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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended JANUARY 31, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-18198
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DEVLIEG-BULLARD, INC.
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(Exact name of registrant as specified in its charter)
Delaware 62-1270573
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Gorham Island, Westport, CT 06880
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(Address of principal executive offices) (Zip Code)
203-221-8201
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
The number of shares of common stock outstanding as of March 1, 1999 was
12,834,899.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DeVlieg-Bullard, Inc.
Balance Sheets
(in thousands, except share data)
January 31, July 31,
1999 1998
---- ----
ASSETS (unaudited)
- ------
Current assets:
Cash and cash equivalents $ 395 $ 365
Accounts receivable, net 18,262 24,895
Inventories, net 48,580 45,459
Other current assets 1,748 1,418
--------- ---------
Total current assets 68,985 72,137
Property, plant and equipment, net 8,374 8,781
Assets held for sale 861 1,692
Engineering drawings 15,796 16,393
Goodwill 10,884 11,025
Other assets 16,716 13,887
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Total assets $ 121,616 $ 123,915
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 19,599 $ 17,625
Accrued expenses and other current liabilities 11,453 10,007
Revolving credit agreement 27,021 25,670
Current portion of long-term debt 5,437 5,201
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Total current liabilities 63,510 58,503
Long-term debt (related party $4,375) 12,928 13,528
Postretirement benefit obligation 22,341 21,357
Other noncurrent liabilities 9,815 11,121
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Total liabilities 108,594 104,509
Stockholders' equity:
Common stock, $0.01 par value; authorized
30,000 shares; issued and outstanding
12,522,400 and 12,334,900 shares 125 123
Additional paid-in capital 34,230 34,230
Excess purchase price over net assets acquired from
related parties (16,242) (16,242)
Retained earnings/(deficit) (4,931) 1,438
Cumulative translation adjustment (160) (143)
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Total stockholders' equity 13,022 19,406
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Total liabilities and stockholders' equity $ 121,616 $ 123,915
========= =========
The accompanying notes are an integral part of these financial statements.
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DeVlieg-Bullard, Inc.
Statement of Operations
(unaudited - in thousands, except per share data)
Three Months Ended Six Months Ended
January 31, January 31,
1999 1998 1999 1998
---- ---- ---- ----
Net sales $ 24,429 $ 28,008 $ 51,029 $ 54,491
Cost of sales 20,915 23,605 41,253 42,100
-------- -------- -------- --------
Gross profit 3,514 4,403 9,776 12,391
Operating expenses:
Engineering 813 509 1,422 1,005
Selling 3,306 2,927 6,291 5,671
General and administrative 5,248 3,607 8,657 6,575
-------- -------- -------- --------
Total E S G & A expenses 9,367 7,043 16,370 13,251
Anticipated loss on disposal -- 250 -- 250
Other expense/(income), net 36 (7) (205) (18)
-------- -------- -------- --------
Total operating expenses 9,403 7,286 16,165 13,483
-------- -------- -------- --------
Operating loss (5,889) (2,883) (6,389) (1,092)
Interest expense (including related party interest
of $181, $185, $363 and $370) 1,597 1,317 2,982 2,637
-------- -------- -------- --------
Loss before income taxes (7,486) (4,200) (9,371) (3,729)
Benefit for income taxes (2,303) (1,764) (3,002) (1,565)
-------- -------- -------- --------
Net loss $ (5,183) $ (2,436) $ (6,369) $ (2,164)
======== ======== ======== ========
Loss per common share:
Basic $ (0.37) $ (0.17) $ (0.45) $ (0.15)
======== ======== ======== ========
Diluted $ (0.37) $ (0.17) $ (0.45) ($ 0.15)
======== ======== ======== ========
Average number of shares outstanding:
Basic 14,153 14,065 14,130 14,062
======== ======== ======== ========
Diluted 14,153 14,065 14,130 14,062
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
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DeVlieg-Bullard, Inc.
