UNITED STATES
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 EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from________ to_________
Commission File Numbers:
DDi Corp. 000-30241
DDi Capital Corp. 333-41187
DDi CORP.
DDi CAPITAL CORP.
----------------------------------------------------------
(Exact name of registrants as specified in their charters)
Delaware 06-1576013
California 33-0780382
-------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1220 Simon Circle
Anaheim, California 92806
----------------------------------------------------
(Address of principal executive offices) (Zip code)
(714) 688-7200
----------------------------------------------------
(Registrants' telephone number, including area code)
Not Applicable
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether DDi Corp. and DDi Capital Corp.: (1) have
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) have been
subject to such filing requirements for the past 90 days: Yes [X] No [_].
As of May 7, 2001, all of the voting stock of DDi Capital Corp. was held by
DDi Intermediate Holdings Corp., and all of the voting stock of DDi Intermediate
Holdings Corp. was held by DDi Corp.
As of May 7, 2001, DDi Corp. had 47,715,324 shares of common stock,
par value $0.01 per share, outstanding and DDi Capital Corp. had 1,000 shares of
common stock, par value $0.01 per share, outstanding.
This Quarterly Report on Form 10-Q is a combined quarterly report being
filed separately by two registrants: DDi Corp ("DDi Corp." f/k/a DDi Holdings
Corp.) and DDi Capital Corp. ("DDi Capital"). Except where the context clearly
indicates otherwise, any references in this report to "DDi Corp." includes all
subsidiaries of DDi Corp. including DDi Capital. DDi Capital makes no
representation as to the information contained in this report in relation to
DDi Corp. and its subsidiaries other than DDi Capital.
DDi Capital meets the conditions set forth in General Instructions H(1)(a)
and (b) of Form 10-Q, and is filing this form with the reduced disclosure format
pursuant to General Instruction H(2).
DDi CORP.
DDi CAPITAL CORP.
FORM 10-Q
TABLE OF CONTENTS
Page No.
--------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2001
and December 31, 2000 3
Condensed Consolidated Statements of Operations for the three
months ended March 31, 2001 and 2000 4
Consolidated Statements of Comprehensive Income (Loss) for
the three months ended March 31, 2001 and 2000 5
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2001 and 2000 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 21
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 24
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
- ------------------------------
DDi CAPITAL CORP. AND DDi CORP.
Condensed Consolidated Balance Sheets
(In thousands)
DDi Capital DDi Corp.
------------------------------ -----------------------------
March 31, December 31, March 31, December 31,
2001 2000 2001 2000
------------------------------ -----------------------------
(Unaudited) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 108,897 $ 39,629 $ 113,410 $ 66,874
Marketable securities - available for sale 16,430 - 16,430 -
Accounts receivable, net 64,331 87,860 81,935 99,828
Inventories 18,923 24,824 26,847 30,290
Prepaid expenses and other 2,330 2,349 4,318 3,145
Deferred income taxes 14,584 14,584 10,978 14,584
----------------------------- ----------------------------
Total current assets 225,495 169,246 253,918 214,721
Property, plant and equipment, net 84,860 80,928 106,815 92,726
Debt issue costs, net 8,139 9,217 12,030 9,217
Goodwill and other intangibles, net 195,056 199,389 272,151 263,456
Other 729 1,048 1,312 1,247
----------------------------- ----------------------------
$ 514,279 $ 459,828 $ 646,226 $ 581,367
============================= ============================
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt and capital lease obligations $ 16,159 $ 13,656 $ 16,499 $ 16,935
Accounts payable 25,475 26,612 41,135 37,099
Accrued expenses and other 29,544 39,559 36,999 44,452
Income taxes payable 8,145 6,099 11,840 8,215
----------------------------- ----------------------------
Total current liabilities 79,323 85,926 106,473 106,701
Long-term debt and capital lease obligations 189,311 291,797 315,724 316,308
Deferred income taxes 17,971 17,971 17,947 20,493
Notes payable and other 3,581 1,468 3,581 1,468
----------------------------- ----------------------------
Total liabilities 290,186 397,162 443,725 444,970
----------------------------- ----------------------------
Commitments and contingencies
Stockholders' equity:
Common stock, additional paid-in-capital and other 547,588 386,298 536,421 468,595
Accumulated other comprehensive loss (3,223) - (10,453) (3,048)
Accumulated deficit (320,272) (323,632) (323,467) (329,150)
----------------------------- ----------------------------
Total stockholders' equity 224,093 62,666 202,501 136,397
----------------------------- ----------------------------
$ 514,279 $ 459,828 $ 646,226 $ 581,367
============================= ============================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
DDi CAPITAL CORP. AND DDi CORP.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
DDi Capital DDi Corp.
------------------------------------------------------------------------
Three Months Ended March 31, Three Months Ended March 31,
2001 2000 2001 2000
----------------- ----------------- ----------------- -----------------
Net sales $ 118,682 $ 75,285 $ 140,709 $ 75,285
Cost of sales 74,808 49,035 88,150 49,035
----------------- ----------------- ----------------- -----------------
Gross profit 43,874 26,250 52,559 26,250
Operating expenses:
Sales and marketing 8,813 6,891 9,444 6,891
General and administrative 5,254 3,938 7,137 3,938
Amortization of intangibles 4,482 5,168 5,708 5,168
----------------- ----------------- ----------------- -----------------
Operating income 25,325 10,253 30,270 10,253
Interest expense (net) 6,073 10,700 7,218 12,155
----------------- ----------------- ----------------- -----------------
Income (loss) before income taxes and extraordinary loss 19,252 (447) 23,052 (1,902)
Income tax expense (8,846) (671) (10,323) (75)
----------------- ----------------- ----------------- -----------------
Income (loss) before extraordinary loss 10,406 (1,118) 12,729 (1,977)
Extraordinary loss--early extinguishment of debt,
net of income tax benefit of $4,505 7,046 - 7,046 -
----------------- ----------------- ----------------- -----------------
Net income (loss) $ 3,360 $ (1,118) $ 5,683 (91,977)
================= ================= =================
Priority distribution due shares of Class L common stock (3,770)
-----------------
Net loss allocable to shares of Class A common stock $ (5,747)
=================
Net loss per share of Class A common stock
(basic and diluted) $ (0.58)
=================
Weighted average shares of Class A common stock
outstanding 9,888,923
=================
Income per share - basic:
Before extraordinary loss $ 0.27
Extraordinary loss $ (0.15)
-----------------
Net income $ 0.12
=================
Income per share - diluted:
Before extraordinary loss $ 0.27
Extraordinary loss $ (0.15)
-----------------
Net income $ 0.12
=================
Weighted average shares used to compute income per share:
Basic 45,998,272
=================
Diluted 47,684,838
=================
- --------------------------------------------------------
Pro forma basic and diluted net loss per share (unaudited) $ (0.08)
=================
Pro forma weighted average basic and diluted shares
outstanding (unaudited) 24,750,000
=================
The accompanying notes are an integral part of these condensed consolided
financial statements.
4
DDi CAPITAL CORP. AND DDi CORP.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(Unaudited)
DDi Capital DDi Corp.
---------------------------------- ----------------------------------
Three Months Ended March 31, Three Months Ended March 31,
2001 2000 2001 2000
---------------- ---------------- ---------------- -----------------
Net income (loss) $ 3,360 $ (1,118) $ 5,683 $ (1,977)
Other comprehensive income (loss):
Foreign currency translation adjustments - - (3,616) -
Cumulative affect of adoption of SFAS No. 133 (627) - (1,150) -
Unrealized loss on interest rate swaps (2,630) - (2,673) -
Unrealized holding gain on marketable
securities - available for sale 34 34
---------------- ---------------- ---------------- -----------------
Comprehensive income (loss) $ 137 $ (1,118) $ (1,722) $ (1,977)
================ ================ ================ =================
The accompanying notes are an integral part of these consolidated
financial statements.
5
DDi CAPITAL CORP. AND DDi CORP.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
DDi Capital DDi Corp.
