Exhibit 13
                                       to
                              Report on Form 10-K
                                      for
                               Fiscal Year Ended
                                 June 28, 1998
                             by DT Industries, Inc.


          Excerpts from Annual Report to Shareholders for the fiscal year 
          ended June 28, 1998.

<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                      SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                        Fiscal Year Ended
                                               June 28,       June 29,       June 30,       June 25,       June 26,
(In thousands, except per share data)            1998           1997           1996           1995           1994
--------------------------------------------------------------------------------------------------------------------
<S>                                           <C>            <C>            <C>            <C>            <C>
Statement of operations data

   Net sales                                  $ 519,342      $ 396,110      $ 235,946      $ 147,369      $ 107,499

   Cost of sales                                380,126        285,044        172,568        109,678         79,555
                                              ----------     ----------     ----------     ----------     ----------
   Gross profit                                 139,216        111,066         63,378         37,691         27,944

   Selling, general and administrative           75,246         54,367         35,445         21,428         13,875
     expenses

   Loss on sale of assets of Knitting
     Elements division                            1,383          ---            ---            ---            ---
                                              ----------     ----------     ----------     ----------     ----------
   Operating income                              62,587         56,699         27,933         16,263         14,069

   Interest expense, net                          6,509         11,088          4,799          1,849          3,506

   Dividends on Company-obligated,  
     mandatorily redeemable convertible 
     preferred securities of subsidiary
     DT Capital Trust holding solely
     convertible junior subordinated
     debentures of the Company                    5,012            251          ---            ---            ---
                                              ----------     ----------     ----------     ----------     ----------
   Income before income taxes and
      extraordinary loss                         51,066         45,360         23,134         14,414         10,563

   Provision for income taxes                    20,182         18,979          9,643          5,964          4,570
                                              ----------     ----------     ----------     ----------     ----------
   Income before extraordinary loss              30,884         26,381         13,491          8,450          5,993

   Extraordinary loss, net(1)                     1,200            324          ---            ---              179
                                              ----------     ----------     ----------     ----------     ----------
   Net income                                 $  29,684      $  26,057      $  13,491      $   8,450      $   5,814
                                              ==========     ==========     ==========     ==========     ==========
   Diluted earnings per common share
   before extraordinary loss                  $    2.49      $    2.41      $    1.50      $    0.94      $    1.10
                                              ==========     ==========     ==========     ==========     ==========
   Diluted earnings per common share          $    2.40      $    2.38      $    1.50      $    0.94      $    1.07
                                              ==========     ==========     ==========     ==========     ==========
   Diluted weighted average common shares
     outstanding                                 13,621         11,022          9,001          9,000          5,458
                                              ==========     ==========     ==========     ==========     ==========
Balance sheet data

   Working capital                            $ 108,440      $  90,981      $  26,161      $  16,791      $   8,846

   Total assets                                 406,002        395,196        233,843        159,263         97,628

   Total debt                                    90,011         48,505         79,327         37,353            432

   Company-obligated, mandatorily redeemable
     convertible preferred securities of
     subsidiary DT Capital Trust holding
     solely convertible junior subordinated
     debentures of the Company                   70,000         70,000          ---            ---            ---

   Stockholders' equity                         190,059        185,267         87,884         75,020         67,234
</TABLE>

1  Reflects costs  incurred of $2,000,  less applicable  income tax benefits  of
   $800  in the fiscal year ended June 28, 1998,  costs incurred  of $540,  less
   applicable  income  tax  benefits  of $216  in the fiscal year ended June 29,
   1997, and costs incurred  of $314,  less  applicable  income tax benefits  of
   $135  in the fiscal year ended June 26, 1994,  related  to the extinguishment
   and refinancing of debt by the Company.

                                      -8-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                                    OVERVIEW

     DT  Industries,  Inc.  (DTI or the Company) was formed  through a series of
acquisitions beginning with the initial acquisitions of Detroit Tool Group, Inc.
and  the  Peer  Division  of  Teledyne,   Inc.  in  1992.  Subsequent  to  those
transactions, the Company or its subsidiaries completed a number of acquisitions
for the Special Machines and Components segments.  The acquisitions are elements
of  a  strategic  plan  to  acquire  companies  with  proprietary  products  and
manufacturing  capabilities which have strong market and technological positions
in the niche markets they serve and to further the  Company's  goal of providing
customers a full range of integrated  automated  systems.  The Company  believes
that emphasis on complementary  acquisitions of companies serving target markets
has  allowed it to broaden  its  product  offerings  and to provide  customers a
single source for complete integrated automation systems.  The acquisitions have
expanded  the  Company's  base  of  customers  and  markets,   creating  greater
opportunities for cross-selling among the various divisions of the Company.

     The Company  has made the  following  acquisitions  in the past three years
which affected the results of operations:

     August 1995               H. G. Kalish Inc. (Kalish)
     September 1995            Arrow Precision Elements, Inc. (Arrow)
     November 1995             Swiftpack Automation Ltd. (Swiftpack)
     January 1996              Assembly Machines, Inc. (AMI)
     July 1996                 Mid-West Automation Enterprises, Inc. (Mid-West)
     September 1996            Hansford Manufacturing Corporation (Hansford)
     July 1997                 Lucas Assembly and Test Systems (LATS),
                               renamed Assembly Technology & Test (ATT)

     In August 1998,  after the close of fiscal 1998, the Company  completed the
acquisition  of  certain  of  the  net  assets  of  Scheu  &  Kniss,   Inc.  for
approximately $10.2 million. Scheu & Kniss, located in Louisville,  Kentucky, is
a manufacturer of tablet press  replacement  parts and rebuild  services serving
primarily the pharmaceutical, nutritional, battery and confectionery industries.
Annualized sales of Scheu & Kniss approximate $7.5 million.

     For a better  understanding of the significant  factors that influenced the
Company's  performance  during the past three years,  the  following  discussion
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto appearing elsewhere in this Annual Report.

     The Company operates in two business segments:  Special Machines, including
the  Automation  and Packaging  Groups,  and  Components.  The Special  Machines
segment designs and builds integrated  automation systems,  custom equipment and
proprietary  machines which  assemble,  test or package  industrial and consumer
products.  The Components  segment stamps and fabricates a range of standard and
custom  metal  components  for  the  transportation,   agricultural   equipment,
appliance,  heavy equipment,  and electrical  industries.  The Knitting Elements
division of the Components  segment,  including Arrow Precision  Elements,  Inc.
noted previously, was sold in May 1998.