Statements of Cash Flows
(unaudited - in thousands)
Six Months Ended
January 31,
Cash flows from operating activities: 1999 1998
---- ----
Net loss $ (6,369) $ (2,164)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,493 2,595
Provision for losses on accounts receivable 201 134
(Gain)/loss on disposal of assets held for sale (241) 250
Deferred income taxes (3,128) --
Changes in assets and liabilities, net of effects from acquisitions
Accounts receivable 6,432 938
Inventories (3,121) (508)
Other current assets (330) (305)
Accounts payable 1,974 2,627
Accrued expenses and other current liabilities 808 (5,242)
Other, net (323) (450)
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Net cash used in operating activities (1,604) (2,125)
Cash flows from investing activities:
Capital expenditures (278) (810)
Proceeds from sale of assets 1,724 --
-------- --------
Net cash provided by/used for investing activities 1,446 (810)
Cash flows from financing activities:
Borrowings under revolving credit agreement 57,515 60,307
Repayments under revolving credit agreement (56,164) (55,415)
Proceeds from issuance of long-term debt 2,500 --
Payments of long-term debt (3,648) (2,152)
Proceeds from exercise of stock options
or stock purchase warrants 2 55
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Net cash provided by financing activities 205 2,795
Effect of exchange rate changes on cash (17) (26)
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Net increase in cash and cash equivalents 30 (166)
Cash and cash equivalents at beginning of period 365 637
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Cash and cash equivalents at end of period $ 395 $ 471
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,543 $ 2,305
Income taxes, net of refunds 85 254
The accompanying notes are an integral part of these financial statements.
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Supplemental disclosure of cash flow information (continued):
During the six months ended January 31, 1999 and 1998, the Company entered into
capital leases for computer equipment totaling $435 and $475, respectively,
which were financed by capital lease obligations.
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DeVlieg-Bullard, Inc.
Notes to Financial Statements
NOTE 1: BASIS OF PRESENTATION
Pursuant to the rules and regulations of the Securities and Exchange Commission
for Form 10-Q, the financial statements, footnote disclosures and other
information normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed. The financial
statements contained in this report are unaudited but, in the opinion of the
management of DeVlieg-Bullard, Inc. (the "Company"), reflect all adjustments,
consisting of only normal recurring adjustments, necessary to fairly present the
financial position of the Company as of January 31, 1999 and the results of
operations and cash flows for the interim periods of the fiscal year ending July
31, 1999 ("fiscal 1999") and the fiscal year ended July 31, 1998 ("fiscal 1998")
presented herein. The results of operations for any interim period are not
necessarily indicative of results for the full year. These financial statements,
footnote disclosures and other information should be read in conjunction with
the financial statements and the notes thereto included in the Company's annual
report on Form 10-K for the year ended July 31, 1998.
The financial statements include all accounts of the Company after elimination
of all significant interdivision transactions and balances. Amounts in these
notes, except per share data, are expressed in thousands.
NOTE 2: INVENTORIES
January 31, July 31,
Inventories consisted of: 1999 1998
---- ----
(unaudited)
Raw materials $ 1,018 $ 1,620
Work-in-process 14,565 14,671
Finished goods 32,997 29,168
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$48,580 $45,459
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Valuation reserves for obsolete, excess and slow-moving inventory aggregated
$9,169 and $10,556 at January 31, 1999 and July 31, 1998, respectively.
Inventories valued using LIFO were $20,281 and $19,298 at January 31, 1999 and
July 31, 1998, respectively. There was no LIFO reserve against those
inventories, as the carrying value approximates current cost. The financial
accounting basis for the inventories of acquired companies exceeds the tax basis
by $12,224 at January 31, 1999 and July 31, 1998.
