS - all of the documents required or
contemplated to be executed and delivered to Administrative
Agent for the benefit of Lenders under (a) Section 8 of this
Agreement, and (b) the Fourth Amendment, all other documents
granting a Security Interest in any asset of Borrower or any
other Person to secure the payment or performance of any of
the Loan Obligations from time to time, including any such
documents listed on Exhibit 9.1.1 and any similar documents at
any time executed and delivered to Administrative Agent for
the benefit of Lenders from time to time, by Borrower or any
other Person to secure payment or performance of any of the
Loan Obligations.
(gg) Notwithstanding anything in any other Loan Document to
the contrary, DT Resources, Inc. is hereby designated as a Significant
Subsidiary and shall be subject to all obligations of a Significant
Subsidiary under the Loan Documents, except DT Resources shall not be
required to become a Guarantor, or execute a Guaranty or Subsidiary
Security Agreement so long as (i) each Significant Subsidiary, the
Indebtedness of which is held by DT Resources, Inc., has executed a
Subsidiary Security Agreement; and (ii) if requested by Administrative
Agent, DT Resources, Inc. has agreed to subordinate such Significant
Subsidiaries' Obligations under such Indebtedness to the Loan
Obligations in form and substance satisfactory to Administrative Agent.
(hh) Exhibit 13.13 to the Credit Agreement is amended and
restated in the form of, and all references in the Credit Agreement to
Exhibit 13.13 are hereby deemed to be references to, the attached
Exhibit 13.13.
3. COLLATERAL. Domestic Borrower shall execute and deliver to
Administrative Agent, or cause to be executed and delivered to Administrative
Agent, the following documents and items (the "Additional Security Documents"),
each satisfactory to Lenders:
(a) as security for the payment and performance of all of the
Loan Obligations, a security agreement executed by Domestic Borrower in
form and substance satisfactory to Administrative Agent (the "Borrower
Security Agreement") granting to Administrative Agent for the benefit
of Lenders a first priority Security Interest in all personal property
of Domestic Borrower other than assets of any Pension Benefit Plan and
subject to any Permitted Security Interests;
(b) as security for the payment and performance of all of the
Loan Obligations, a security agreement executed by every Significant
Subsidiary domiciled in the United States (other than DT Resources,
Inc.) and Vanguard Technical Solutions, Inc., Armac Industries Co., and
Assembly Machines, Inc. (the "Additional Guarantors") in form and
substance satisfactory to Administrative Agent (the "Subsidiary
Security Agreement"), granting to Administrative Agent for the benefit
of Lenders a first priority Security Interest in all personal property
of each such Significant Subsidiary and Additional Guarantor subject to
any Permitted Security Interests;
(c) UCC-1 Financing Statements executed by Domestic Borrower
and each Significant Subsidiary (other than DT Resources, Inc.) for
filing in such filing offices as
12
<PAGE>
Administrative Agent deems necessary for the perfection of the
Security Interests granted in the documents referred to in clauses (a)
and (b) above (the "Financing Statements");
(d) landlord's waivers in form and substance satisfactory to
Administrative Agent for each location leased by Domestic Borrower and
each Significant Subsidiary domiciled in the United States (the
"Landlord Waivers"), which locations are listed on Schedule 2 hereto;
provided that Administrative Agent may, in its discretion, waive
delivery of any Landlord Waiver if Administrative Agent determines that
obtaining such Landlord Waiver is impracticable or immaterial to the
transactions contemplated hereby;
(e) as security for the payment and performance of all of the
Loan Obligations, mortgages or deeds of trust, as appropriate, executed
by Domestic Borrower or the applicable Subsidiary, as the case may be,
in form and substance satisfactory to Administrative Agent, granting a
first priority (except for Permitted Security Interests) lien to
Administrative Agent for the benefit of Lenders on all real property
owned by Domestic Borrower and each Subsidiary domiciled in the United
States (the "Deeds of Trust"), which real property is listed on
Schedule 1 hereto;
(f) Mortgagee Policies of Title Insurance with respect to the
real property described in clause (f) above, showing a satisfactory
state of title (the "Title Policies");
(g) as security for the payment and performance of all of the
Loan Obligations, an aircraft security agreement executed by Domestic
Borrower in form and substance satisfactory to Administrative Agent
(the "Aircraft Security Agreement") granting to Administrative Agent
for the benefit of Lenders a first priority Security Interest in all
aircraft and aircraft engines of Domestic Borrower;
(h) as security for the payment and performance of the Loan
Obligations of the Canadian Borrowers, a security agreement executed by
Kalish, Inc. (the "Canadian Security Agreement") in form and substance
satisfactory to Administrative Agent and Lenders, granting to
Administrative Agent for the benefit of Lenders a first priority
Security Interest in all personal property of Kalish, Inc., subject to
any Permitted Security Interests;
(i) an unconditional guaranty of the Loan Obligations by the
Additional Guarantors, in form and substance satisfactory to
Administrative Agent (the "Additional Guaranty"); and
(j) any additional documents, instruments, certificates and
other items as Administrative Agent reasonably deems appropriate or
necessary to (i) perfect and maintain the liens and Security Interests
granted pursuant to the documents referred to above or (ii) to preserve
and protect the rights of Administrative Agent and Lenders under any
Loan Document ("Collateral Requirements").