     Due to the significant acquisitions in recent years by the Special Machines
segment and the sale of the Knitting Elements division, as of and for the fiscal
year ended June 28, 1998, the Components  segment has become less significant to
the  Company  as a whole and no longer  qualifies  for  separate  disclosure  as
specified  by Statement of Financial  Accounting  Standards  No. 14,  "Financial
Reporting  for  Segments of a Business  Enterprise."  The  Company has  included
certain  separate  disclosures  for the  Components  segment in the fiscal  1998
consolidated financial statements to enhance comparability with prior periods.

                                      -9-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

     Set forth below is certain financial data relating to each business segment
(in thousands):

                                                 Fiscal Year Ended
                                        June 28,       June 29,       June 30,
                                          1998           1997           1996
                                      ----------     ----------     ----------
Net sales

   Special Machines
      DTI Automation                  $ 355,052      $ 248,213      $ 106,217
      DTI Packaging                     116,803        100,435         87,667
                                      ----------     ----------     ----------
         Total Special Machines         471,855        348,648        193,884

   Components                            47,487         47,462         42,062
                                      ----------     ----------     ----------
      Total                           $ 519,342      $ 396,110      $ 235,946
                                      ==========     ==========     ==========
Gross profit

   Special Machines                   $ 130,714      $ 100,215      $  53,299
      Gross margin                        27.7%          28.7%          27.5%

   Components                             8,502         10,851         10,079
      Gross margin                        17.9%          22.9%          24.0%
                                      ----------     ----------     ----------
         Total gross profit           $ 139,216      $ 111,066      $  63,378
         Total gross margin               26.8%          28.0%          26.9%
                                      ==========     ==========     ==========
Operating income

   Special Machines                   $  68,237      $  56,787      $  26,557
      Operating margin                    14.5%          16.3%          13.7%

   Components                             3,391          6,966          6,934
      Operating margin                     7.1%          14.7%          16.5%

   Corporate                             (9,041)        (7,054)        (5,558)
                                      ----------     ----------     ----------
         Total operating income       $  62,587      $  56,699      $  27,933
         Total operating margin           12.1%          14.3%          11.8%
                                      ==========     ==========     ==========
Depreciation and amortization expense

   Special Machines                   $  11,507      $   8,891      $   4,683
   Components                             1,491          1,258          1,038
   Corporate                                752            904            395
                                      ----------     ----------     ----------
      Total                           $  13,750      $  11,053      $   6,116
                                      ==========     ==========     ==========
Capital expenditures

   Special Machines                   $  12,754      $   7,424      $   6,145
   Components                             3,459          3,806          2,138
   Corporate                              1,101            620          1,966
                                      ----------     ----------     ----------
      Total                           $  17,314      $  11,850      $  10,249
                                      ==========     ==========     ==========
Identifiable assets

   Special Machines                   $ 428,039      $ 357,337      $ 203,210
   Components                            25,170         34,812         28,528
   Corporate                              6,793          3,047          2,105
                                      ----------     ----------     ----------
      Total                           $ 460,002      $ 395,196      $ 233,843
                                      ==========     ==========     ==========

                                      -10-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

     Gross margin of the Special  Machines segment may vary from year to year as
a result of the  variations  in  profitability  of contracts for large orders of
automated  production systems or special machines.  In addition,  changes in the
product mix in a given  period  affect  gross  margin for the  Special  Machines
segment.  The  Special  Machines  segment's  gross and  operating  margins  were
expected  to be lower in fiscal  1998 as a result of the  acquisition  of ATT in
July 1997.  ATT's  historical  margins have been lower than the Special Machines
segment's historical margins.

     The percentage of completion  method of accounting is used by the Company's
Special  Machines  segment to recognize  revenues and related  costs.  Under the
percentage of completion  method,  revenues for customer  contracts are measured
based on the ratio of engineering and manufacturing labor hours incurred to date
compared to total estimated  engineering and  manufacturing  labor hours or, for
certain customer  contracts,  the ratio of total costs incurred to date to total
estimated  costs.  Any revisions in the  estimated  total costs or values of the
contracts  during  the  course of the work are  reflected  when the  facts  that
require  the  revisions  become  known.   Revenue  from  the  sale  of  products
manufactured by the Company's  Components segment is recognized upon shipment to
the customer.

     Costs and related expenses to manufacture the products are recorded as cost
of sales when the related revenue is recognized. Provisions for estimated losses
on  uncompleted  contracts  are made in the  period  in which  such  losses  are
determined.


RESULTS OF OPERATIONS

     The following table sets forth, for the periods  indicated,  the percentage
of  net  sales   represented  by  certain  items   reflected  in  the  Company's
consolidated statement of operations:

<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended
                                                         June 28,       June 29,       June 30,
                                                           1998           1997           1996
                                                       ----------     ----------     ----------
<S>                                                       <C>            <C>            <C>   
Net sales                                                 100.0%         100.0%         100.0%

Cost of sales                                              73.2           72.0           73.1
                                                       ----------     ----------     ----------
Gross profit                                               26.8           28.0           26.9

Selling, general and administrative expenses               14.5           13.7           15.1

Loss on sale of assets of Knitting Elements
   division                                                 0.2            ---            ---
                                                       ----------     ----------     ----------
Operating income                                           12.1           14.3           11.8

Interest expense                                            1.3            2.8            2.0

Dividends on Company-obligated, mandatorily
   redeemable convertible preferred securities
   of subsidiary DT Capital Trust holding solely
   convertible junior subordinated debentures 
   of the Company                                           1.0            0.1            ---
                                                       ----------     ----------     ----------
Income before provision for income taxes
   and extraordinary loss                                   9.8           11.4            9.8

Provision for income taxes                                  3.9            4.8            4.1
                                                       ----------     ----------     ----------
Income before extraordinary loss                            5.9            6.6            5.7

Extraordinary loss on debt refinancing                      0.2            0.1            ---
                                                       ----------     ----------     ----------
Net income                                                  5.7%           6.5%           5.7%
                                                       ==========     ==========     ==========
</TABLE>

                                      -11-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                       FISCAL 1998 COMPARED TO FISCAL 1997

NET SALES

     Consolidated  net sales  increased  $123.2  million,  or  31.1%,  to $519.3
million for the year ended June 28, 1998, from $396.1 million for the year ended
June 29, 1997. Of the $123.2 million  increase in sales,  $107.4 million was due
to the incremental sales of recently acquired businesses offset by the reduction
in sales  from the  disposition  of the  Knitting  Elements  division,  with the
remaining  $15.8  million,  or 4.0%,  relating to increased  sales from existing
businesses.  Recently acquired businesses include Hansford in September 1996 and
ATT in July 1997.