NOTE 3: SEGMENT REPORTING
Machine Tooling
Services Tool Systems Industrial
Six Months Ended January 31, 1999 Group Group Group Group Corporate Total
----- ----- ----- ----- --------- -----
Sales $18,102 $11,823 $ 8,840 $12,465 $ -- $ 51,230
Intersegment sales (6) -- (195) -- -- (201)
Net sales 18,096 11,823 8,645 12,465 -- 51,029
Operating income/(loss) (a) 1,083 (4,685) 116 18 (2,921) (9,389)
Identifiable assets 50,720 27,223 18,115 8,535 17,023 121,616
Six Months Ended January 31, 1998
Net sales $18,656 $12,680 $10,350 $12,805 $ -- $ 54,491
Operating income/(loss) (a) 3,276 (3,611) 888 668 (2,313) (1,092)
Identifiable assets 43,790 36,484 18,023 8,295 13,125 119,717
(a) Interest expense and income taxes are primarily allocated as Corporate
expenses.
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NOTE 4: EARNINGS PER SHARE
The table below sets forth the computation of the weighted average number of
shares used for basic and diluted earnings per share:
Three months ended Six Months ended
January 31, January 31,
1999 1998 1999 1998
Average common shares outstanding 12,443 12,281 12,389 12,278
Stock purchase warrants (a) 1,710 1,784 1,741 1,784
------ ------ ------ ------
Average common shares outstanding-basic 14,153 14,065 14,130 14,062
Contingently issuable stock purchase warrants (b) (b) (b) (b)
Stock options (b) (b) (b) (b)
------ ------ ------ ------
Average common shares outstanding-diluted 14,153 14,065 14,130 14,062
====== ====== ====== ======
(a) Class A and Class B Stock Purchase Warrants are included in the computation
of basic earnings per share.
(b) When a net loss is recorded, additional shares for stock options and
contingent stock purchase warrants are not included because their inclusion
would be antidilutive. Because the second quarter and first six months of
fiscal 1999 and fiscal 1998 results reflect a net loss, basic and diluted
earnings per share are calculated based on the same weighted average number
of shares outstanding.
NOTE 5: LONG-TERM DEBT
On November 6, 1998, the Company amended its credit facility with its senior
lender to increase the term loan by $2,500. The new term loan is to be repaid
from the proceeds from the sales of real estate and excess machinery and
equipment. The proceeds from the new term loan were used to repay a portion of
the outstanding revolving credit agreement. As of January 31, 1999, the balance
outstanding on the new term loan is $542.
In connection with the additional term loan, Charles E. Bradley, a junior
subordinated debenture holder and Chairman of the Board, signed a personal
guaranty for up to $500,000 of the additional term loan.
At January 31, 1999, the Company was not in compliance with financial covenants
under the senior and subordinated debt agreements. The Company has received a
verbal commitment to a waiver from the senior lenders and has received waiver
letters from the subordinated debenture holders for waivers of non-compliance
with these financial covenants.
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DeVlieg-Bullard, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Summarized below is a discussion of the results of operations of the Company,
including its Services, Machine Tool, Tooling Systems and Industrial operating
groups. Amounts, except per share data, are expressed in thousands.
During fiscal 1998, the Company moved to outsource a major portion of machine
and/or aftermarket parts that had previously been produced internally. This
resulted in an inadequate level of inventory, which led to disruptions in
production during fiscal 1998. As a result of decreased sales experienced during
fiscal 1998, the Company suffered from liquidity problems, which delayed
payments to vendors and caused a lack of availability of parts during the first
six months of fiscal 1999. In November, the Company borrowed additional funds
under a term loan, which partially relieved the liquidity problems. However, the
Company's lack of liquidity has impacted its ability to complete and ship
machines in the Machine Tool Group, which has further exacerbated the Company's
liquidity problems. The Company's lack of liquidity has adversely impacted all
of the Company's operations.
In January 1999, the Company replaced senior management and took steps to reduce
costs further, including closing the corporate offices in Westport, Connecticut.