---------------------------------- ----------------------------------
Three Months Ended March 31, Three Months Ended March 31,
2001 2000 2001 2000
---------------- ---------------- ---------------- -----------------
Cash flows from operating activities:
Net cash provided by operating activities $ 37,473 $ 5,953 $ 38,066 $ 5,906
---------------- ---------------- ---------------- -----------------
Cash flows from investing activities:
Purchases of property, plant and equipment (8,097) (3,839) (10,482) (3,839)
Purchases of short-term investments (26,064) - (26,064) -
Proceeds from sale of short-term investments 9,667 - 9,667 -
Acquisition of Thomas Walter - - (24,500) -
Acquisition related expenditures (124) - (124) -
---------------- ---------------- ---------------- -----------------
Net cash used in investing activities (24,618) (3,839) (51,503) (3,839)
---------------- ---------------- ---------------- -----------------
Cash flows from financing activities:
Net principal payments on long-term debt (100,969) (1,358) (101,691) (1,358)
Proceeds from issuance of convertible subordinated notes - - 100,000 -
Payments of deferred note payable (25) (518) (25) (518)
Principal payments on capital lease obligations (585) - (725) -
Payment of debt issuance costs (2,751) - (6,697) -
Capital contribution from (to) Parent, net 160,743 (41) - -
Net proceeds from issuance of common stock
through follow-on public offering - - 66,975 -
Costs incurred in connection with the issuance of
common stock through follow-on public offering - - (801) -
Proceeds from exercise of stock options - - 1,653 6
---------------- ---------------- ---------------- -----------------
Net cash provided by (used in) financing activities 56,413 (1,917) 58,689 (1,870)
---------------- ---------------- ---------------- -----------------
Effect of exchange rate changes on cash - - 1,284 -
---------------- ---------------- ---------------- -----------------
Net increase in cash and cash equivalents 69,268 197 46,536 197
Cash and cash equivalents, beginning of year 39,629 644 66,874 648
---------------- ---------------- ---------------- -----------------
Cash and cash equivalents, end of period $ 108,897 $ 841 $ 113,410 $ 845
================ ================ ================ =================
Supplemental disclosure of cash flow information:
Non-cash operating activities:
During the three months ended March 31, 2001 depreciation and amortization
expense was approximately $9 million for DDi Capital and approximately $11
million for DDi Corp.
During the three months ended March 31, 2000, depreciation and amortization
expense approximately $9 million for DDi Capital and DDi Corp.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
DDi CAPITAL CORP. AND DDi CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE 1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements for DDi Corp. ("DDi
Corp.") include the accounts of its wholly-owned subsidiaries, DDi Intermediate
Holdings Corp. ("Intermediate") and its subsidiaries and DDi Europe Limited
("DDi Europe" f/k/a MCM Electronics Limited ("MCM")). The unaudited condensed
consolidated financial statements for DDi Capital Corp. ("DDi Capital"), a
wholly-owned subsidiary of Intermediate, includes the accounts of its wholly-
owned subsidiary Dynamic Details, Incorporated and its subsidiaries ("Dynamic
Details"). Collectively, DDi Corp. and its subsidiaries are referred to as the
"Company". The unaudited condensed consolidated financial statements of DDi
Corp. include the results of MCM commencing on April 14, 2000, the date of
acquisition of MCM (see Note 7), Automata International, Inc. ("Automata")
commencing on August 4, 2000, the date of the acquisition of Automata's assets
(see Note 8), Golden Manufacturing, Inc. ("Golden") commencing on September 15,
2000, the date of the acquisition of Golden's assets (see Note 9) and Thomas
Walter Limited ("Thomas Walter") commencing on March 5, 2001, the date of
acquisition of Thomas Walter (see Note 10). All intercompany transactions have
been eliminated in consolidation.
In October 1997, the predecessor of DDi Corp. incorporated Dynamic Details as a
wholly-owned subsidiary and contributed substantially all of its assets, subject
to certain liabilities, to Dynamic Details. In November 1997, the predecessor
of DDi Corp. incorporated DDi Capital as a wholly-owned subsidiary and, in
February 1998, contributed substantially all its assets (including the shares of
common stock of Dynamic Details), subject to certain liabilities, including
senior discount notes to DDi Capital. In July 1998, the predecessor of DDi
Corp. incorporated Intermediate as a wholly-owned subsidiary and contributed all
of the shares of common stock of DDi Capital to Intermediate. In April 2000,
DDi Corp. acquired MCM (see Note 7) and subsequently combined MCM with its other
European operations to form DDi Europe. DDi Europe, Dynamic Details and Dynamic
Details Design, LLC, a wholly-owned subsidiary of Intermediate formed in 1998,
represent the operating subsidiaries of DDi Corp.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary (consisting only of
normal recurring adjustments) to present fairly the financial position of DDi
Capital and DDi Corp. as of March 31, 2001, and the results of operations for
the three months ended March 31, 2001 and 2000 and cash flows for the three
months ended March 31, 2001 and 2000. The results of operations for such
interim periods are not necessarily indicative of results of operations to be
expected for the full year.
These financial statements have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such regulations, although the Company believes the
disclosures provided are adequate to prevent the information presented from
being misleading.
This report on Form 10-Q for the quarter ended March 31, 2001 should be read in
conjunction with the audited financial statements presented in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000.
Concurrent with DDi Corp.'s initial public offering on April 14, 2000 (see Note
6), each share of Class L common stock was reclassified into one share of Class
A common stock plus an additional number of shares of Class A common stock
(determined by dividing the preference amount of such per share by the initial
public offering price of $14.00 per share). Class A and Class L common stock
share ratably in the net income (loss) remaining after giving effect to the 12%
yield on the Class L common stock. Each share of Class A common stock was then
converted into 2.8076 shares of new common stock when DDi Corp. reincorporated
in the state of Delaware.
NATURE OF BUSINESS
The Company is a leading provider of time-critical, technologically advanced
design, development and manufacturing services to original equipment
manufacturers and other electronics manufacturing service providers. The
Company serves over 2,000 customers, primarily in the telecommunications,
computer and networking industries.
7
DDi CAPITAL CORP. AND DDi CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE 2. INVENTORIES
Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market and consist of the following (in thousands):
DDi Capital DDi Corp.
-----------------------------------------------------
March 31, December 31, March 31, December 31,
2001 2000 2001 2000
-----------------------------------------------------
Raw materials $ 10,743 $ 9,970 $ 13,911 $ 12,561
Work-in-process 5,467 12,117 9,824 14,667
Finished goods 2,713 2,737 3,112 3,062
------------------------------------------------------
Total $ 18,923 $ 24,824 $ 26,847 $ 30,290
======================================================
NOTE 3. LONG-TERM DEBT AND CAPITAL LEASES
Long-term debt and capital lease obligations consist of the following (in
thousands):
DDi Capital DDi Corp.
----------------------------------------------------------
March 31, December 31, March 31, December 31,
2001 2000 2001 2000
----------------------------------------------------------
Senior Term Facility (a) $146,773 $ 147,743 $ 146,773 $ 147,743
10.0% Senior Subordinated Notes - 100,000 - 100,000
5.25% Convertible Subordinated Notes - - 100,000 -
12.5% Capital Senior Discount Notes (b) 51,881 50,311 51,881 50,311
DDi Europe Facilities Agreement (c) - - 25,132 27,249
Capital lease obligations 6,816 7,399 8,437 7,940
----------------------------------------------------------
Sub-total 205,470 305,453 332,223 333,243
Less current maturities (16,159) (13,656) (16,499) (16,935)
----------------------------------------------------------
Total $189,311 $ 291,797 $ 315,724 $ 316,308
==========================================================
(a) The Senior Term Facility, together with the Revolving Credit Facility,
which had no amounts outstanding as of March 31, 2001 and December 31,
2000, comprise the Senior Credit Facility. Interest rates are LIBOR-based
and range from 7.38% to 8.38% as of March 31, 2001.
(b) Face amount of $63,000, net of unamortized discount of $11,119 and $12,689
at March 31, 2001 and December 31, 2000, respectively.
(c) Interest rates are LIBOR-based and range from 6.94% to 8.44% at March 31,
2001.
NOTE 4. DERIVATIVES
Pursuant to its interest rate risk management strategy and to certain
requirements imposed by the Dynamic Details Senior Credit Facility, the Company
has entered into interest rate exchange agreements ("Swap Agreements"). The Swap
Agreements represent an effective cash flow hedge of the variable rate of
interest (1-month LIBOR) paid under the Senior Term Facility, minimizing
exposure to increases in interest rates related to this debt over its scheduled
term. Under the Swap Agreements, the Company received a variable rate of
interest (1-month LIBOR) and pays a maximum annual rate of interest applied to a
notional amount equal to the principal balance of the Senior Term Facility for
the period January 1, 2001 through December 31, 2001. During this period, the
Company's maximum annual rate is 5.75% for a given month, unless 1-month LIBOR
for that month equals or exceeds 7.00%, in which case the Company pays 7.00% for
that month. From January 2, 2002 through the scheduled maturity of the Senior
Term Facility in 2005, the Company pays a fixed annual rate of 6.58% applied to
a notional amount equal to 50% of the principal balance of the Senior Term
Facility during that period.
On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging
Activities." In accordance with the transition provisions of SFAS No. 133, DDi
Capital and DDi Corp. recorded a cumulative-effect-type adjustment to
accumulated other comprehensive loss for the initial difference between the book
value and fair value of interest rate swap agreements as of January 1, 2001. The
initial difference amounted to approximately $0.6 million for DDi Capital and
approximately $1.2 million for DDi Corp. The fair value of interest rate swaps
at March 31, 2001 is included in current and long-term liabilities in the
Condensed Consolidated Balance Sheets.
8
DDi CAPITAL CORP. AND DDi CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE 5. EARNINGS PER SHARE
Basic and diluted earnings per share - DDi Corp. has adopted the provisions of
SFAS No. 128 "Earnings Per Share." SFAS No. 128 requires DDi Corp. to report
both basic net income (loss) per share, which is based on the weighted average
number of common shares outstanding, excluding contingently issuable shares such
as the Class L common stock that were contingently convertible into common stock
upon certain events, and diluted net income (loss) per share, which is based on
the weighted average number of common shares outstanding and dilutive potential
common shares outstanding.