     Sales by the Special Machines segment  increased $123.2 million while sales
by the  Components  segment  were  substantially  equal to fiscal  1997 at $47.5
million.  The  increase in sales by the Special  Machines  segment was due to an
increase in sales from existing  businesses of $14.3 million,  or 4.1%, over the
year ended June 29, 1997, and $108.9 million in  incremental sales from recently
acquired  businesses.  Special Machines  segment sales from existing  businesses
increased due to the growth occurring in sales of packaging  systems,  including
thermoforming and extrusion systems and liquid and tablet packaging lines. Sales
of automated  assembly and test systems were down  slightly  from the prior year
reflecting  lower  sales  of  assembly  systems  to  certain  customers  in  the
electronics industry partially offset by the growth in sales of welding systems,
custom  build-to-print  machines  and  sales  of  systems  to  customers  in the
automotive industry.  The Components segment sales were unchanged from the prior
year reflecting growth in sales of parts to customers in the  transportation and
agricultural  equipment  industries  offset  by  reduced  sales of the  Knitting
Elements business which was sold in May 1998.


GROSS PROFIT

     Gross profit  increased $28.1 million,  or 25.3%, to $139.2 million for the
year ended June 28, 1998, from $111.1 million for the year ended June 29,  1997,
as a result of the sales increases  discussed above.  The gross margin decreased
to 26.8% from 28.0%, primarily as a result of acquired businesses.  Gross margin
exclusive of acquired operations  decreased to 27.7%,  primarily  reflecting the
decline in the gross margin of the Components segment.  The Components segment's
gross  margin  continues  to  remain  below  historical  levels  as a result  of
production  inefficiencies.  The Company  believes it has taken steps to bolster
operating management and implement systems and processes to improve productivity
and profitability.


SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES

     SG&A expenses  increased $20.8 million,  or 38.4%, to $75.2 million for the
year ended June 28, 1998, from $54.4  million  for the year ended June 29, 1997.
The  increase  was  primarily  due to  recently  acquired  businesses,  with the
remaining increase the result of personnel additions, increased costs related to
compensation and incentive programs,  professional fees,  commissions and travel
costs,  most  of  which  related  to the  overall  growth  of the  Company.  The
additional  professional  fees  pertained to the  selection of the core business
system and various tax and human resource consulting  projects.  As a percentage
of consolidated net sales, SG&A expenses increased to 14.5% from 13.7%.


LOSS ON THE SALE OF ASSETS OF KNITTING ELEMENTS DIVISION

     On May 1, 1998,  the Company  sold  substantially  all of the assets of its
non-core  Knitting   Elements   division  for  $9.4  million.   DTI  incurred  a
non-recurring,  non-cash  operating  charge of $1.4 million related to the sale.
The loss, net of the estimated tax benefit,  lowered diluted  earnings per share
by $0.06.


OPERATING INCOME

     Operating income increased $5.9 million, or 10.4%, to $62.6 million for the
year ended June 28, 1998,  from $56.7  million for the year ended June 29, 1997,
as a  result  of the  factors  noted  above.  Excluding  the  Knitting  Elements
divestiture,  the  operating  margin  decreased to 12.3% from 14.3% in the prior
year as a result of the lower operating margins of recently acquired  businesses
and factors discussed above.


INTEREST EXPENSE

     Interest  expense  decreased  to $6.5  million  for the year ended June 28,
1998,  from $11.1  million  for the year ended June 29,  1997.  The  decrease in
interest expense is the result of the public offering of common

                                      -12-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

stock in November 1996, the Convertible  Preferred Securities (as defined below)
offering in June 1997 and  operating  cash flow in fiscal 1998 which allowed the
Company to retire debt.


DIVIDENDS ON  COMPANY-OBLIGATED,  MANDATORILY  REDEEMABLE  CONVERTIBLE PREFERRED
SECURITIES OF SUBSIDIARY DT CAPITAL TRUST

     Dividends  on the  Company-obligated,  mandatorily  redeemable  convertible
preferred securities of subsidiary DT Capital Trust holding solely the Company's
convertible subordinated debentures (Convertible Preferred Securities) were $5.0
million for the fiscal year ended June 28, 1998, and $0.3 million for the fiscal
year ended June 29, 1997.  The  Convertible  Preferred  Securities  offering was
completed in June 1997.


INCOME TAXES

     Provision  for income taxes  increased to $20.2  million for the year ended
June 28, 1998,  from $19.0 million for the year ended June 29, 1997,  reflecting
an  effective  tax rate of  approximately  39.5%  and  41.8%  for  each  period,
respectively.   This  rate  differs  from  statutory   rates  due  to  permanent
differences primarily related to non-deductible goodwill amortization on certain
acquisitions.  The decrease in the effective  tax rate in fiscal 1998  primarily
reflects the effect of lower state taxes.


NET INCOME, EXTRAORDINARY LOSSES AND EARNINGS PER SHARE

     Income before  extraordinary  loss  increased to $30.9 million for the year
ended June 28, 1998, from $26.4  million  for the year ended June 29,  1997 as a
result of the factors noted above.  Due to the extinguishments  and refinancings
of debt in fiscal 1998 and 1997, the Company recognized  extraordinary losses of
$1.2 million,  or $0.10 per share, in July 1997 attributable to the write-off of
$2.0 million  unamortized  deferred  financing fees, less applicable  income tax
benefits of $0.8  million  and $0.3  million,  or $0.03 per share,  in July 1996
attributable  to the write-off of $0.5 million  unamortized  deferred  financing
fees, less applicable income benefits of $0.2 million.  As a result,  net income
was $29.7 million for the year ended June 28, 1998, versus $26.1 million for the
year ended June 29, 1997.

     Diluted earnings per common share before the extraordinary losses and after
the loss on the sale of assets of the Knitting  Elements division in fiscal 1998
were  $2.49 for the year ended June 28,  1998,  versus  $2.41 for the year ended
June 29, 1997. After the extraordinary losses, diluted earnings per common share
were  $2.40 and $2.38 for the years  ended  June 28,  1998,  and June 29,  1997,
respectively.  On a diluted basis,  weighted  average common shares and dilutive
potential common shares  outstanding for the year ended June 28, 1998, were 13.6
million  versus 11.0 million for the year ended June 29,  1997.  The increase in
weighted  average  common  and  dilutive  potential  common  shares  outstanding
reflects the 2.25 million shares of common stock issued in a public  offering in
November  1996  and  the  assumed   conversion  of  the  Convertible   Preferred
Securities.

     Basic earnings per common share before the extraordinary  losses were $2.73
for the year ended June 28, 1998, versus $2.55 for the year ended June 29, 1997.
After the extraordinary  losses,  basic earnings per common share were $2.63 and
$2.52 for the years ended June 28, 1998, and June 29,  1997,  respectively.  The
basic  weighted  average common shares  outstanding  for the year ended June 28,
1998 were 11.3 million versus 10.3 million for the year ended June 29, 1997. The
increase is  primarily  the result of the 2.25  million  shares of common  stock
issued in a public  offering in November  1996.  Prior year  earnings per common
share  and  weighted  average  common  and  dilutive   potential  common  shares
outstanding  have been  restated to reflect  Statement of  Financial  Accounting
Standards No. 128, "Earnings Per Share."