In addition, the Company is instituting plans to sell slow-moving and excess
inventory at reduced prices. A reserve of approximately $4,000 was taken in the
second quarter to provide for severance expenses, costs associated with closing
the corporate office and writing down inventory to expected selling prices. The
Company has also identified several significant cost savings opportunities that
should be fully realized in fiscal year 2000.
The Company believes that these cost reduction efforts, together with
anticipated proceeds from asset dispositions, will provide the Company with
sufficient liquidity to source adequate levels of parts to complete and ship its
backlog of machine orders, resulting in an improved liquidity position in the
fourth quarter of fiscal 1999.
THREE MONTHS ENDED JANUARY 31, 1999 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1998.
Net sales for the second quarter of fiscal 1999 were $24,429 compared to $28,008
for the second quarter of fiscal 1998, a decrease of $3,579, or 12.8%. The
decrease in sales was primarily in the Machine Tool Group, as well as in the
Tooling Systems Group, although all groups showed declines from the prior year's
second quarter.
Gross profit for the second quarter of fiscal 1999 was $3,514 compared to $4,403
for the second quarter of fiscal 1998, a decrease of $889, or 20.2%. The
Services Group showed improvement, principally in the National Acme aftermarket
business, while the other divisions showed declines, particularly at the Machine
Tool Group, where inventory adjustments of approximately $1,800 were recorded to
reflect a reduction to net realizable value as well as associated with the
closing of the Company's Cleveland facility.
E S G & A expenses were $9,367 and $7,043 in the second quarter of fiscal 1999
and fiscal 1998, respectively. During the second quarter of fiscal 1999, the
Company accrued approximately $2,200 for costs associated with management
restructuring and plant closings. Included in the charge was severance
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costs related to several senior management changes, as well as moving and other
costs associated with closing the Company's headquarters in Westport,
Connecticut; a charge for costs associated with the closing of the Company's
Cleveland facility and the write-off of an investment in a mainframe computer
system that will be abandoned.
Interest expense was $1,597 in the second quarter of fiscal 1999 compared to
$1,317 in fiscal 1998's second quarter. The increase in interest expense is a
result of increased debt.
An income tax benefit of $2,303 was recorded for the second quarter of fiscal
1999 compared to a benefit of $1,764 for the same period last year, reflecting
the losses recorded in both years.
SIX MONTHS ENDED JANUARY 31, 1999 COMPARED TO SIX MONTHS ENDED JANUARY 31, 1998.
Net sales for the first six months of fiscal 1999 were $51,029 compared to
$54,491 for the first six months of fiscal 1998, a decrease of $3,462, or 6.4%.
The decrease in net sales was primarily at the Tooling Systems Group, but all
divisions were below prior year levels.
Gross profit for the first six months of fiscal 1999 was $9,776 compared to
$12,391 for the first six months of fiscal 1998, a decrease of $2,615 or 21.1%,
reflecting the reduced volume, as well as the impact of certain reserves
recorded in the second quarter related to inventory at the Machine Tool Group.
E S G & A expenses were $16,370 and $13,251 in the first six months of fiscal
1999 and fiscal 1998, respectively. The increase in operating expenses is
primarily due to severance and other costs related to the recent management
changes and closing of the corporate office, as well as a write-off of obsolete
computer equipment. These charges were recorded in the second quarter.
Interest expense was $2,982 in the first six months of fiscal 1999 compared to
$2,637 in the same period in fiscal 1998. The increase in interest expense is a
result of increased debt.
An income tax benefit of $3,002 was recorded for the first six months of fiscal
1999 compared to $1,565 for the same period last year, reflecting the net losses
in both years.