DDi Corp.
--------------------------------------------------------------
Three Months Ended Three Months ended
(in thousands, except share amounts) March 31, 2001 March 31, 2000
------------------------------- -----------------------------
Numerator: Basic Diluted Basic Diluted
----- ------- ----- -------
Income (loss) before extraordinary item $ 12,729 $ 12,729 $ (1,977) $ (1,977)
Priority distribution due shares of Class L common stock (3,770) (3,770)
------------------------------- -----------------------------
Income (loss) allocable to common stock 12,729 12,729 (5,747) (5,747)
Extraordinary item (7,046) (7,046) - -
------------------------------- -----------------------------
Net income (loss) allocable to common stock $ 5,683 $ 5,683 $ (5,747) $ (5,747)
=============================== =============================
Denominator:
Weighted average shares of common stock outstanding (basic) 45,998,272 45,998,272 9,888,923 9,888,923
Dilutive potential common shares:
Stock options and warrants - 1,686,566 - -
------------------------------- -----------------------------
Shares used in computing diluted income (loss) per share 45,998,272 47,684,838 9,888,923 9,888,923
=============================== =============================
As a result of the loss before extraordinary item, after deducting priority
distributions of Class L common stock, incurred by DDi Corp. during the three
months ended March 30, 2000, all potential common shares were anti-dilutive and
excluded from the diluted net loss per share calculation for that period.
Pro forma loss per share (unaudited) - Pro forma basic and diluted net loss per
share for the three months ended March 31, 2000 have been calculated based on
the net loss applicable to common stock assuming the reclassification of DDi
Corp.'s Class A and L common stock (see Note 1), which occurred immediately
prior to the completion of the initial public offering (see Note 6), had
occurred at the beginning of the period.
NOTE 6. PUBLIC OFFERINGS
On April 14, 2000, DDi Corp. completed an initial public offering of 12,000,000
shares of its common stock at $14.00 per share with proceeds of $156.7 million,
net of underwriting discounts and commissions. The net proceeds were used to
reduce the indebtedness of the Dynamic Details senior term loans, redeem a
portion of the senior discount notes issued by DDi Intermediate, pay associated
redemption premiums and accrued and unpaid interest thereon, finance a portion
of the acquisition of MCM (see Note 7) and pay offering expenses. In
conjunction with the redemption of debt, the Company recorded net extraordinary
losses (see Note 14).
On October 16, 2000, DDi Corp. completed a secondary public offering of
6,000,000 shares of its common stock, with 4,608,121 shares issued by DDi Corp.
and the remainder offered by selling shareholders. The shares were offered at
$27.875 per share, generating proceeds to DDi Corp. of $120.0 million, net of
underwriting discounts, commissions and expenses. The net proceeds were used to
redeem the remaining $17.5 million of the Intermediate Senior Discount Notes,
pay associated redemption premiums of $3.6 million and accrued and unpaid
interest thereon of $5.2 million, and repurchase a portion of the Capital Senior
Discount Notes, with an accreted balance of $36.5 million, for $37.6 million.
The remaining net proceeds of approximately $56 million will be used for general
corporate purposes, including potential future acquisitions. DDi Corp.
contributed approximately $35 million of the $56 million to Dynamic Details.
On February 14, 2001, DDi Corp. and some of its shareholders completed a follow-
on public offering of 6,000,000 shares of its common stock, with 3,000,000
shares issued by the DDi Corp. and the remainder sold by selling shareholders.
The shares were sold at $23.50 per share, generating proceeds of $67.0 million,
net of underwriting discounts. Concurrently, DDi Corp. issued 5.25% Convertible
Subordinated Notes due March 1, 2008 with an aggregate principal of $100.0
million.
9
DDi CAPITAL CORP. AND DDi CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
These notes are convertible at any time prior to maturity into shares of common
stock at a conversion price of $30.00 per share, subject to certain adjustments.
These notes generated proceeds of $97.0 million, net of underwriting discounts.
The net proceeds of both transactions have been used to repurchase a portion of
the Capital Senior Discount Notes (see Note 15) and all of the Dynamic Details
Senior Subordinated Notes.
NOTE 7. ACQUISITION OF MCM ELECTRONICS
On April 14, 2000, DDi Corp. completed the acquisition of MCM, a time-critical
electronics manufacturing service provider based in the United Kingdom, for a
total purchase price of approximately $82 million, excluding acquisition
expenses of approximately $4 million, paid in a combination of cash of
approximately $10 million, the issuance of 2,230,619 shares of common stock
valued at approximately $29 million, the repayment of outstanding indebtedness
of MCM of approximately $24 million, and the assumption of approximately $23
million of MCM's remaining outstanding indebtedness (net of cash acquired of
approximately $8 million).
The acquisition of MCM was accounted for as a purchase in accordance with
Accounting Principles Board Opinion No.16, and accordingly, the results of
operations of MCM since the date of acquisition are included in the accompanying
condensed consolidated financial statements for DDi Corp. The total purchase
price has been allocated to the underlying assets and liabilities based upon
their estimated respective fair values at the date of acquisition. The Company
has allocated to tangible assets (aggregating approximately $30 million)
acquired and liabilities assumed (aggregating approximately $46 million), with
the remaining consideration consisting of goodwill and identifiable intangible
assets.
NOTE 8. ACQUISITION OF AUTOMATA INTERNATIONAL
On August 4, 2000, Dynamic Details completed the acquisition of substantially
all the U.S. assets of Automata, a Virginia-based manufacturer of
technologically advanced printed circuit boards. Dynamic Details acquired
substantially all the U.S. assets of Automata for total cash consideration of
approximately $19.5 million, plus fees and expenses of $0.3 million.
This transaction was accounted for under the purchase method of accounting in
accordance with Accounting Principles Board ("APB") Opinion No. 16 and
accordingly, the results of operations of Automata since the date of the
transaction are included in the accompanying condensed consolidated financial
statements of DDi Capital and DDi Corp. The total purchase price has been
allocated to the underlying assets acquired and liabilities assumed based upon
their respective fair market values at the date of acquisition. The excess of
the purchase price was allocated to goodwill and is being amortized over its
estimated useful life of 20 years.
NOTE 9. ACQUISITION OF GOLDEN MANUFACTURING
On September 15, 2000, Dynamic Details completed the acquisition of the assets
of Golden, a Texas-based manufacturer of engineered metal enclosures and
provider of value-added assembly services to communications and electronics
original equipment manufacturers, for approximately $14.4 million paid in
combination of cash of approximately $12.6 million and the assumption of
approximately $1.8 million of Golden's outstanding capital lease liabilities
(net of cash acquired of approximately $0.7 million).
This transaction was accounted for under the purchase method of accounting in
accordance with APB Opinion No. 16 and accordingly, the results of operations of
Golden since the date of the transaction are included in the accompanying
condensed consolidated financial statements of DDi Capital and DDi Corp. The
total purchase price has been allocated to the underlying assets acquired and
liabilities assumed based upon their respective fair market values at the date
of acquisition. The excess of the purchase price was allocated to goodwill and
is being amortized over its estimated useful life of 20 years.
NOTE 10. ACQUISITION OF THOMAS WALTER LIMITED
On March 5, 2001, DDi Europe completed the acquisition of Thomas Walter Limited
("Thomas Walter"), a leading circuit board manufacturer based in Marlow, England
for approximately $24.2 million plus contingent consideration of approximately
$3.5 million and fees and expenses of $0.3 million. Thomas Walter is a well-
established provider of complex, quick-turn rigid and rigid-flex printed circuit
boards for the European electronics industry.
10
DDi CAPITAL CORP. AND DDi CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
The acquisition of Thomas Walter was accounted for as a purchase in accordance
with APB Opinion No. 16 and accordingly, the results of operations of Thomas
Walter since the date of acquisition are included in the accompanying condensed
consolidated financial statements of DDi Corp. The purchase price of $24.5
million has been allocated to the underlying assets and liabilities based upon
their estimated respective fair values at the date of acquisition. As of the
filing of this report, management is assessing fair value adjustments to the
intangible assets acquired (including identifiable intangibles such as developed
technologies, customer relationships/tradenames and assembled workforce). These
intangibles will be amortized over their estimated useful lives. The residual
value will be allocated to goodwill and will be amortized over its estimated
useful life of 20 years.
Based upon the status of the Company's valuation efforts as of the date of this
filing, a final valuation of the intangible assets has not been reflected in the
accompanying condensed consolidated financial statements. The Company
anticipates making a final purchase price allocation in the second quarter of
2001 based upon completion of management's assessment. The excess of the
purchase price over the fair value of Thomas Walter's tangible net assets is
currently reflected as goodwill and is being amortized over its estimated useful
life of 20 years.