                                      -13-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                       FISCAL 1997 COMPARED TO FISCAL 1996

NET SALES

     Consolidated  net sales  increased  $160.2  million,  or  67.9%,  to $396.1
million for the year ended June 29, 1997, from $235.9 million for the year ended
June 30, 1996. Of the $160.2 million  increase in sales,  $139.3 million was due
to the incremental  sales of recently  acquired  businesses,  with the remaining
$20.9 million,  or 8.8%,  relating to increased sales from existing  businesses.
Recently acquired  businesses included Kalish in August 1995, Arrow in September
1995, Swiftpack in November 1995, AMI in January 1996, Mid-West in July 1996 and
Hansford in September 1996.

     Sales by the Special Machines segment increased $154.8 million and sales by
the  Components  segment  increased  $5.4 million.  The increase in sales by the
Special  Machines  segment  was  due  to an  increase  in  sales  from  existing
businesses  of $16.7  million,  or 8.6%,  over the year ended June 30, 1996, and
$138.1 million in incremental  sales from recently  acquired  businesses.  Sales
from existing  businesses were up due to the strong growth occurring in assembly
systems,  welding  systems,  foam  extrusion  equipment  and  liquid  and tablet
packaging  systems.  The  increases  in sales of assembly  and  welding  systems
reflects  international  expansion  by  certain  customers  and DTI's  increased
penetration  into  new  markets.  Foam  extrusion  equipment  sales  have  grown
significantly,  led by a strong  international  market.  The  growth in sales of
assembly,  welding, foam extrusion and packaging systems was partially offset by
a decrease in sales of custom build-to-print  machines. The increase in sales by
the Components segments was due to an increase in sales from existing businesses
of $4.2 million, or 9.9%, over the year ended June 30, 1996, and $1.2 million in
incremental  sales relating to the Arrow  acquisition.  The increase in sales of
the  Components  segment  is a result of the sales  increases  to a  significant
customer in the  agricultural  equipment  industry and sales to new customers in
new markets. These gains offset the substantial decline in sales to customers in
the transportation industry as a result of the trucking industry downturn.


GROSS PROFIT

     Gross profit  increased $47.7 million,  or 75.2%, to $111.1 million for the
year ended June 29, 1997,  from $63.4  million for the year ended June 30, 1996,
as a result of the sales  increases  discussed  above  and gross  profit  margin
improvement.  The gross  margin  increased  to 28.0% from  26.9%.  Gross  margin
exclusive of acquired operations  increased to 27.7% reflecting a more favorable
product mix within the Special Machines  segment.  The Components  segment gross
margin  decreased to 22.9% from 24.0%  primarily  due to decreased  productivity
resulting from the increase in new business and the related start up costs.


SG&A EXPENSES

     SG&A expenses  increased $19.0 million,  or 53.4%, to $54.4 million for the
year ended June 29, 1997,  from $35.4  million for the year ended June 30, 1996.
The  increase  was  primarily  due to  recently  acquired  businesses,  with the
remaining increase the result of personnel additions, increased costs related to
compensation  and incentive  programs,  consulting fees and increased travel and
marketing costs,  most of which related to the overall growth of the Company and
the  development of group operating  structures and systems.  As a percentage of
consolidated  net  sales,  SG&A  expenses  decreased  to 13.7% from  15.1%.  The
percentage  decrease resulted primarily from lower SG&A expenses as a percentage
of sales associated with recently acquired businesses.


OPERATING INCOME

     Operating income increased $28.8 million,  or 103.0%,  to $56.7 million for
the year ended June 29,  1997,  from $27.9  million  for the year ended June 30,
1996, as a result of the factors noted above.  The operating margin increased to
14.3% from 11.8% in the prior year.


INTEREST EXPENSE

     Interest  expense  increased  to $11.1  million for the year ended June 29,
1997, from $4.8  million  for the year  ended  June 30,  1996.  The increase  in
interest expense  resulted  primarily from the increase in the debt level of the
Company to finance recent  acquisitions  and meet working  capital  requirements
partially  offset 

                                      -14-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

by the net  proceeds  of an  offering  of common  stock in  November  1996.  The
Company's sale of Convertible Preferred Securities had little effect on interest
expense for fiscal 1997 as that offering was not completed until June 1997.


DIVIDENDS ON  COMPANY-OBLIGATED,  MANDATORILY  REDEEMABLE  CONVERTIBLE PREFERRED
SECURITIES OF SUBSIDIARY DT CAPITAL TRUST

     Dividends on the Convertible Preferred Securities were $0.3 million for the
fiscal year ended June 29, 1997. The Convertible  Preferred  Securities offering
was completed in June 1997.


INCOME TAXES

     Provision  for income taxes  increased to $19.0  million for the year ended
June 29, 1997, from $9.6 million for the year ended June 30, 1996, reflecting an
effective tax rate of approximately 42% for each period.  This rate differs from
statutory rates due to permanent differences primarily related to non-deductible
goodwill amortization on certain acquisitions.


NET INCOME, EXTRAORDINARY LOSSES AND EARNINGS PER SHARE

     Income before  extraordinary  loss  increased to $26.4 million for the year
ended June 29, 1997, from $13.5  million  for the year ended June 30, 1996, as a
result of the factors noted above. The Company  recognized an extraordinary loss
of $0.3  million,  or $0.03 per share,  attributable  to the  write-off  of $0.5
million  unamortized  deferred  financing  fees, net of related $0.2 million tax
benefit, due to the extinguishment and refinancing of the Company's debt in July
1996.  As a result,  net  income was $26.1  million  for the year ended June 29,
1997.

     Diluted earnings per common share before the extraordinary  loss were $2.41
for the year ended June 29, 1997, versus $1.50 for the year ended June 30, 1996.
On a diluted basis, weighted average common shares and dilutive potential common
shares  outstanding  for the year ended June 29, 1997,  were 11.0 million versus
9.0 million for the year ended June 30,  1996.  The  increase is a result of the
issuance of common  stock in November  1996 and the  dilutive  effect of certain
common stock equivalents,  including stock options and the estimated  contingent
shares which may be issuable in conjunction with the Kalish acquisition.

     Basic  earnings per common share before the  extraordinary  loss were $2.55
for the year ended June 29, 1997, versus $1.50 for the year ended June 30, 1996.
After the  extraordinary  loss,  basic  earnings per common share were $2.52 and
$1.50 for the years  ended June 29,  1997 and June 30,  1996  respectively.  The
basic  weighted  average common shares  outstanding  for the year ended June 29,
1997, were 10.3 million versus 9.0 million for the year ended June 30, 1996. The
increase  is a result of the  issuance of common  stock in a public  offering in
November 1996.