OPERATING RESULTS BY BUSINESS SEGMENT
SERVICES GROUP sales for the second quarter of fiscal 1999 were $8,411, compared
to $9,147 in the second quarter of fiscal 1998. Sales for the first six months
of fiscal 1999 were $18,102 compared with $18,656 in the same period in the
prior year. The decline in sales is the result of the Company's lack of
liquidity, which resulted in difficulties obtaining credit from vendors and
maintaining sufficient inventory levels. The Services Group recorded a net
operating loss of $126 for the second quarter of fiscal 1999, compared with net
operating income of $322 during the second quarter of fiscal 1998. For the first
six months of fiscal 1999, operating income was $1,083 compared to $3,276 in the
same period of fiscal 1998. During the second quarter of fiscal 1999, the
Services Group recorded a reserve of approximately $700 for severance and
related costs for management changes, as well as a write-off of the investment
in a computer system which has been abandoned.
MACHINE TOOL GROUP sales for the second quarter of fiscal 1999 were $5,164,
compared to $7,096 in the second quarter of fiscal 1998. Sales for the first six
months of fiscal 1999 were $11,823 compared with $12,680 in the same period in
the prior year. The decline in sales is the result of the Company's lack of
liquidity, which resulted in difficulties obtaining credit from vendors and
maintaining sufficient inventory levels to complete machines. The Machine Tool
Group recorded a net operating loss of $3,684 for the
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second quarter of fiscal 1999, compared with a net operating loss of $3,611 in
the same period of fiscal 1998. For the first six months of fiscal 1999, the
Machine Tool Group's operating loss was $4,685, as compared with an operating
loss of $3,611 in the first half of fiscal 1998. During the second quarter of
fiscal 1999, the Machine Tool Group recorded reserves of approximately $2,300
for additional severance and related costs for closing the Cleveland plant, as
well as costs incurred in moving the Mideastern operation to a new, larger,
facility in Pennsylvania and reserves for inventory values.
TOOLING SYSTEMS GROUP sales for the second quarter of fiscal 1999 were $4,480,
compared to $5,028 in the second quarter of fiscal 1998. Sales for the first six
months of fiscal 1999 were $8,840 compared with $10,350 in the same period in
the prior year. The Tooling Systems Group recorded a net operating loss of $104
in the second quarter of fiscal 1999 compared to operating income of $75 in the
same period a year ago. For the first six months of fiscal 1999, operating
income was $116 as compared to $888 recorded in the first six months of fiscal
1998. The declines in operating income are related to the volume declines.
INDUSTRIAL GROUP sales were $6,575 in the second quarter of fiscal 1999, as
compared to $6,737 in the second quarter of fiscal 1998. For the first six
months of fiscal 1999, sales were $12,465 as compared to $12,805 in the first
six months of the prior year. Sales have been adversely impacted by the
Company's lack of liquidity, as shipments from vendors are delayed. Operating
income was $59 for the second quarter of fiscal 1999 as compared to $268 in the
second quarter of the prior year. Operating income was $18 for the first six
months of fiscal 1999, compared to $668 in the same period a year ago. The
decline in operating income is related to the volume decline and increased
computer-related costs due to the installation of a new computer system.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Net cash used by operating activities was $1,604 for the six months ended
January 31, 1999, compared to $2,125 for the first six months of fiscal 1998.
Cash used for capital expenditures was $278 and $810 for the first six months of
fiscal 1999 and 1998, respectively. The Company currently has no material
commitments for specific capital expenditures, however, the Company anticipates
approximately $1,900 of capital expenditures for year 2000 compliance upgrades
to computer systems. Proceeds from the sale of assets were $1,724. The remaining
$234 of payments against the additional term loan was from the collection of
receivables on asset sales made prior to July 31, 1998.
FINANCING AND INVESTING
The balance outstanding under the Company's revolving credit agreement was
$27,021 at January 31, 1999, compared to $25,670 at July 31, 1998. Long-term
debt, including current maturities, at January 31, 1999, was $18,365, compared
to $18,729 at July 31, 1998, a decrease of $364. The Company's total
indebtedness was $45,386 and $44,399 at January 31, 1999 and July 31, 1998,
respectively, an increase of $987. The increase in debt was used to finance
working capital needs, particularly those of the Services and Machine Tool
Groups as the Company works through the current difficulties discussed above.