NOTE 11. UNAUDITED PRO FORMA INFORMATION
The accompanying condensed consolidated statements of operations include the
accounts of MCM, Automata and Golden for the period January 1, 2001 through
March 31, 2001 and includes the accounts of Thomas Walter for the period March
5, 2001 through March 31, 2001. The following pro forma information for the
three months ended March 31, 2001 and 2000 presents net sales, income (loss)
before extraordinary item, and net income (loss) for each of these periods as if
the MCM, Automata and Thomas Walter transactions were consummated at the
beginning of each period. The unaudited pro forma financial information does
not reflect Golden's pre-acquisition results. As of the filing of this report,
management is assessing purchase price allocation adjustments to the intangible
assets acquired and to liabilities assumed in the Thomas Walter acquisition
based on fair values. The following pro forma information does not reflect
final purchase price allocation results. These results may have a material
effect on the reported results of operations.
Pro Forma Pro Forma
March 31, March 31,
2001 2000
------------- -------------
(in millions, except
per share data)
Net Sales:
--DDi Capital $140.7 $ 89.4
--DDi Corp. $144.2 $110.8
Net Income (Loss) Before Extraordinary Item:
--DDi Capital $ 12.7 $ (3.1)
--DDi Corp. $ 12.8 $ (2.2)
Net Income (Loss):
--DDi Capital $ 5.7 $ (3.1)
--DDi Corp. $ 5.8 $ (2.2)
DDi Corp. net income (loss) per share of common stock--basic $ 0.13 $(0.22)
DDi Corp. net income (loss) per share of common stock--diluted $ 0.12 $(0.22)
11
DDi CAPITAL CORP. AND DDi CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE 12. SEGMENT REPORTING
The Company has adopted the provisions of SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 established
standards for reporting information about operating segments in annual financial
statements and requires selected information about operating segments in interim
financial reports issued to stockholders. It also established standards for
related disclosures about products and services, geographic areas and major
customers. Operating segments are defined as components of an enterprise that
engage in business activities from which it may earn revenues and incur expenses
whose separate financial information is available and is evaluated regularly by
the Company's chief operating decision makers, or decision making group, to
perform resource allocations and performance assessments.
The Company's chief operating decision makers are the Chairman and Chief
Executive Officer. Based on the evaluation of the Company's financial
information, management believes that the Company operates in one reportable
segment which designs, develops, manufactures, assembles and tests complex
printed circuit boards, back panels and related electronic products. The
Company operates in two geographical areas, domestic (U.S.A.) and international.
Revenues are attributed to the country to which the product is sold. Revenues
by product and service are not reported as it is impracticable to do so. During
the three months ended March 31, 2001 there were no material assets or revenues
from any individual foreign country.
The following summarizes financial information for DDi Corp. by geographic area:
Three months ended March 31,
(in thousands) 2001 2000
----------- -----------
Net sales:
Domestic $ 105,979 $ 68,515
Europe 25,850 3,203
Other 8,880 3,567
--------- --------
Total $ 140,709 $ 75,285
========= ========
Net sales by geographic area for DDi Capital for the three months ended
March 31, 2001 and 2000 were the same as DDi Corp. except the sales to Europe
were $3,823 for the three months ended March 31, 2001.
March 31, December 31,
(in thousands) 2001 2000
--------- ------------
Long-lived assets:
Domestic $ 292,675 $ 290,582
International 99,633 76,064
--------- ---------
Total $ 392,308 $ 366,646
========= =========
Long-lived assets for DDi Capital as of March 31, 2001 and December 31, 2000
consist only of domestic long-lived assets.
12
DDi CAPITAL CORP. AND DDi CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE 13. COMPREHENSIVE INCOME (LOSS)
SFAS No. 130 "Reporting Comprehensive Income" establishes requirements for
reporting and disclosure of comprehensive income (loss) and its components.
Comprehensive income (loss) includes unrealized holding gains and losses and
other items that have previously been excluded from net income and reflected
instead in stockholders' equity. Comprehensive income for DDi Capital consists
of net income plus the effect of unrealized holding gains on marketable
securities classified as available-for-sale and unrealized losses on interest
rate swaps. Comprehensive loss for DDi Corp. consists of net income plus the
effect of unrealized holding gains on marketable securities classified as
available-for-sale, unrealized losses on interest rate swaps and foreign
currency translation adjustments. For the three months ended March 31, 2001,
unrealized holding gains on marketable securities classified as available-for-
sale amounted to approximately $34,000 for both DDi Capital and DDi Corp.,
unrealized losses on interest rate swaps amounted to approximately $2.6 million
and approximately $2.7 million for DDi Capital and DDi Corp., respectively, and
foreign currency translation adjustments amounted to approximately $3.6 million
for DDi Corp.
The Company adopted SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" on January 1, 2001 (see Note 4). In accordance with the
transition provisions of SFAS No. 133, DDi Capital and DDi Corp. recorded a
cumulative-effect-type adjustment to accumulated other comprehensive loss for
the initial difference between the book value and fair value of interest rate
swap agreements as of January 1, 2001. The initial difference amounted to
approximately $0.6 million for DDi Capital and approximately $1.2 million for
DDi Corp.
NOTE 14. EXTRAORDINARY ITEM
During the quarter ended March 31, 2001, Dynamic Details recorded, as
extraordinary items, the write-off of unamortized debt issuance costs of
approximately $3.3 million, the payment of repurchase premium of approximately
$7.8 million, and direct transaction costs of approximately $0.4 million, net of
related income taxes of $4.5 million, related to the repurchase of the Dynamic
Details Senior Subordinated Notes funded from the net proceeds of DDi Corp.'s
February 14, 2001 follow-on public offering (see Note 6).
NOTE 15. SUBSEQUENT EVENTS
On April 27, 2001, Dynamic Details acquired substantially all the assets of
Nelco Technology, Inc. ("Nelco"), a wholly owned subsidiary of Park
Electrochemical Corp., for approximately $2.9 million in cash, net of fees and
expenses. Nelco is an Arizona-based manufacturer of semi-finished printed
wiring boards, commonly known as mass lamination. This transaction will be
accounted for under the purchase method of accounting and the purchase price
will be allocated to the underlying assets acquired and liabilities assumed
based upon their respective fair market values at the date of acquisition. No
adjustments have been made to the accompanying historical consolidated financial
statements for this transaction.
In April 2001, DDi Capital has repurchased a portion of the DDi Capital Senior
Discount Notes, with an accreted balance of $38.4 million, for $44.9 million,
using a portion of the proceeds from DDi Corp.'s February 14, 2001 follow-on
public offering and issuance of convertible subordinated notes (see Note 6).
On April 17, 2001, Dynamic Details filed Form 15 with the Securities and
Exchange Commission to suspend its duty to file reports required by Section
13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Dynamic Details will therefore no longer file reports under the Exchange Act.
On May 9, 2001, Dynamic Details completed the acquisition of Olympic Circuits
Canada ("Olympic"), a Canadian based time-critical electronics manufacturing
service provider specializing in quick-turn prototype printed circuit boards for
total cash consideration of approximately $12.7 million. This transaction will
be accounted for under the purchase method of accounting and the purchase price
will be allocated to the underlying assets acquired and liabilities assumed
based upon their respective fair market values at the date of acquisition. No
adjustments have been made to the accompanying historical consolidated financial
statements for this transaction.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS.
- ---------------
OVERVIEW
DDi Corp., formerly known as DDi Holdings Corp. ("DDi Corp."), provides
technologically advanced, time-critical electronics design, development and
manufacturing services to original equipment manufacturers and other electronics
manufacturing service providers. Operating through our primary operating
subsidiaries, DDi Europe Limited ("DDi Europe") and Dynamic Details,
Incorporated ("Dynamic Details"), we target the fast-growing communications and
networking equipment industries, which are characterized by aggressive new
product development programs demanding the rapid application of advanced
technology and design.
As used herein, the "Company," "we," or "us" means DDi Corp. and its wholly-
owned subsidiaries, including DDi Capital Corp. ("DDi Capital"), DDi Europe and
Dynamic Details.
This discussion and analysis should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations set
forth in DDi Capital Corp.'s and DDi Corp.'s Annual Report on Form 10-K for the
year ended December 31, 2000.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 Compared to the Three Months Ended March 31,
2000
Net Sales
- ---------
DDi Capital net sales increased $43.4 million (58%) to $118.7 million for the
three months ended March 31, 2001, from $75.3 million for the same period in
2000. Such increase is attributable to: (i) the production of more complex and
larger panels, which increased the average sales price per panel; (ii) the
impact of the acquisition of Automata International, Inc. ("Automata"), which
contributed $24.0 million to our net sales and (iii) the impact of the
acquisition of Golden Manufacturing, Inc. ("Golden"), which contributed $5.0
million to our net sales. DDi Corp. net sales increased $65.4 million (87%) to
$140.7 million for the three months ended March 31, 2001, from $75.3 million for
the same period in 2000. Such increase reflects the higher level of sales
achieved by DDi Capital and the impact of the acquisition of MCM Electronics
Limited ("MCM") in April 2000 and Thomas Walter Limited ("Thomas Walter") in
March 2001. In aggregate, the Golden, MCM and Thomas Walter acquisitions
contributed $27.0 million to DDi Corp. net sales for 2001. Excluding such
acquisitions, net sales increased $38.4 million (51%).