LIQUIDITY AND CAPITAL RESOURCES

     During  fiscal  1998,  net  cash  provided  by  operating   activities  was
approximately  $43.8  million.  During  fiscal 1997,  net cash used by operating
activities was approximately $0.7 million. During fiscal 1996, net cash provided
by  operating  activities  was  approximately  $15.1  million.  Net income  plus
non-cash  operating  charges  provided  $46.8  million,  $40.1 million and $20.7
million of operating cash flow in fiscal 1998, 1997 and 1996, respectively.

     For the fiscal year ended June 28, 1998,  net increases in working  capital
balances used  operating cash of $3.0 million.  The increase in working  capital
from June 29, 1997  reflects  the growth in the  packaging  systems  businesses,
primarily  contributing  to an increase in  inventory  and costs and earnings in
excess of amounts  billed.  These  increases were partially  offset by the lower
level of  manufacturing  activity  related  to  certain  electronics  customers,
contributing to the overall decrease in accounts receivable.

     In fiscal 1997,  working capital balances increased $40.8 million primarily
due to a $26.5  million  increase  in  accounts  receivable  and a $7.2  million
increase in inventory.  These  increases  were driven by the increased  level of
manufacturing activity in the Special Machines segment and a trend toward larger
dollar  value and  longer  lead time  projects  as well as the  strong  level of
shipments in the final months of the year.

     In fiscal 1996,  working capital balances  increased $5.6 million primarily
due to the increased  investment in current  assets as a result of the increased
sales and backlog, a decrease in customer advances due to  

                                      -15-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

unusually  large  advances  at June 25,  1995, and  large  deposits  to  certain
suppliers at June 30, 1996.

     Working capital balances can fluctuate  significantly  between periods as a
result  of the  significant  costs  incurred  on  individual  contracts  and the
relatively  large amounts  invoiced and collected by the Company for a number of
large  contracts,  and the amounts  and timing of customer  advances or progress
payments associated with certain contracts.

     The generation of $43.8 million of cash from operations  during fiscal 1998
was combined with additional net borrowings on the revolving  credit  agreements
of $40.8  million  and the  proceeds  from the sale of  assets  of the  Knitting
Elements  division of $9.4 million to provide funding for the acquisition of ATT
for $46.7 million,  capital  expenditures of $17.3 million and the repurchase of
0.9 million shares of the Company's common stock for $24.4 million.  The Company
completed  the  repurchase  of an aggregate 1 million  shares of common stock in
July 1998 at a total cost of $27.5 million.  In August 1998, the Company's Board
of Directors  authorized  purchases of up to 1 million  additional shares of the
Company's  common  stock.  The  repurchased  shares will be used  primarily  for
employee stock option programs.

     On July 21,  1997,  the Company  replaced  the Second  Amended and Restated
Credit Facilities  Agreement and the foreign currency  denominated term facility
then  outstanding  with a new $175  million  multi-currency  revolving  and term
credit facility.  The  multi-currency  facility  provides a $10 million Canadian
term loan and a $165  million  revolving  credit  facility,  which  includes  an
approximate  $80  million  sub-limit  for  multi-currency  borrowings  in Pounds
Sterling and Deutsche  Marks.  At June 28, 1998,  the Company had borrowed $88.4
million  under  the  multi-currency   credit  facility.   Borrowings  under  the
multi-currency  facility  bear  interest  at  floating  rates based on the agent
bank's  base rate or LIBOR (at the  option of DTI) plus a  specified  percentage
based on the ratio of funded  debt to  operating  cash flow and the  ratings  of
DTI's  corporate  debt. At June 28, 1998,  interest rates on the  multi-currency
credit  facility  ranged  from 4.1% to 8.5%.  The  agreement  is  secured by the
capital stock of each of the significant  domestic  subsidiaries  and 65% of the
capital  stock of each  significant  foreign  subsidiary  of DTI. The  agreement
contains  certain  financial and other covenants and restrictions and matures in
July 2002.  In  conjunction  with  entering  into the new credit  facility,  the
Company   recognized  an  extraordinary  loss  in  July  1997  of  $1.2  million
attributable to the write-off of $2.0 million of unamortized  deferred financing
fees, net of related $0.8 million tax benefit.

     The Company also maintains  revolving  credit  facilities of  approximately
$3.0  million  through  its  foreign  subsidiaries.  At  June  28,  1998,  total
outstanding indebtedness under such facilities was approximately $1.4 million.

     On  June  12,  1997,   the  Company   completed  a  private   placement  to
institutional  investors of 1,400,000  7.16%  Convertible  Preferred  Securities
(liquidation  preference  of  $50  per  Convertible  Preferred  Security).   The
placement was made through the  Company's  wholly owned  subsidiary,  DT Capital
Trust (Trust), a newly-formed  Delaware business trust. The securities represent
undivided  beneficial  ownership  interests in the Trust.  The sole asset of the
Trust is the $72.2 million  aggregate  principal amount of the 7.16% Convertible
Junior Subordinated  Deferrable Interest Debentures Due 2012 which were acquired
with the proceeds from the offering as well as the sale of Common  Securities to
the Company. The Company's obligations under the Convertible Junior Subordinated
Debentures,  the Indenture  pursuant to which they were issued,  the Amended and
Restated  Declaration  of Trust of the Trust  and the  Guarantee  of DTI,  taken
together, constitute a full and unconditional guarantee by DTI of amounts due on
the Convertible Preferred  Securities.  The Convertible Preferred Securities are
convertible  at the option of the  holders at any time into the common  stock of
DTI at an effective  conversion  price of $38.75 per share and are redeemable at
DTI's  option after June 1, 2000 and  mandatorily  redeemable  in 2012.  The net
proceeds of the  offering of  approximately  $67.8  million  were used by DTI to
retire  indebtedness.  A  registration  statement  relating  to  resales of such
Convertible  Preferred  Securities was declared  effective by the Securities and
Exchange Commission on September 2, 1997.

     During fiscal 1997, the Company also completed the public  offering of 2.25
million shares of its common stock at a price to the public of $34.50 per share,
raising   $73.5  million   after   deducting   issuance   costs.   The  proceeds

                                      -16-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

received by the Company from the offering were used to reduce indebtedness.