4. SWINGLINE ADVANCES. Notwithstanding anything in the Credit Agreement
or any other Loan Document, commencing on the date of this Amendment and
continuing at all times thereafter, the Borrower may not request, and
Administrative Agent will not make, Swingline Advances.
13
<PAGE>
5. AMENDMENT FEE. Borrower shall pay to the Administrative Agent, for
the pro rata benefit of the Lenders, an amendment fee in the aggregate amount of
$325,000 (the "Amendment Fee"), earned and due and payable as of the date of
this Amendment.
6. TIDES. Until the Loan Obligations are paid in full and all
Commitments are cancelled, Domestic Borrower shall exercise its option to defer
interest payments on those certain 7.16% Convertible Junior Subordinated
Deferrable Interest Debentures and shall not make such payments.
7. ACKNOWLEDGMENT OF THE BORROWER. The Borrower acknowledges and agrees
that the Lenders executing this Amendment have done so in their sole discretion
and without any obligation. The Borrower further acknowledges and agrees that
any action taken or not taken by the Lenders or the Administrative Agent prior
to, on or after the date hereof shall not constitute a waiver or modification of
any term, covenant or provision of any Loan Document other than with respect to
the Existing Events of Default or prejudice any rights or remedies other than
with respect to the Existing Events of Default which the Administrative Agent or
any Lender now has or may have in the future under any Loan Document, Applicable
Law or otherwise, all of which rights and remedies are expressly reserved by the
Administrative Agent and the Lenders.
8. SUBSIDIARIES ACKNOWLEDGMENT. By signing below, each of the Domestic
Borrower's Subsidiaries which has executed a guaranty of the Loan Obligations
(a) consents and agrees to this Amendment's execution and delivery, (b) ratifies
and confirms its obligations under its guaranty, (c) acknowledges and agrees
that its obligations under its guaranty are not released, diminished, impaired,
reduced, or otherwise adversely affected by this Amendment, and (d) acknowledges
and agrees that it has no claims or offsets against, or defenses or
counterclaims to, its guaranty.
9. RELEASE.
(a) Upon this Amendment becoming effective, the Domestic
Borrower and each of its Subsidiaries hereby unconditionally and
irrevocably remises, acquits, and fully and forever releases and
discharges the Administrative Agent and the Lenders and all respective
affiliates and subsidiaries of the Administrative Agent and the
Lenders, their respective officers, servants, employees, agents,
attorneys, principals, directors and shareholders, and their respective
heirs, legal representatives, successors and assigns (collectively, the
"Released Lender Parties") from any and all claims, demands, causes of
action, obligations, remedies, suits, damages and liabilities
(collectively, the "Borrower Claims") of any nature whatsoever, whether
now known, suspected or claimed, whether arising under common law, in
equity or under statute, which the Domestic Borrower or any of its
Subsidiaries ever had or now has against the Released Lender Parties
which may have arisen at any time on or prior to the date of this
Amendment and which were in any manner related to any of the Loan
Documents or the enforcement or attempted enforcement by the
Administrative Agent or the Lenders of rights, remedies or recourses
related thereto.
(b) Upon this Amendment becoming effective, the Domestic
Borrower and each of its Subsidiaries covenants and agrees never to
commence, voluntarily aid in any way,
14
<PAGE>
prosecute or cause to be commenced or prosecuted against any of the
Released Lender Parties any action or other proceeding based upon any
of the Borrower Claims which may have arisen at any time on or prior
to the date of this Amendment and were in any manner related to any of
the Loan Documents.