Gross Profit
- ------------
DDi Capital gross profit increased $17.6 million (67%) to $43.9 million for the
three months ended March 31, 2001, from $26.3 million for the same period in
2000. Such increase in gross profit resulted from improved pricing, and the
impact of the Automata and Golden acquisitions. DDi Corp. gross profit
increased $26.3 million (100%) to $52.6 million for the three months ended March
31, 2001, from $26.3 million for the same period in 2000. Such increase
reflects the improvements in gross profit achieved by DDi Capital and the impact
of the acquisitions of MCM and Thomas Walter.
Sales and Marketing Expenses
- ----------------------------
DDi Capital sales and marketing expenses increased $1.9 million (28%) to $8.8
million for the three months ended March 31, 2001, from $6.9 million for the
same period in 2000. Such increase is due to the impact of the Automata and
Golden acquisitions (approximately $1.5 million) and the increase in sales
volume in the other divisions. As a percentage of net sales, sales and
marketing expenses declined, due to improved operating leverage. DDi Corp.
sales and marketing expenses increased $2.5 million (36%) to $9.4 million for
the three months ended March 31, 2001, from $6.9 million for the same period in
2000. Such increase reflects the increase in sales and marketing expenses
incurred by DDi Capital and the impact of the acquisitions of MCM and Thomas
Walter.
General and Administration Expenses
- -----------------------------------
DDi Capital general and administration expenses increased $1.4 million (36%) to
$5.3 million for the three months ended March 31, 2001, from $3.9 million for
the same period in 2000. Such increase is due to the impact of the Automata
and Golden acquisitions (approximately $1.1 million) and the increase in sales
volume in the other divisions. As a percentage of net sales, general and
administrative expenses declined, due to improved operating leverage. DDi Corp.
general and administration expenses increased $3.2 million (82%) to $7.1 million
for the three months ended March 31, 2001, from $3.9 million for the same period
in 2000. Such increase reflects the increase in general and administration
expenses incurred by DDi Capital and the impact of the acquisitions of MCM and
Thomas Walter.
14
Amortization of Intangibles
- ---------------------------
DDi Capital amortization of intangibles decreased $0.7 million (13%) to $4.5
million for the three months ended March 31, 2001, from $5.2 million for the
same period in 2000. The decrease is due to the use of accelerated
amortization methods with regard to certain identifiable intangibles, partially
offset by the additional amortization resulting from the Automata and Golden
acquisitions (approximately $0.2 million). DDi Corp. amortization of
intangibles increased $0.5 million (10%) to $5.7 million for the three months
ended March 31, 2001, from $5.2 million for the same period in 2000. Such
increase reflects the amortization attributable to the acquisitions of MCM and
Thomas Walter, partially offset by the decrease in amortization of intangibles
incurred by DDi Capital.
Net Interest Expense
- --------------------
DDi Capital net interest expense decreased $4.6 million (43%) to $6.1 million
for the three months ended March 31, 2001, from $10.7 million for the same
period in 2000. Such decrease is due primarily to the redemption of a portion
of the Dynamic Details Senior Term Facility principal in April 2000, the
redemption of a portion of the DDi Capital Senior Discount Notes in October
2000, and the redemption of the Dynamic Details Senior Subordinated Notes in
March 2001. These redemptions were funded by cash generated from equity and
convertible debenture offerings. A decrease in interest applicable to the
Dynamic Details Senior Term Facility also contributed to the reduction in net
interest expense. DDi Corp. net interest expense decreased $5.0 million (41%)
to $7.2 million for the three months ended March 31, 2001, from $12.2 million
for the same period in 2000. Such decrease reflects the decrease in net
interest expense incurred by DDi Capital and the redemption of the DDi
Intermediate Holdings Corp. Senior Discount Notes in April and October 2000.
These decreases were partially offset by interest incurred from the acquisition
of MCM (approximately $0.6 million) and from the issuance of DDi Corp.
Convertible Subordinated Notes (approximately $0.7 million) in March 2001.
Income Taxes
- ------------
DDi Capital income taxes increased $8.1 million to $8.8 million for the three
months ended March 31, 2001, from a $0.7 million for the same period in 2000,
reflecting a higher level of taxable income earned in the current period. DDi
Corp. income taxes increased $10.2 million to $10.3 million for the three months
ended March 31, 2001, from $0.1 million for the same period in 2000. Such
increase reflects the increased DDi Capital provision and the impact of the
acquisitions of MCM and Thomas Walter, which generated a combined $1.7 million
in tax expense for the three months ended March 31, 2001. The provisions for
income taxes are based upon our expected effective tax rate in the respective
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, cash, cash equivalents and marketable securities were
$125.3 million for DDi Capital and $129.8 million for DDi Corp., compared to
$39.6 million for DDi Capital and $66.9 million for DDi Corp. as of December 31,
2000. The principal source of liquidity to fund ongoing operations for the
three months ended March 31, 2001 was cash provided by operations.
Net cash provided by operating activities for the three months ended March 31,
2001 was $37.5 million for DDi Capital and $38.1 million for DDi Corp., compared
to $6.0 million for DDi Capital and $5.9 million for DDi Corp. for the three
months ended March 31, 2000.
Capital expenditures for the three months ended March 31, 2001 were $8.1 million
for DDi Capital and $10.5 million for DDi Corp., compared to $3.8 million for
both DDi Capital and DDi Corp. for the three months ended March 31, 2000.
As of March 31, 2001, DDi Capital and DDi Corp. had long-term borrowings of
$189.3 million and $315.7 million, respectively. We have $75.0 million
available for borrowing under our revolving credit facility for revolving credit
loans, letters of credit and swing line loans, less amounts that may be in use
from time-to-time. At March 31, 2001, we had no amounts outstanding under this
revolving credit facility and had $0.7 million reserved against the facility for
a letter of credit. In addition, at March 31, 2001, we had available a $50
million uncommitted incremental borrowing facility.
On February 14, 2001, DDi Corp. and some of its shareholders completed a follow-
on public offering of 6,000,000 shares of its common stock, with 3,000,000
shares issued by DDi Corp. and the remainder sold by selling shareholders. The
shares were sold at $23.50 per share, generating proceeds of $67.0 million, net
of underwriting discounts, commissions and expenses. Concurrently, DDi Corp.
issued 5.25% Convertible Subordinated Notes due March 1, 2008 with an aggregate
principal of $100.0 million. These notes are convertible at any time prior to
maturity into shares of common stock at a conversion price of $30.00 per share,
subject to certain adjustments. These notes generated proceeds of $97.0
million, net of underwriting discounts, commissions and expenses. The net
proceeds of both transactions have been used to repurchase a portion of the DDi
Capital Senior Discount Notes and all of the Dynamic Details Senior Subordinated
Notes (see Note 6 and Note 15 to the Condensed Consolidated Financial
Statements).
15
Based upon the current level of operations, we believe that cash generated from
operations, available cash and amounts available under our senior credit
facility will be adequate to meet our debt service requirements, capital
expenditures and working capital needs for the foreseeable future, although no
assurance can be given in this regard. Accordingly, there can be no assurance
that our business will generate sufficient cash flow from operations or that
future borrowings will be available to enable us to service our indebtedness.
We remain leveraged and our future operating performance and ability to service
or refinance our indebtedness will be subject to future economic conditions and
to financial, business and other factors, certain of which are beyond our
control.
COLORADO FACILITY
In December 1999, we implemented a plan to consolidate our Colorado operations
into our Texas facility, resulting in the closure of the Colorado facility. In
conjunction with the closure of the Colorado facility, we recorded charges in
the fourth quarter of 1999 totaling $7.0 million, consisting of $4.5 million for
severance and other exit costs and $2.5 million related to the impairment of net
property, plant and equipment. The exit costs were accrued for as of December
31, 1999. The closure of the facility was effectively complete as of March 31,
2000. The accrued exit costs remaining as of March 31, 2001 are approximately
$0.5 million, representing expenses principally related to net rental payments
through scheduled maturities of real property operating leases.
RISKS ASSOCIATED WITH INTANGIBLE ASSETS
At March 31, 2001, intangible assets were $195.1 million for DDi Capital and
$272.2 million for DDi Corp. These amounts represented a significant portion of
each company's total assets at that date. The intangible assets consist of
goodwill and other identifiable intangibles relating to acquisitions.
Additional intangible assets may be added in future periods, principally from
the consummation of further acquisitions. Amortization of these additional
intangibles will, in turn, have a negative impact on earnings. In addition, we
continuously evaluate whether events and circumstances have occurred that
indicate the remaining balance of intangible assets may not be recoverable.
When factors indicate that assets should be evaluated for possible impairment,
we may be required to reduce the carrying value of our intangible assets, which
could have a material adverse effect on our results during the periods in which
such a reduction is recognized. There can be no assurance that we will not be
required to write down intangible assets in future periods.