Cash and equivalents at January 31, 1999 were $395, an increase of $30 compared
to July 31, 1998. Net cash provided by financing activities was $205 in the
first half of fiscal 1999 compared to $2,795 in the first six months of the
prior year.
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The senior credit facility aggregating $40,000 is comprised of $5,952 in term
loans and a revolving credit agreement, which provides for borrowings up to
$31,500. Interest on the outstanding borrowings under the revolving credit
agreement is payable monthly in arrears at 1.25% above the prime rate or, at the
Company's option, at alternative rates based on LIBOR. The effective rate based
on LIBOR was 8.19% at January 31, 1999. The amount the Company may borrow under
the revolving credit agreement is based upon a formula related to the Company's
eligible accounts receivable and inventories, reduced by outstanding letters of
credit. On November 6, 1998, the Company increased the existing term loans by
$2,500. The proceeds from the new term loan were used to repay a portion of the
outstanding revolving credit agreement. Payments on the new term loan will be
made with proceeds from the sale of real estate, and excess machinery and
equipment. As of January 31, 1999, $1,958 of the additional term loan had been
repaid. Payments on the existing term debt remained at $200 per month. Unused
borrowings available at January 31, 1999 were $833.
Interest on the term loans is payable monthly at 1.5% above prime rate or, at
the Company's option, at alternative rates based on LIBOR. The effective rate
based on LIBOR was 8.44% at January 31, 1999.
Pursuant to the subordinated debt facility, the Company issued Subordinated
Debentures in May 1994 in the principal amount of $12,000. Of this amount,
$4,000 was replaced by Junior Subordinated Debentures. Interest payments on the
Subordinated Debentures of 11.5% per annum are payable quarterly in arrears
commencing July 1, 1994. The Subordinated Debentures provide for the repayment
of principal of $2,000 in fiscal 1999 and fiscal 2000 and $4,000 in fiscal 2001.
Interest on the Junior Subordinated Debentures accrues at 14.5%, and the cash
interest of 11% per annum is payable quarterly in arrears commencing January 1,
1996. The Junior Subordinated Debentures provide for the repayment of principal
of $4,000 and unpaid interest in June 2001 or thirty days after the payment of
the Subordinated Debentures. In November 1998, the agreement was amended to
provide for a delay in the scheduled interest payment for May 1999 under certain
circumstances, as defined. The payment would be due in October 1999.
The Company was not in compliance with certain financial covenants under its
senior and subordinated credit facilities at January 31, 1999. While the Company
has received a verbal commitment to a waiver from the senior lenders and has
received waiver letters from the subordinated debenture holders for these
covenant defaults at January 31, 1999, the Company does not expect to be in
compliance with certain financial covenants under its senior and subordinated
credit facilities at April 30, 1999. In addition, the Company is required to
make a principal payment of $2,000 on October 31, 1999. Accordingly, the Company
will be required to renegotiate its financial covenants and obtain sufficient
liquidity to make the required payment pursuant to the Subordinated Debentures.
The Company is actively discussing with its lenders amendments to its credit
facilities as well as other alternatives to improve the Company's liquidity
position, including possible asset sales. There can be no assurance that the
Company will be able to renegotiate its credit facilities or that alternative
sources of liquidity will be available or available on acceptable terms. The
Company's lack of liquidity has adversely affected its ability to source parts
from vendors which has adversely affected the Company's sales in each of its
operating groups. The Company will need additional capital to implement its
business strategy. There can be no assurance such capital will be available or
available on terms acceptable to the Company.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries to represent years. These systems and products
will need to be able to accept four digit entries to distinguish years beginning
with 2000 from prior years. As a result, systems and products that do not
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accept four digit year entries will need to be upgraded or replaced to comply
with such "Year 2000" requirements.