(c) The agreements of the Domestic Borrower and each of its
Subsidiaries set forth in this Section 9 shall survive termination of
this Amendment and the other Loan Documents.
10. REPRESENTATIONS AND WARRANTIES. By its execution and delivery
hereof, the Borrower represents and warrants to the Lenders that, as of the date
hereof:
(a) the information contained in Schedules 1 and 2 attached
hereto is true and correct in all respects, and (i) Domestic Borrower
and its Significant Subsidiaries domiciled in the United States do not
own any real property in the United States other than the real property
listed on Schedule 1, and (ii) Domestic Borrower and its Significant
Subsidiaries domiciled in the United States do not lease any real
property in the United States other than the real property listed on
Schedule 2;
(b) after giving effect to the waiver set forth in Section 1
of this Amendment, the representations and warranties contained in the
Credit Agreement and the other Loan Documents are true and correct on
and as of the date hereof as if made on and as of such date;
(c) after giving effect to the waiver set forth in Section 1
of this Amendment, no event has occurred and is continuing which
constitutes a Default or an Event of Default; and
(d) the Domestic Borrower has (i) initiated a review and
assessment of all areas within its business and operations that could
be adversely affected by the AYear 2000 Problem@ (that is, the risk
that computer applications used by the Domestic Borrower and its
Subsidiaries (or its suppliers and vendors) may be unable to recognize
and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan
and a timeline for addressing the Year 2000 Problem on a timely basis,
and (iii) to date, implemented that plan in accordance with that
timetable. The Domestic Borrower reasonably believes that, based upon
successful implementation of the plan and timeline, all of the computer
applications that are material to the business and operations of the
Domestic Borrower and its Subsidiaries will on a timely basis be able
to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be AYear 2000 compliant@), except to
the extent that a failure to do so could not reasonably be expected to
have a Material Adverse Effect.
11 CONDITIONS OF EFFECTIVENESS. This Amendment shall be effective as
of September 24, 1999, so long as all corporate actions of Borrower and the
Significant Subsidiaries taken in connection herewith and the transactions
contemplated hereby shall be satisfactory in form and substance to
Administrative Agent and Lenders, and each of the following conditions precedent
shall have been satisfied:
15
<PAGE>
(a) All reasonable out-of-pocket fees and expenses in
connection with the Loan Documents, including this Amendment and the
Additional Security Documents, including legal and other professional
fees and expenses incurred on or prior to the date of this Amendment by
Administrative Agent or any Lender, including, without limitation, the
fees and expenses of Winstead Sechrest & Minick P.C. and Arthur
Andersen L.L.P., shall have been paid.
(b) Administrative Agent and each Lender shall have received
each of the following, in form and substance satisfactory to
Administrative Agent, Lenders and Administrative Agent's counsel:
(i) an opinion of PricewaterhouseCoopers, accountants
for the Borrower and its Subsidiaries, with respect to the
fiscal year 1999 audited consolidated financial statements of
the Borrower, which shall not be limited as to the scope of
the audit or qualified as to the status of the Borrower and
its Subsidiaries as a going concern;
(ii) a certificate of the Borrower certifying (A) as
to the accuracy in all material respects, after giving effect
to this Amendment, the Additional Security Documents, and the
Waiver in Section 1 hereof, of the representations and
warranties set forth in the Credit Agreement, this Amendment,
the Additional Security Documents, and the other Loan
Documents, and (B) that there exists no Default or Event of
Default, after giving effect to this Amendment and the Waiver
in Section 1 hereof, and the execution, delivery and
performance of this Amendment and the Additional Security
Documents will not cause a Default or Event of Default;
(iii) certified copies of resolutions of the boards
of directors of the Borrower and each Significant Subsidiary
authorizing the transactions contemplated by this Amendment
and the Additional Security Documents;
(iv) the Borrower Security Agreement, the Subsidiary
Security Agreement, the Aircraft Security Agreement, the
Financing Statements, and any and all Collateral Requirements
in connection with any of the foregoing (other than as set
forth in Section 12 below);
(v) payment of the Amendment Fee;
(vi) an opinion of counsel to the Borrower and each
Subsidiary addressed to the Lenders and in form and substance
satisfactory to the Administrative Agent, dated as of the date
hereof, and covering such matters incident to the transactions
contemplated by this Amendment and the Additional Security
Documents as the Administrative Agent or its counsel may
reasonably request; and
(vii) such other documents, certificates and
instruments as the Administrative Agent shall require prior to
the date hereof.