FORWARD-LOOKING STATEMENTS
A number of the matters and subject areas discussed in this Form 10-Q are
forward-looking in nature. The discussion of such matters and subject areas is
qualified by the inherent risks and uncertainties surrounding future
expectations generally, and also may differ materially from our actual future
experience involving any one or more of such matters and subject areas. We
wish to caution readers that all statements other than statements of historical
facts included in this quarterly report on Form 10-Q regarding our financial
position and business strategy may constitute forward-looking statements. All
of these forward-looking statements are based upon estimates and assumptions
made by our management, which although believed to be reasonable, are inherently
uncertain. Therefore, undue reliance should not be placed on such estimates and
statements. No assurance can be given that any of such estimates or statements
will be realized and it is likely that actual results will differ materially
from those contemplated by such forward-looking statements. Factors that may
cause such differences include: (1) increased competition; (2) increased costs;
(3) inability to consummate acquisitions on attractive terms; (4) loss or
retirement of key members of management; (5) increases in our cost of borrowings
or unavailability of additional debt or equity capital on terms considered
reasonable by management; (6) adverse state, federal or foreign legislation or
regulation or adverse determinations by regulators; (7) changes in general
economic conditions in the markets in which we may compete and fluctuations in
demand in the electronics industry; and (8) the ability to sustain historical
margins as the industry develops. We have attempted to identify, in context,
certain of the factors that we currently believe may cause actual future
experiences to differ from our current expectations regarding the relevant
matter or subject area. In addition to the items specifically discussed in the
foregoing, our business and results of operations are subject to the risks and
uncertainties described herein under the headings "Risks Associated With
Intangible Assets" and "Factors That May Affect Future Results" contained
herein, however, the operations and results of our business also may be subject
to the effect of other risks and uncertainties. Such risks and uncertainties
include, but are not limited to, items described from time-to-time in our
registration statements and periodic reports filed with the Securities and
Exchange Commission.
FACTORS THAT MAY AFFECT FUTURE RESULTS
SUBSTANTIAL INDEBTEDNESS
We have a substantial amount of indebtedness. As of March 31, 2001, our total
debt was approximately $205.5 million for DDi Capital and $332.2 million for DDi
Corp. As of March 31, 2001, we had $74.3 million available under the Dynamic
16
Details senior credit facility for future borrowings for general corporate
purposes and working capital needs. In addition, subject to the restrictions in
the DDi Corp. Convertible Subordinated Notes, DDi Capital Senior Discount Notes
and Dynamic Details senior credit facility, we may incur additional indebtedness
in an unrestricted amount from time to time to finance acquisitions or capital
expenditures or for other purposes.
As a result of our level of debt and the terms of our debt instruments:
. our vulnerability to adverse general economic conditions is heightened;
. we will be required to dedicate a substantial portion of our cash flow from
operations to repayment of debt, limiting the availability of cash for
other purposes;
. we are and will continue to be limited by financial and other restrictive
covenants in our ability to borrow additional funds, consummate asset
sales, enter into transactions with affiliates or conduct mergers and
acquisitions;
. our flexibility in planning for, or reacting to, changes in our business
and industry will be limited;
. we are sensitive to fluctuations in interest rates because some of our debt
obligations are subject to variable interest rates; and
. our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or
other purposes may be impaired.
Our ability to pay principal and interest on our indebtedness and to satisfy our
other debt obligations will depend upon our future operating performance, which
will be affected by prevailing economic conditions and financial, business and
other factors, some of which are beyond our control, as well as the availability
of revolving credit borrowings under our senior credit facility or successor
facilities. We anticipate that our operating cash flow, together with
borrowings under our senior credit facility and the proceeds of DDi Corp.'s
public offerings, will be sufficient to meet our operating expenses and to
service our debt requirements as they become due. If we are unable to service
our indebtedness, we will be forced to take actions such as reducing or delaying
capital expenditures, selling assets, restructuring or refinancing our
indebtedness (which could include the DDi Capital senior discount notes), or
seeking additional equity capital. There is no assurance that we can effect any
of these remedies on satisfactory terms, or at all.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The terms of our indebtedness restrict, among other things, our ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur indebtedness, merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of our assets. DDi Europe, DDi Capital and Dynamic Details
are also required to maintain specified financial ratios and satisfy certain
financial condition tests. Their ability to meet those financial ratios and
tests can be affected by events beyond their control, and there can be no
assurance that they will meet those tests. A breach of any of these covenants
could result in a default under some or all of our indebtedness agreements. Upon
the occurrence of an event of default, lenders under such indebtedness could
elect to declare all amounts outstanding together with accrued interest, to be
immediately due and payable. If we were unable to repay such amounts, the
lenders could proceed against the collateral granted to them to secure that
indebtedness. Substantially all the assets of Dynamic Details and its
subsidiaries are pledged as security under the Dynamic Details senior credit
facility. All the assets of DDi Europe are pledged as security under the DDi
Europe facilities agreement.
TECHNOLOGICAL CHANGE AND PROCESS DEVELOPMENT
The market for our products and services is characterized by rapidly changing
technology and continuing process development. The future success of our
business will depend in large part upon our ability to maintain and enhance our
technological capabilities, to develop and market products and services that
meet changing customer needs, and to successfully anticipate or respond to
technological changes on a cost-effective and timely basis. Research and
development expenses are expected to increase as manufacturers make demands for
products and services requiring more advanced technology on a quicker turnaround
basis. We are more leveraged than some of our principal competitors, and
therefore may not be able to respond to technological changes as quickly as
these competitors.
In addition, the electronics manufacturing services industry could in the future
encounter competition from new or revised technologies that render existing
technology less competitive or obsolete or that reduce the demand for our
services. We
17
cannot assure you that we will effectively respond to the technological
requirements of the changing market. To the extent we determine that new
technologies and equipment are required to remain competitive, the development,
acquisition and implementation of such technologies and equipment may require us
to make significant capital investments. There can be no assurance that we will
be able to obtain capital for these purposes in the future or that any
investments in new technologies will result in commercially viable technological
processes.
DEPENDENCE ON A CORE GROUP OF SIGNIFICANT CUSTOMERS
Although we have a large number of customers, net sales to our largest customer
accounted for approximately 10.8% of net sales for DDi Capital, and 12.7% of net
sales for DDi Corp during the three months ended March 31, 2001. Net sales to
the ten largest customers accounted for approximately 46.1% of net sales for DDi
Capital and 44.7% of net sales for DDi Corp. during the same period. We may
depend upon a core group of customers for a material percentage of our net sales
in the future. Substantially all sales are made on the basis of purchase orders
rather than long-term agreements. We cannot assure you that significant
customers will order services from us in the future or that they will not reduce
or delay the amount of services ordered. Any reduction or delay in orders could
negatively impact revenues. In addition, we generate significant accounts
receivable in connection with providing services to customers. If one or more
significant customers were to become insolvent or otherwise were unable to pay
us for the services provided; results of operations would be adversely affected.
DEPENDENCE ON ACQUISTION STRATEGY
As part of our business strategy, we expect that we will continue to grow by
pursuing acquisitions of other companies, assets or product lines that
complement or expand our existing business. Competition for attractive companies
in our industry is substantial. We cannot assure you that we will be able to
identify suitable acquisition candidates or to finance and complete transactions
that we select. In addition, existing credit facilities restrict our ability to
acquire the assets or business of other companies. The attention of our
management may be diverted, and operations may be otherwise disrupted. If we
fail to effectively execute this acquisition strategy, the growth of our
revenues may suffer and the price of DDi Corp.'s common stock may decline.
ABILITY TO INTEGRATE ACQUIRED BUSINESSES AND MANAGE EXPANSION
Since December 1997, we have completed a merger with one company and acquired
six other companies. We have a limited history of owning and operating our
businesses on a consolidated basis. We cannot assure that we will be able to
successfully integrate these companies and meet performance expectations without
disrupting the quality and reliability of service to customers or diverting
management resources. The integration of these acquired companies and our
expected growth has placed and may continue to place a significant strain on our
management, financial resources and information, operating and financial
systems. If we are unable to successfully integrate these companies and manage
this growth effectively, our rate of growth and revenues may be adversely
affected.
COSTS OF INTERNATIONAL EXPANSION
We have expanded into new foreign markets and intend to continue our
international expansion. We completed our acquisition of MCM and Thomas Walter,
both United Kingdom companies, on April 14, 2000 and March 5, 2001,
respectively. Entry into foreign markets may require considerable management
time as well as, in the case of new operations, start-up expenses for market
development, hiring and establishing office facilities before any significant
revenues are generated. As a result, operations in new foreign markets may
achieve low margins or may be unprofitable. We will be unable to utilize net
operating losses incurred by foreign operations to reduce our U.S. income taxes.
Therefore, as we continue to expand internationally, we may not generate the
revenues we expect, and our operating margins may be negatively impacted and DDi
Corp.'s common stock price may decline.
VARIABILITY OF ORDERS
Our operating results have fluctuated in the past because we sell on a purchase-
order basis rather than pursuant to long-term contracts. We are therefore
sensitive to variability in demand by our customers. Because we time
expenditures in anticipation of future sales, our operating results may be less
than we estimate if the timing and volume of customer orders do not match
expectations. Furthermore, we may not be able to capture all potential revenue
in a given period if our customers' demand for quick-turnaround services exceeds
our capacity during that period. Because of these factors, you should not rely
on quarter-to-quarter comparisons of our results of operations as an indication
of future performance.