The Company believes that its internal systems are Year 2000 compliant or will
be replaced in connection with previously planned upgrades to information
systems prior to the need to comply with Year 2000 requirements. The Company
believes that, with modifications to existing software and conversions to new
systems, the Year 2000 issue will not pose significant operational problems for
its computer systems. However, if such modifications and conversions are not
made, or not completed timely, the Year 2000 issue could have a material impact
on the operations of the Company. In order to assure that this does not occur,
the Company plans to devote all resources required to resolve any significant
year 2000 issues in a timely manner. A number of the Company's customers and
suppliers may also be affected by the Year 2000 issue that require that they
expend significant resources to modify or replace their existing systems; their
failure to properly address the Year 2000 issue could have significant impact on
the Company's operations.
The Services, Machine Tool and Tooling Systems Groups will upgrade their current
systems to make them year 2000 compliant. The Industrial Group has completed its
installation of a new software package that includes additional functionality in
the area of materials requirement planning. The total expected costs for these
upgrades is approximately $2,800, of which approximately $872 has already been
spent. A significant amount of fiscal 1999 capital expenditures will be devoted
to upgrading current hardware and software to add capabilities and comply with
Year 2000 issues.
The Company expects to complete the system upgrades by the summer of 1999.
However, if there is a delay in new system installation, management believes the
existing systems can be upgraded to Year 2000 compliance in a relatively short
period of time.
The Company has assessed its non-information technology equipment and has
determined that it is either year 2000 compliant or can be upgraded at little
cost to be year 2000 compliant.
CAUTIONARY FACTORS
The discussions in this document may include certain forward-looking statements.
Actual results could differ materially from those reflected by the
forward-looking statements contained in this document and a number of factors
may affect future results, liquidity and capital resources. These factors
include the ability of the Company to obtain sufficient financing from its
senior and subordinated lenders; the ability of the Company to obtain sufficient
parts from its vendors; the ability of the Company to obtain trade credit from
those vendors on favorable terms; the fact that the Company derives a
substantial portion of its sales from cyclical industries, including the
automotive, aerospace and housing industries; the ability to introduce new
products in a timely fashion; the pace of technological changes affecting the
products manufactured and services provided by the Company; the Company's
substantial debt service requirements, much of which are based on variable
rates; the dependence of the Company's growth on acquisitions and the Company's
ability to finance such acquisitions and to profitably integrate the acquired
operations; the level of margins achievable in the markets served by the
Company; and the ability to continue to minimize operating expenses. Although
the Company believes it has the business strategy and resources needed for
improved operations, future sales and margin trends cannot be reliability
predicted.
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PART II - Other Information
Item 4: Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of DeVlieg-Bullard, Inc. was held on January
20, 1999, at which meeting the stockholders elected all directors to hold office
until the next annual meeting and until their successors are duly elected and
qualified.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Sixth Amendment to Investment Agreement and Amendment to Senior
Debentures dated November 6, 1998, among DeVlieg-Bullard, Inc., Banc
One Capital Partners Corporation, PNC Capital Corp., Charles E. Bradley
and John G. Poole.
10.2 Guaranty dated as of November 6, 1998 by Charles E. Bradley, Sr. for the
benefit of The CIT Group/Business Credit, Inc. and BNY Financial
Corporation.
10.3 Credit Support Fee Agreement dated November 5, 1998 by DeVlieg-Bullard,
Inc. in favor of Charles E. Bradley.
27 Financial Data Schedules (SEC use only)
(b) Reports on Form 8-K
During the quarter ended January 31, 1999, the Company did not file any reports
on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
DeVlieg-Bullard, Inc.
---------------------
(Registrant)
Date: March 22, 1999 By: /s/ Richard W. Sappenfield
-------------------------------------
Richard W. Sappenfield
Chief Executive Officer
(Acting Principal Accounting Officer)
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