16
<PAGE>
12 ADDITIONAL EVENTS OF DEFAULT. It will constitute an Event of
Default if (a) the Borrower shall fail, on or before December 31, 1999, to
deliver to Administrative Agent the Landlord Waivers, the Title Policies, the
Canadian Security Agreement, and any and all Collateral Requirements in
connection with any of the foregoing, or (b) the Borrower shall fail, on or
before October 31, 1999, to deliver to Administrative Agent the Deeds of Trust,
the Additional Guaranty, and legal descriptions of real property not delivered
to Administrative Agent on or before the date hereof and necessary for the
filing of certain Financing Statements.
13 REFERENCE TO CREDIT AGREEMENT. Upon the effectiveness of this
Amendment, each reference in the Credit Agreement to "this Agreement,"
"hereunder," or words of like import shall mean and be a reference to the Credit
Agreement, as affected and amended by this Amendment.
14 COUNTERPARTS; EXECUTION VIA FACSIMILE. This Amendment may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. This
Amendment may be validly executed and delivered by facsimile or other electronic
transmission.
15 GOVERNING LAW: BINDING EFFECT. This Amendment shall be governed by
and construed in accordance with the laws of the State of Texas and shall be
binding upon the Borrower, the Administrative Agent, each Lender and their
respective successors and assigns.
16 HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
17 LOAN DOCUMENT. This Amendment is a Loan Document and is subject to
all provisions of the Credit Agreement applicable to Loan Documents, all of
which are incorporated in this Amendment by reference the same as if set forth
in this Amendment verbatim.
18 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
the date first above written.
DT INDUSTRIES, INC., KALISH INC. formerly Kalish Canada Inc.,
a Delaware corporation a New Brunswick, Canada corporation
By:/s/ Bruce P. Erdel By:/s/ Bruce P. Erdel
Bruce P. Erdel, Senior Vice Bruce P. Erdel, Vice
President-Finance and President and Treasurer
Administration
DT CANADA INC., ASSEMBLY TECHNOLOGIE &
a New Brunswick, Canada corporation AUTOMATION GMBH, a German
limited liability company
By: /s/ Bruce P. Erdel By: /s/ Bruce P. Erdel
Bruce P. Erdel, Vice President Bruce P. Erdel,
and Treasurer Geschaftsfuhrer
DT INDUSTRIES (UK) II LIMITED,
a corporation of England and Wales
By: /s/ Bruce P. Erdel
Bruce P. Erdel, Director
<PAGE>
BANK OF AMERICA, N.A., formerly DRESDNER BANK AG, NEW YORK
NationsBank, N.A., as Administrative Agent AND GRAND CAYMAN BRANCHES
and a Lender
By: /s/ William E. Livingstone By:/s/ Beverly G. Cason
William E. Livingstone, IV Beverly G. Cason
Managing Director Vice President
By:/s/ John R. Morrison
John R. Morrison
Vice President
THE BANK OF NEW YORK THE BANK OF NOVA SCOTIA
By:/s/ Edward J. DeSalvio By:/s/ F.C.H. Ashby
Edward J. DeSalvio F.C.H. Ashby
Vice President Senior Manager Loan
Operations
THE SAKURA BANK, LIMITED MERCANTILE BANK NATIONAL ASSOCIATION
By:/s/ Tamihiro Kawauchi By:/s/ Timothy N. Scheer
Tamihiro Kawauchi Timothy N. Scheer
Senior Vice President Vice President
GENERAL ELECTRIC CAPITAL THE SUMITOMO BANK, LIMITED
CORPORATION
By: /s/ Gregory Hong By:/s/ Suresh S. Tata
Gregory Hong Suresh S. Tata
Duly Authorized Signatory Senior Vice President
NATIONAL CITY BANK
By: /s/ Jeffrey C. Geeding
Jeffrey C. Geeding
<PAGE>
Senior Vice President
ACKNOWLEDGED AND AGREED:
ADVANCED ASSEMBLY AUTOMATION, INC.