     In August 1998,  the Company  completed  the  acquisition  of the assets of
Scheu & Kniss,  Inc., a Louisville,  Kentucky-based manufacturer of tablet press
replacement  parts and rebuild  services serving  primarily the  pharmaceutical,
nutritional,  battery  and  confectionery  industries.  The  purchase  price  of
approximately  $10.2  million was  primarily  financed by  borrowings  under the
Company's  revolving  credit  facility.   Annualized  sales  of  Scheu  &  Kniss
approximate $7.5 million.  As the transaction  occurred subsequent to the end of
fiscal 1998,  the balance  sheet and results of  operations of Scheu & Kniss are
excluded  from the  fiscal  1998  consolidated  balance  sheet  and  results  of
operations of DTI. The pro forma effects of the Scheu & Kniss acquisition on the
Company's  fiscal 1998  financial  position  and results of  operations  are not
material.

     Capital  expenditures  were  $17.3  million  in  fiscal  1998.   Management
anticipates   that  capital   expenditures  for  fiscal  1999  will  range  from
approximately $20 million to $25 million. This includes recurring replacement or
refurbishment  of machinery and  equipment  and purchases to improve  production
methods  or  processes  or to  expand  manufacturing  capabilities.  Incremental
capital  expenditures  in fiscal 1999 are  expected to include the  purchase and
expansion of a previously leased packaging facility for approximately $7 million
and  expected  second  year costs of  approximately  $7  million  related to the
continued implementation of an integrated financial and operations core business
system.  Implementation  of  the  core  business  system  across  the  Company's
operating units is expected to be  substantially  completed by the end of fiscal
2001.  Funding for capital  expenditures is expected to be provided by cash from
operating activities and through the Company's credit facilities.

     The Company paid  quarterly  cash dividends of $0.02 per share on September
15, 1997,  December 15, 1997,  March 14, 1998 and June 15, 1998, to stockholders
of record on September 2, 1997,  November 28, 1997,  February 27, 1998,  and May
29, 1998, respectively.

     Based on its ability to generate funds from operations and the availability
of funds under its current credit facilities,  the Company believes it will have
sufficient  funds  available to meet its  currently  anticipated  operating  and
capital expenditure requirements.


BACKLOG

     The Company's  backlog is based upon customer  purchase  orders the Company
believes are firm. As of June 28, 1998, the Company had $224.8 million of orders
in backlog,  which compares to a backlog of  approximately  $175.5 million as of
June 29, 1997.  The  acquisition  of ATT  increased the backlog $69.3 million at
June 28, 1998, in  comparison  to June 29,  1997.  Excluding  the effect of this
acquisition, backlog would have been $155.5 million at June 28, 1998, a decrease
of $20.0 million, or 11.4%, from a year ago.

     The backlog for the  Special Machines  segment at June 28, 1998, was $219.2
million,  an increase of $51.2 million from a year ago.  Excluding the effect of
the ATT acquisition,  the Special  Machines  backlog  decreased $18.1 million or
10.7%.  This decrease is primarily the result of the drop in orders with certain
electronics  customers.  Backlog for the Components  segment was $5.6 million at
June 28,  1998,  a decrease of $1.9  million,  or 25.3%,  from the $7.5  million
backlog a year ago.  The lower  Components  segment  backlog  is a result of the
Company's efforts to discontinue  production of various low margin parts coupled
with the sale of the Knitting Elements division.

     The level of backlog at any particular time is not  necessarily  indicative
of the  future  operating  performance  of the  Company.  Additionally,  certain
purchase orders are subject to  cancellation by the customer upon  notification.
Certain  orders are also  subject to delays in  completion  and  shipment at the
request of the customer.  The Company believes most of the orders in the backlog
will be recognized as sales during fiscal 1999.


OUTLOOK

     Fiscal 1998 orders for the Special Machines segment were affected by lesser
demand from certain significant  customers in the electronics  industry, a trend
that is expected to continue into fiscal 1999. Additionally, certain significant
agricultural equipment customers within the Components segment are forecasting a
decrease in orders for certain  parts,  resulting  in the  expectation  of lower
revenues  in the first half of fiscal

                                      -17-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

1999. The combination of softness in backlog and the expected  softness in order
opportunities  in the near term for these  significant  customers is expected to
result in lower first half revenues for fiscal 1999.


FOREIGN OPERATIONS

     The  Company's  primary  foreign   operations  are  conducted  through  its
subsidiaries  in  Canada,  the  United  Kingdom  and  Germany.   The  functional
currencies  of these  subsidiaries  are the  currencies  native to the  specific
country in which the  subsidiary is located.  Foreign  operations  accounted for
approximately  18%, 7% and 12% of the Company's net sales and approximately 20%,
9% and 14% of the Company's  earnings from  operations in fiscal 1998,  1997 and
1996, respectively.


MARKET RISK

     In the  ordinary  course of  business,  the  Company  is exposed to foreign
currency and interest rate risks.  These  exposures  primarily  relate to having
investments  in assets  denominated  in  foreign  currencies  and to  changes in
interest  rates.  Fluctuations in currency  exchange rates can impact  operating
results,  including net sales and operating expenses. The Company hedges certain
of its foreign currency  exposure by borrowing in the local functional  currency
in countries  where the Company has  significant  assets  denominated in foreign
currencies.  Such  borrowings  include  Pounds  Sterling,  Canadian  dollars and
Deutsche  Marks in the United  Kingdom,  Canada and Germany,  respectively  (see
Liquidity and Capital Resources).  The Company may utilize derivative  financial
instruments, including forward exchange contracts and swap agreements  to manage
certain of its  foreign  currency  and  interest  rate  risks that it  considers
practical  to  do  so.  The  Company  holds  no  material  derivative  financial
instruments  at June 28,  1998.  The  Company  does not  enter  into  derivative
financial  instruments  for  trading  purposes.  Market  risks that the  Company
currently has elected not to hedge primarily relate to its floating-rate debt.


SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS

     In general, the Company's business is not subject to seasonal variations in
demand for its products.  However,  because  orders for certain of the Company's
products can be several million dollars,  a relatively  limited number of orders
can  constitute  a meaningful  percentage  of the  Company's  revenue in any one
quarterly  period.  As a result,  a relatively  small  reduction or delay in the
number of orders can have a material  impact on the timing of recognition of the
Company's  revenues.  Certain of the  Company's  revenues are derived from fixed
price  contracts.  To the  extent  that  original  cost  estimates  prove  to be
inaccurate,  profitability from a particular contract may be adversely affected.
Gross  margins in the  Special  Machines  segment  may vary  between  comparable
periods as a result of the  variations in  profitability  of contracts for large
orders of special  machines as well as product mix between the various  types of
custom and  proprietary  equipment  manufactured  by the  Company.  Accordingly,
results  of  operations  of the  Company  for  any  particular  quarter  are not
necessarily  indicative  of  results  that may be  expected  for any  subsequent
quarter or related fiscal year.