18
Because a significant portion of our operating expenses are fixed, even a small
revenue shortfall can have a disproportionate effect on operating results. It is
possible that, in future periods, results may be below the expectations of
public market analysts and investors. This could cause the market price of DDi
Corp.'s common stock to decline.
A substantial portion of our net sales are derived from quick-turn services for
which we provide both the materials and the manufacturing services. As a result,
we often bear the risk of fluctuations in the cost of materials, and the risk of
generating scrap and excess inventory, which can affect gross profit margins. We
forecast future inventory needs based upon the anticipated demands of our
customers. Inaccuracies in making these forecasts or estimates could result in a
shortage or an excess of materials, either of which could negatively affect
production schedules and margins.
INTELLECTUAL PROPERTY
Our success depends in part on proprietary technology and manufacturing
techniques. We have no patents for these proprietary techniques and rely
primarily on trade secret protection. Litigation may be necessary to protect our
technology and determine the validity and scope of the proprietary rights of
competitors. Intellectual property litigation could result in substantial costs
and diversion of our management and other resources. If any infringement claim
is asserted against us, we may seek to obtain a license of the other party's
intellectual property rights. We cannot assure you that a license would be
available on reasonable terms or at all.
ENVIRONMENTAL MATTERS
Our operations are regulated under a number of federal, state and foreign
environmental and safety laws and regulations that govern, among other things,
the discharge of hazardous materials into the air and water, as well as the
handling, storage and disposal of such materials. These laws and regulations
include the Clean Air Act, the Clean Water Act, the Resource Conservation and
Recovery Act, and the Comprehensive Environmental Response, Compensation and
Liability Act, as well as analogous state and foreign laws. Compliance with
these environmental laws is a major consideration for us because we use in our
manufacturing process materials classified as hazardous such as ammoniacal
etching solutions, copper and nickel. In addition, because we are a generator
of hazardous wastes, we may be subject to potential financial liability for
costs associated with an investigation and any remediation of sites at which we
have arranged for the disposal of hazardous wastes if such sites become
contaminated. Even if we fully comply with applicable environmental laws and are
not directly at fault for the contamination, we may still be liable. The wastes
we generate include spent ammoniacal etching solutions, solder stripping
solutions and hydrochloric acid solution containing palladium; waste water which
contains heavy metals, acids, cleaners and conditioners; and filter cake from
equipment used for on-site waste treatment. Violations of environmental laws
could subject us to revocation of our effluent discharge permits. Any such
revocations could require us to cease or limit production at one or more of our
facilities, thereby negatively impacting revenues and potentially causing the
market price of DDi Corp.'s common stock to decline.
COMPETITION
The printed circuit board industry is highly fragmented and characterized by
intense competition. We principally compete with independent and captive
manufacturers of complex quick-turn and longer-lead printed circuit boards. Our
principal competitors include independent small private companies and integrated
subsidiaries of more broadly based volume producers that also manufacture
multilayer printed circuit boards and other electronic assemblies. Some of our
principal competitors are less highly-leveraged than us and may have greater
financial and operating flexibility. Moreover, we may face additional
competitive pressures as a result of changes in technology.
Competition in the complex quick-turn and longer-lead printed circuit board
industry has increased due to the consolidation trend in the industry, which
results in potentially better capitalized and more effective competitors. Our
basic technology is generally not subject to significant proprietary protection,
and companies with significant resources or international operations may enter
the market. Increased competition could result in price reductions, reduced
margins or loss of market share, any of which could materially adversely affect
our business, financial condition and results of operations.
DEPENDENCE ON KEY MANAGEMENT
We depend on the services of our senior executives, including Charles D. Dimick,
Chairman, and Bruce D. McMaster, President and Chief Executive Officer. We
cannot assure that we will be able to retain these and other executive officers
and key personnel or attract additional qualified management in the future. Mr.
McMaster is not a party to an employment agreement with us, and Mr. Dimick's
employment agreement expires in July 2001. Our business also depends on our
ability to continue to recruit, train and retain skilled employees, particularly
engineering and sales personnel, due to our
19
focus on the technologically advanced and time-critical segment of the
electronics manufacturing services industry. In addition, our ability to
successfully integrate acquired companies depends in part on our ability to
retain key management and existing employees at the time of the acquisition.
CONTROLLING STOCKHOLDERS
Investment funds affiliated with Bain Capital, Inc. beneficially own
approximately 14.1% of the outstanding common stock of DDi Corp. In addition,
of the eight directors who serve on our board, three are current representatives
of Bain Capital, Inc. and two are former representatives of Bain Capital, Inc.
By virtue of such stock ownership and board representation, these entities will
continue to have a significant influence over all matters submitted to our
stockholders, including the election of our directors, and to exercise
significant control over our business, policies and affairs. Such concentration
of voting power could have the effect of delaying, deterring or preventing a
change of control or other business combination that might otherwise be
beneficial to our stockholders.
20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
- --------------------------------------------------------------------
Interest Rate Risk
The DDi Europe facilities agreement and the Dynamic Details senior credit
facility bear interest at a floating rate; the DDi Capital Senior Discount Notes
and DDi Corp. Convertible Subordinated Notes bear interest at fixed rates. We
reduce our exposure to interest rate risks through swap agreements.
The Dynamic Details revolving credit facility bears interest at (i) 2.00% per
annum plus the applicable LIBOR or (ii) 1.25% per annum plus the federal reserve
reported overnight funds rate plus 0.5% per annum. As of March 31, 2001 we had
no amount outstanding under our revolving credit facility. Based upon our
anticipated utilization of the Dynamic Details revolving credit facility through
the year ending December 31, 2001, a 10% change in interest rates is not
expected to materially affect the interest expense to be incurred on this
facility during such period.
Under the terms of the current swap agreements, we pay a maximum annual rate of
interest applied to a notional amount equal to the principal balance of the term
facility portion of the Dynamic Details senior credit facility through December
31, 2001. The maximum annual rate is 5.75% for a given month, unless one-month
LIBOR for that month equals or exceeds 7.00%, in which case we pay 7.00% for
that month. From January 1, 2002 through the scheduled maturity of the senior
term facility portion of the Dynamic Details senior credit facility in 2005, we
pay a fixed annual rate of 6.58% applied to a notional amount equal to 50% of
the principal balance of the senior term facility during that period. The term
loan facility portion of the Dynamic Details senior credit facility bears
interest based on one-month LIBOR. As of March 31, 2001, one-month LIBOR was
5.08%. If one-month LIBOR increased by 10% to 5.59%, interest expense related
to the term loan facility portion would increase by approximately $0.8 million
over the twelve months ending March 31, 2002. Since the increased rate would
not exceed 5.75%, that increase in interest expense would not be offset by
payments under the swap agreement.
Under the terms of the current swap agreement, DDi Europe pays a fixed annual
rate of interest equal to 6.92% applied to fixed amounts of debt per the
agreement, through September 2002. As of March 31, 2001, the swap covers
approximately 92% of the outstanding debt under the facilities agreement. If
DDi Europe were to borrow the full amount available on its facilities agreement,
the fixed amounts of debt per the swap agreement would still cover approximately
57% of the outstanding debt. The DDi Europe facilities agreement bears interest
based on three-month LIBOR. As of March 31, 2001, three-month LIBOR was 4.88%.
If three-month LIBOR increased by 10% to 5.37%, interest expense related to the
term loan facility would not increase due to the fixed rate of 6.92% under the
swap agreement.
A change in interest rates would not have an effect on our interest expense on
the DDi Capital Senior Discount Notes or DDi Corp. Convertible Subordinated
Notes because these instruments bear a fixed rate of interest.
Foreign Currency Exchange Risk
The sales and expenses and financial results of DDi Europe's operations are
denominated in British pounds. We have foreign currency translation risk equal
to our net investment in those operations. However, since nearly all of our
sales are denominated in each operation's local currency, we have relatively
little exposure to foreign currency transaction risk with respect to sales made.
Therefore, the effect of an immediate 10% change in exchange rates would not
have an impact on our operating results over the 12 month period ending March
31, 2002. We do not use forward exchange contracts to hedge exposures to
foreign currency denominated transactions and do not utilize any other
derivative financial instruments for trading or speculative purposes.
21
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------------------------------------------
(a) Exhibits.
---------
The exhibits listed below are hereby filed with the Commission as part of
this Quarterly Report on Form 10-Q. Certain of the following exhibits have been
previously filed with the Commission pursuant to the requirements of the
Securities Act or the Exchange Act. Such exhibits are identified by the
parenthetical references following the listing of each such exhibit and are
incorporated herein by reference.
Exhibit Description
- ------- -----------
3.1 Certificate of Incorporation of DDi Merger Co. (currently known as DDi
Corp.) (Previously filed with the Commission on March 30, 2001 as
Exhibit 3.1 to DDi Corp.'s and DDi Capital's combined Annual Report on
Form 10-K.)