By:/s/ Bruce P. Erdel
Bruce P. Erdel, Vice President
ASSEMBLY TECHNOLOGY & TEST, INC.
By:/s/ Bruce P. Erdel
Bruce P. Erdel, Vice President
DETROIT TOOL AND ENGINEERING COMPANY
By:/s/ Bruce P. Erdel
Bruce P. Erdel, Vice President
<PAGE>
DETROIT TOOL METAL PRODUCTS CO.
By:/s/ Bruce P. Erdel
Bruce P. Erdel, Vice President
HANSFORD MANUFACTURING CORPORATION
By:/s/ Bruce P. Erdel
Bruce P. Erdel, Vice President
PHARMA GROUP, INC.
By:/s/ Bruce P. Erdel
Bruce P. Erdel, Vice President
MID-WEST AUTOMATION ENTERPRISES, INC.
By:/s/ Bruce P. Erdel
Bruce P. Erdel, Vice President
MID-WEST AUTOMATION SYSTEMS, INC.
By:/s/ Bruce P. Erdel
Bruce P. Erdel, Vice President
SENCORP SYSTEMS, INC.
By:/s/ Bruce P. Erdel
Bruce P. Erdel, Vice President
<PAGE>
SCHEDULE 1
- --------------------------------------------------------------------------------
OWNED REAL PROPERTY
- --------------------------------------------------------------------------------
Name of Company Description of Property
- --------------- -----------------------
Assembly Machines, Inc. 2400 Yoder Drive
Erie, PA 16506
Assembly Technology & Test, Inc. 400 Florence
Saginaw, MI 48602
1904 S. Hamilton
Saginaw, MI 48602
210 S. Michigan Ave.
Lots 1 and 2
Blk 113 Adeline Millers,
2nd addition
Saginaw, MI 48602
1908 S. Michigan Ave.
E S Vacant Blk A
Adeline Millers,
2nd addition
Also that part of vacated
Adeline St. lying adjacent
thereto
Saginaw, MI 48602
Detroit Tool and Engineering Company 441 W. Elm
Lebanon, MO
("Engineering" -- approx.
5.25 acres)
("Heat Treat" -- approx.
1.25 acres)
939 Bethel Road
Lebanon, MO
("Bishop" -- approx. 10 acres)
Peer Division
2100 E. Empire
Benton Harbor, MI 49022
Detroit Tool Metal Products Co. 100 Carr Road
Lebanon, MO 65536
Pharma Group, Inc. Lakso Division
44 Mead St.
Leominster, MA
Scheu & Kniss Division
1500 W. Ormsby
Louisville, KY
23
<PAGE>
Sencorp Systems, Inc. 400 Kidds Hill Road
Hyannis, MA
- --------------------------------------------------------------------------------
24
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 2
- --------------------------------------------------------------------------------------------------------------------
LEASED REAL PROPERTY
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name of Company Description of Property Landlord
- --------------- ----------------------- --------
DT Industries, Inc. 18,372 square feet American National Insurance Company
Corporate Center 1949 E. Sunshine
1949 E. Sunshine Suite 1-206
Suite 2-300 Springfield, MO
Springfield, MO 65804
Advanced Assembly Automation, Inc. 313 Mound Street City Wide Development Corporation
Dayton, OH 45407 8 N. Main Street
Dayton, OH 45402
907 W. Fifth St. City Wide Development Corporation
Dayton, OH 45407 8 N. Main Street
Dayton, OH 45402
Assembly Technology & Test, Inc. 12921 Stark Rd. Epic Investment
Livonia, MI 48150 1204 Turquoise Trail
Cerrillos, NM 87010
12841 Stark Rd. The Allen Group, Inc.
Livonia, MI 48150
Detroit Tool and Engineering Company 1201 Kansas Ave. EFMR, Inc.
Lebanon, MO 21347 Pinetree Drive
(Warehouse Facility) Lebanon, MD
Storage Building Thornton Enterprises
(approx. 2,000 square feet)
Storage Facility R-Rentals
(approx. 6,000 square feet)
Hansford Manufacturing Corporation 3111 Winton Rd. South Van Buren N. Hansford, Jr.
Rochester, NY 14623
3750 Monroe Ave. 3750 Monroe Ave. Associates
Pittsford, NY
Kalish, Inc. 6535 Millcreek Dr. Westpen Properties Ltd.