NEW ACCOUNTING PRONOUNCEMENT

     In June 1997 the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise and Related  Information" (SFAS 131). The statement requires that the
Company  report  certain  information  if  specific  requirements  are met about
operating  segments  of  the  Company  including   information  about  services,
geographic  areas of operation  and major  customers.  SFAS 131 is effective for
years   beginning  after  December  15,  1997.  The  Company  is  reviewing  the
applicability of SFAS 131 on its future reporting requirements.


YEAR 2000 COMPLIANCE

     The Company utilizes software and related computer  technologies  essential
to its operations  and to certain  products that use two digits rather than four
to specify the year, which could result in a date  recognition  problem with the
transition  to the year 2000.  The Company  has  established  a plan,  utilizing
internal  resources,  to  assess  the  potential  impact of the year 2000 on the
Company's  systems and  operations  and to  implement  solutions to address this
issue.   The  Company   is  presently   in   the   assessment   phase   of   its

                                      -18-
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

year 2000 plan which  includes  surveying the Company's  suppliers,  vendors and
service providers for year 2000 compliance.  The Company expects to complete the
assessment phase by November 1998. The Company's plan for remediation includes a
combination of repair and replacement of affected systems. For substantially all
of the Company's internal systems, this remediation is an incidental consequence
of the ongoing  implementation  of a new integrated  core business  system.  The
Company  expects  the  remediation  phase to be  completed  by June 1999 and for
testing to be  conducted  in July 1999.  The Company  expects  that all critical
systems  will be year  2000  compliant  by July  31,  1999.  As the  Company  is
presently  in  the  assessment  phase  of its  year  2000  plan,  the  costs  of
remediation  cannot be quantified at this time. The cost of implementation of an
integrated  core business  system which is year 2000 compliant has been included
in the  Company's  capital  expenditures  plan.  The Company is  dependent  upon
various third  parties,  including  certain  product  suppliers,  to conduct its
business  operations.  The failure of mission-critical  third parties to achieve
year 2000 compliance  could have a material effect on the Company's  operations.
The Company is diligently  quantifying issues and developing contingency sources
to mitigate the risks  associated with  interruptions in its supply chain due to
year 2000  problems.  The Company plans to develop a  contingency  plan by March
1999 in the event its  systems or its  mission-critical  vendors do not  achieve
year 2000 compliance.  However,  there can be no assurance that the Company will
not experience  unanticipated  costs and/or business  interruptions  due to year
2000 problems in its internal systems, its supply chain or from customer product
migration  issues,  or that  such  costs  and/or  interruptions  will not have a
material adverse effect on the Company's consolidated results of operation.


CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

     Certain information contained in this report,  particularly the information
appearing in the Letter to  Shareholders  and in this section under the headings
"Results  of  Operations,"   "Liquidity  and  Capital   Resources,"   "Backlog,"
"Outlook,"  "Market Risk" and "Year 2000  Compliance"  includes  forward-looking
statements.  These  statements  comprising all  statements  herein which are not
historical are based upon the Company's  interpretation  of what it believes are
significant  factors  affecting  its  businesses,   including  many  assumptions
regarding future events,  and are made pursuant to the safe harbor provisions of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange Act of 1934,  as amended.  References  to  "opportunities,"
"growth potential," "objectives" and "goals," the words "anticipate," "believe,"
"estimate,"   "expect,"  and  similar  expressions  used  herein  indicate  such
forward-looking  statements.  Actual results could differ  materially from those
anticipated in any  forward-looking  statements as a result of various  factors,
including economic  downturns in industries  served,  delays or cancellations of
customer orders, delays in shipping dates of products, significant cost overruns
on certain  projects,  foreign currency  exchange rate  fluctuations,  delays in
achieving  anticipated cost savings or in fully implementing  project management
systems  and  possible  future  acquisitions  that may not be  complementary  or
additive.  Additional information regarding certain important factors that could
cause  actual  results  of  operations  or  outcomes  of other  events to differ
materially from any such  forward-looking  statement  appears  elsewhere herein,
including under the heading "Seasonality and Fluctuations in Quarterly Results."

                                      -19-
<PAGE>

        STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

     The accompanying consolidated financial statements of DT Industries,  Inc.,
have been prepared by management,  which is responsible  for their integrity and
objectivity.  The  statements  have been prepared in conformity  with  generally
accepted  accounting  principles and include amounts based on management's  best
estimates and judgements.

     Management  has  established  and  maintains a system of  internal  control
designed to provide  reasonable  assurance that assets are  safeguarded and that
the financial  records reflect the authorized  transactions of the Company.  The
system of internal control includes widely  communicated  statements of policies
and business  practices  that are designed to require all  employees to maintain
high ethical standards in the conduct of Company affairs.  The internal controls
are  augmented  by  organizational  arrangements  that  provide for  appropriate
delegation of authority and division of responsibility.

     The    consolidated    financial    statements   have   been   audited   by
PricewaterhouseCoopers  LLP, independent accountants.  As part of their audit of
the    Company's    fiscal    1998    consolidated     financial     statements,
PricewaterhouseCoopers  LLP considered the Company's  system of internal control
to the extent they deemed  necessary to determine the nature,  timing and extent
of their audit tests.

     The  Board  of  Directors  pursues  its  responsibility  for the  Company's
financial  reporting through its Audit Committee,  which is composed entirely of
outside  directors.  The Audit Committee meets periodically with the independent
accountants and management.  The independent  accountants  have direct access to
the  Audit   Committee,   with  and   without   the   presence   of   management
representatives,  to discuss the results of their audit work and their  comments
on the  adequacy of internal  accounting  controls  and the quality of financial
reporting.


/s/ Stephen J. Gore

Stephen J. Gore
President and Chief Executive Officer


/s/ Bruce P. Erdel

Bruce P. Erdel
Senior Vice President, Finance and Administration




                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and 
Stockholders of DT Industries, Inc.

     In our  opinion,  the  accompanying  consolidated  balance  sheets  and the
related  consolidated  statements  of  operations,  of changes in  stockholders'
equity and of cash flows present fairly, in all material respects, the financial
position of DT Industries,  Inc. and its subsidiaries at June 28, 1998, and June
29, 1997,  and the results of their  operations and their cash flows for each of
the three fiscal years in the period ended June 28,  1998,  in  conformity  with
generally accepted  accounting  principles.  These financial  statements are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which require that we plan and perform the audits to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.