3.2 Amended and Restated By-laws of DDi Corp. (Previously filed with the
Commission on March 30, 2001 as Exhibit 3.2 to DDi Corp.'s and DDi
Capital's combined Annual Report on Form 10-K.)
3.3 Certificate of Merger of DDi Corp., a California corporation, with and
into DDi Merger Co., a Delaware corporation. (Previously filed with
the Commission on March 30, 2001 as Exhibit 3.3 to DDi Corp.'s and DDi
Capital's combined Annual Report on Form 10-K.)
3.4 DDi Capital Corp. Articles of Incorporation, as amended. (Previously
filed with the Commission on November 26, 1997 as Exhibit 3.1 to DDi
Capital's Registration Statement on Form S-4, Registration No. 333-
41187.)
3.5 Amendment to the Articles of Incorporation of DDi Capital Corp. dated
December 15, 1998. (Previously filed with the Commission on March 31,
1999 as Exhibit 3.1.1 to DDi Capital's Annual Report on Form 10-K.)
3.6 DDi Capital Corp. By-laws. (Previously filed with the Commission on
November 26, 1997 as Exhibit 3.2 to DDi Capital's Registration
Statement on Form S-4, Registration No. 333-41187.)
4.1 Subordinated Indenture dated February 20, 2001 between DDi Corp. and
State Street Bank and Trust Company Relating to Subordinated Debt
Securities. (Previously filed with the Commission on March 30, 2001 as
Exhibit 4.5 to DDi Corp.'s and DDi Capital's combined Annual Report on
Form 10-K.)
4.2 Supplemental Indenture dated February 20, 2001 between DDi Corp. and
State Street Bank and Trust Company Relating to 5 1/4% Convertible
Subordinated Notes due 2008. (Previously filed with the Commission on
March 30, 2001 as Exhibit 4.6 to DDi Corp.'s and DDi Capital's
combined Annual Report on Form 10-K.)
10.1 Second Supplemental Indenture dated as of January 31, 2001 between
Dynamic Details, Incorporated, Dynamic Details Incorporated, Virginia,
DDi Sales Corp., Dynamic Details Texas, L.P., Dynamic Details, L.P.,
the 1998 Guarantors, and State Street Bank and Trust Company relating
to Dynamic Detail's 10% Senior Subordinated Notes due 2005.
(Previously filed with the Commission on March 30, 2001 as Exhibit
4.13 to DDi Corp.'s and DDi Capital's combined Annual Report on Form
10-K.)
10.2 Third Supplemental Indenture dated as of February 23, 2001 between
Dyamic Details, Incorporated, Dynamic Details Incorporated, Virginia,
DDi Sales Corp., Dynamic Details Texas, L.P., Dynamic Details, L.P.,
the 1998 Guarantors, and State Street Bank and Trust Company (Relating
to Dynamic Details 10% Senior Subordinated Notes due 2005.)
(Previously filed with the Commission on March 30, 2001 as Exhibit
4.14 to DDi Corp.'s and DDi Capital's combined Annual Report on Form
10-K.)
10.3 Amendment, dated as of January 29, 2001, to the Stockholders Agreement
dated as of March 31, 2000. (Previously filed with the Commission on
March 30, 2001 as Exhibit 4.3 to DDi Corp.'s and DDi Capital's
combined Annual Report on Form 10-K.)
10.4 Fourth Amendment, dated as of February 13, 2001, to the Credit
Agreement, dated as of July 23, 1998, among (i) DDi Capital Corp.,
formerly known as Details Capital Corp.; (ii) Dynamic Details,
Incorporated, formerly known as Details, Inc.; (iii) Dynamic Details
Incorporated, Silicon Valley,
22
formerly known as Dynamic Circuits, Inc.; (iv) the several banks and
other financial institutions from time to time parties thereto; (v)
Bankers Trust Company; and (vi) The Chase Manhattan Bank. (Previously
filed with the Commission on March 30, 2001 as Exhibit 10.16 to DDi
Corp.'s and DDi Capital's combined Annual Report on Form 10-K.)
(b) Reports on Form 8-K.
--------------------
On February 22, 2001, DDi Corp. filed a report on Form 8-K dated
February 8, 2001 disclosing the date of the Dynamic Details commencement of a
tender offer for any and all of the $100 million aggregate outstanding principal
amount of its 10% senior subordinated notes due 2005.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, DDi Corp.
has duly caused this report to be signed on its behalf by the undersigned,
thereto duly authorized, in the city of Anaheim, state of California, on the
14th day of May, 2001.
DDi CORP.
By: /s/ JOSEPH P. GISCH
-------------------
Joseph P. Gisch
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, DDi Capital
Corp. has duly caused this report to be signed on its behalf by the undersigned,
thereto duly authorized, in the city of Anaheim, state of California, on the
14th day of May, 2001.
DDi CAPITAL CORP.
By: /s/ JOSEPH P. GISCH
-------------------
Joseph P. Gisch
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
25
Exhibit Index
Exhibit Description
- ------- -----------
3.1 Certificate of Incorporation of DDi Merger Co. (currently known as DDi
Corp.) (Previously filed with the Commission on March 30, 2001 as
Exhibit 3.1 to DDi Corp.'s and DDi Capital's combined Annual Report on
Form 10-K.)
3.2 Amended and Restated By-laws of DDi Corp. (Previously filed with the
Commission on March 30, 2001 as Exhibit 3.2 to DDi Corp.'s and DDi
Capital's combined Annual Report on Form 10-K.)
3.3 Certificate of Merger of DDi Corp., a California corporation, with and
into DDi Merger Co., a Delaware corporation. (Previously filed with
the Commission on March 30, 2001 as Exhibit 3.3 to DDi Corp.'s and DDi
Capital's combined Annual Report on Form 10-K.)
3.4 DDi Capital Corp. Articles of Incorporation, as amended. (Previously
filed with the Commission on November 26, 1997 as Exhibit 3.1 to DDi
Capital's Registration Statement on Form S-4, Registration No. 333-
41187.)
3.5 Amendment to the Articles of Incorporation of DDi Capital Corp. dated
December 15, 1998. (Previously filed with the Commission on March 31,
1999 as Exhibit 3.1.1 to DDi Capital's Annual Report on Form 10-K.)
3.6 DDi Capital Corp. By-laws. (Previously filed with the Commission on
November 26, 1997 as Exhibit 3.2 to DDi Capital's Registration
Statement on Form S-4, Registration No. 333-41187.)
4.1 Subordinated Indenture dated February 20, 2001 between DDi Corp. and
State Street Bank and Trust Company Relating to Subordinated Debt
Securities. (Previously filed with the Commission on March 30, 2001 as
Exhibit 4.5 to DDi Corp.'s and DDi Capital's combined Annual Report on
Form 10-K.)
4.2 Supplemental Indenture dated February 20, 2001 between DDi Corp. and
State Street Bank and Trust Company Relating to 5 1/4% Convertible
Subordinated Notes due 2008. (Previously filed with the Commission on
March 30, 2001 as Exhibit 4.6 to DDi Corp.'s and DDi Capital's
combined Annual Report on Form 10-K.)
10.1 Second Supplemental Indenture dated as of January 31, 2001 between
Dynamic Details, Incorporated, Dynamic Details Incorporated, Virginia,
DDi Sales Corp., Dynamic Details Texas, L.P., Dynamic Details, L.P.,
the 1998 Guarantors, and State Street Bank and Trust Company relating
to Dynamic Detail's 10% Senior Subordinated Notes due 2005.
(Previously filed with the Commission on March 30, 2001 as Exhibit
4.13 to DDi Corp.'s and DDi Capital's combined Annual Report on Form
10-K.)
10.2 Third Supplemental Indenture dated as of February 23, 2001 between
Dyamic Details, Incorporated, Dynamic Details Incorporated, Virginia,
DDi Sales Corp., Dynamic Details Texas, L.P., Dynamic Details, L.P.,
the 1998 Guarantors, and State Street Bank and Trust Company (Relating
to Dynamic Details 10% Senior Subordinated Notes due 2005.)
(Previously filed with the Commission on March 30, 2001 as Exhibit
4.14 to DDi Corp.'s and DDi Capital's combined Annual Report on Form
10-K.)
10.3 Amendment, dated as of January 29, 2001, to the Stockholders Agreement
dated as of March 31, 2000. (Previously filed with the Commission on
March 30, 2001 as Exhibit 4.3 to DDi Corp.'s and DDi Capital's
combined Annual Report on Form 10-K.)
10.4 Fourth Amendment, dated as of February 13, 2001, to the Credit
Agreement, dated as of July 23, 1998, among (i) DDi Capital Corp.,
formerly known as Details Capital Corp.; (ii) Dynamic Details,
Incorporated, formerly known as Details, Inc.; (iii) Dynamic Details
Incorporated, Silicon Valley, formerly known as Dynamic Circuits,
Inc.; (iv) the several banks and other financial institutions from
time to time parties thereto; (v) Bankers Trust Company; and (vi) The
Chase Manhattan Bank. (Previously filed with the Commission on March
30, 2001 as Exhibit 10.16 to DDi Corp.'s and DDi Capital's combined
Annual Report on Form 10-K.)
26