Mississauga, Ontario
18105 TransCanada Hwy. Teecan Properties Inc.
Kirkland, Quebec 3400 Jean Talon West, #300
Montreal, Quebec H3R 2E8
Pharma Group, Inc. Kalish Division Somerville Fidelco Associates, L.P.
36 Fourth St. 981 Route 22, P.O. Box 6872
Somerville, NJ Bridgewater, NJ 08807
5220 Clark Ave. Alamitos Associates, LLC
25
<PAGE>
Lakewood, CA
Merrill Division Capplanco Four, Inc.
6457 W. Howard St.
Niles, IL
Stokes Division I-95 Business Center at Keystone
1500 Grundy's Lane Park-1, a PA Limited Partnership
Bristol, PA
Mid-West Automation Systems, Inc. 1400 Busch Parkway American National Bank and Trust
Buffalo Grove, IL Company of Chicago
Lot 15, Corporate Grove LaSalle National Trust N.A.
Buffalo Grove, IL
1275 Barclay Blvd. Kerster Randolph Street Property
Buffalo Grove, IL
890 W. Cherry Street Community First National Bank
Suite 200
Louisville, CO
Armac Industries, Co. 925 Airport Rd. 925 Airport Road Realty & Ins.
Fall River, MA 76 County Drive
Somerset, MA 02726
Vanguard Technical Solutions, Inc. 2151 Convention Center Way Spieker Properties, L.P.
Suite 202 West
Ontario, CA
6550 South Bay Colony Dr. AU Bay Colony, LLC
Tucson, AZ
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
26
Exhibit 11
DT INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended
September 26, September 27,
1999 1998
------------- --------------
<S> <C> <C>
Net income (loss) $ (338) $ 3,785
======== ========
Basic:
Basic weighted average shares outstanding 10,107 10,318
====== ======
Basic net income (loss) per share $ (0.03) $ 0.37
======== ========
Net income (loss) $ (338) $ 3,785
Interest expense on Mandatorily Redeemable Convertible
Preferred Securities, net of applicable income taxes -- 771
-------- --------
Net income (loss), adjusted $ (338) $ 4,556
======== ========
Diluted:
Weighted average shares outstanding 10,107 10,318
Add dilutive effect of stock options based on treasury
stock method using average market price -- 166
Add shares contingently issuable to the former owner of Kalish -- 123
Assumed conversion of manditorily redeemable convertible
preferred securities -- 1,806
--------- -----
10,107 12,413
======= ======
Diluted net income (loss) per share $ (0.03) $ 0.37
======== ========
NOTE: For the three months ended September 26, 1999, the convertible preferred
securities were antidilutive and have been excluded from the computation of
diluted earnings per share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information (in thousands except per
share data) extracted from the unaudited Consolidated Balance Sheet at September
26, 1999 and the unaudited Consolidated Statement of Operations for the Three
Months Ended September 26, 1999 and is qualified in its entirety by reference to
such financial statements.
NOTE: For the three months ended September 26, 1999, the convertible
preferred securities were antidilutive and have been excluded
from the computation of diluted earnings per share.
</LEGEND>
<CIK> 0000918999
<NAME> DT INDUSTRIES, INC.
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-25-2000
<PERIOD-START> JUN-28-1999
<PERIOD-END> SEP-26-1999
<EXCHANGE-RATE> 1
<CASH> 8,367
<SECURITIES> 0
<RECEIVABLES> 54,150
<ALLOWANCES> 3,399
<INVENTORY> 64,990
<CURRENT-ASSETS> 209,912
<PP&E> 112,451
<DEPRECIATION> (35,759)
<TOTAL-ASSETS> 471,479
<CURRENT-LIABILITIES> 90,873
<BONDS> 119,897
0
0
<COMMON> 113
<OTHER-SE> 178,834
<TOTAL-LIABILITY-AND-EQUITY> 471,479
<SALES> 100,969
<TOTAL-REVENUES> 100,969
<CGS> 78,086
<TOTAL-COSTS> 78,086
<OTHER-EXPENSES> 19,825
<LOSS-PROVISION> 21
<INTEREST-EXPENSE> 3,051
<INCOME-PRETAX> (14)
<INCOME-TAX> 324
<INCOME-CONTINUING> (338)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (338)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