/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
St. Louis, Missouri
August 5, 1998

                                      -20-
<PAGE>

                        CONSOLIDATED FINANCIAL STATEMENTS

                           CONSOLIDATED BALANCE SHEETS


                                                   June 28,       June 29,
(In thousands, except share and per share data)      1998           1997
---------------------------------------------------------------------------
Assets

   Current assets:
      Cash                                        $   6,915      $   2,821
      Accounts receivable, net                       75,634         68,538
      Costs and estimated earnings in 
        excess of amounts billed ($187,221 
        and $78,900, respectively) on
        uncompleted contracts                        66,910         51,643
      Inventories, net                               48,755         42,198
      Prepaid expenses and other                      8,931          7,051
                                                  ----------     ----------
          Total current assets                      207,145        172,251

   Property, plant and equipment, net                69,183         51,132

   Goodwill, net                                    177,578        168,401

   Other assets, net                                  6,096          3,412
                                                  ----------     ----------
                                                  $ 460,002      $ 395,196
                                                  ==========     ==========
Liabilities and stockholders' equity

   Current liabilities:
      Current portion of long-term debt           $      55      $   1,527
      Accounts payable                               33,627         31,353
      Customer advances                              13,573         11,232
      Billings in excess of costs and 
         estimated earnings ($87,703 
         and $36,073, respectively) on 
         uncompleted contracts                        8,218          7,172
      Accrued liabilities                            43,232         29,986
                                                  ----------     ----------
         Total current liabilities                   98,705         81,270
                                                  ----------     ----------
   Long-term debt                                    89,956         46,978

   Deferred income taxes                              7,827          6,435

   Other long-term liabilities                        3,455          5,246
                                                  ----------     ----------
                                                    101,238         58,659
                                                  ----------     ----------
   Commitments and contingencies (Notes 3 and 10)

   Company-obligated, mandatorily redeemable 
      convertible preferred securities of
      subsidiary DT Capital Trust holding 
      solely convertible junior subordinated       
      debentures of the Company                      70,000         70,000
                                                  ----------     ----------
   Stockholders' equity:

      Preferred stock, $.01 par value; 
         1,500,000 shares authorized;
         no shares issued and outstanding

      Common stock, $.01 par value; 
         100,000,000 shares authorized; 
         10,502,762 and 11,300,875 shares 
         issued and outstanding, respectively           113            113

      Additional paid-in capital                    134,608        133,370

      Retained earnings                              80,561         51,784

   Cumulative translation adjustment                   (778)          ---

   Less -
     Treasury stock (873,000 shares), at cost       (24,445)          ---
                                                  ----------     ----------
     Total stockholders' equity                     190,059        185,267
                                                  ----------     ----------
                                                  $ 460,002      $ 395,196
                                                  ==========     ==========

See accompanying Notes to Consolidated Financial Statements.

                                      -21-
<PAGE>

                        CONSOLIDATED FINANCIAL STATEMENTS

                      CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended
                                                         June 28,       June 29,       June 30,
(In thousands, except share and per share data)            1998           1997           1996
-----------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>   
Net sales                                              $ 519,342      $ 396,110      $ 235,946

Cost of sales                                            380,126        285,044        172,568
                                                       ----------     ----------     ----------
Gross profit                                             139,216        111,066         63,378

Selling, general and administrative expenses              75,246         54,367         35,445

Loss on sale of assets of Knitting Elements
   division (Note 3)                                       1,383           ---            ---
                                                       ----------     ----------     ----------
Operating income                                          62,587         56,699         27,933

Interest expense, net                                      6,509         11,088          4,799

Dividends on Company-obligated, mandatorily 
   redeemable convertible preferred securities
   of subsidiary DT Capital Trust holding 
   solely convertible junior subordinated 
   debentures of the Company, at 7.16% per
   annum                                                   5,012            251            --
                                                       ----------     ----------     ----------
Income before provision for income taxes
   and extraordinary loss                                 51,066         45,360         23,134

Provision for income taxes                                20,182         18,979          9,643
                                                       ----------     ----------     ----------

Income before extraordinary loss                          30,884         26,381         13,491

Extraordinary loss on debt refinancing, net of income
tax benefits of $800 and $216, respectively                1,200            324           ---
                                                       ----------     ----------     ----------
Net income                                             $  29,684      $  26,057      $  13,491
                                                       ==========     ==========     ==========

Basic earnings per common share:

    Income before extraordinary loss                       $2.73          $2.55          $1.50

    Extraordinary loss                                      0.10           0.03           ---
                                                       ----------     ----------     ----------
    Net income                                             $2.63          $2.52          $1.50
                                                       ==========     ==========     ==========

Diluted earnings per common share:

    Income before extraordinary loss                       $2.49          $2.41          $1.50

    Extraordinary loss                                      0.09           0.03           ---
                                                       ----------     ----------     ----------
    Net income                                             $2.40          $2.38          $1.50
                                                       ==========     ==========     ==========

Weighted average common shares outstanding:

    Basic                                              11,297,409     10,349,444      9,001,250

    Diluted                                            13,621,481     11,022,080      9,001,250
                                                       ==========     ==========     ==========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

                                      -22-
<PAGE>

                        CONSOLIDATED FINANCIAL STATEMENTS

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                           Additional                      Cumulative
                                              Common        paid-in         Retained       translation     Treasury
(In thousands)                                stock         capital         earnings       adjustment        stock          Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>             <C>             <C>            <C>            <C>
Balance, June 25, 1995                      $      90       $  61,162       $  13,768       $    ---       $    ---       $  75,020

Exercise of stock options                                          17                                                            17

Payments on stock subscriptions                                    76                                                            76
   receivable

Dividends declared and paid                                                      (720)                                         (720)

Net income                                                                     13,491                                        13,491
                                           -----------     -----------     -----------     -----------    -----------    -----------
Balance, June 30, 1996                             90          61,255          26,539            ---            ---          87,884

Issuance of common stock                           23          73,474                                                        73,497

Exercise of stock options                                         678                                                           678

Payments on stock subscriptions                                   213                                                           213
   receivable

Issuance costs of Company-obligated, 
   mandatorily redeemable convertible
   preferred securities of subsidiary 
   DT Capital Trust holding solely
   convertible junior subordinated 
   debentures of the Company                                   (2,250)                                                       (2,250)

Dividends declared and paid                                                      (812)                                         (812)

Net income                                                                     26,057                                        26,057
                                           -----------     -----------     -----------     -----------    -----------    -----------
Balance, June 29, 1997                            113         133,370          51,784            ---            ---         185,267

Exercise of stock options                                       1,119                                                         1,119

Payments on stock subscriptions
   receivable                                                     119                                                           119

Dividends declared and paid                                                      (907)                                         (907)

Net income                                                                     29,684                                        29,684

Stock repurchase                                                                                             (24,445)       (24,445)

Cumulative translation adjustment                                                                (778)                         (778)
                                           -----------     -----------     -----------     -----------    -----------    -----------
Balance, June 28, 1998                      $     113       $ 134,608       $  80,561       $    (778)     $ (24,445)     $ 190,059
                                           ===========     ===========     ===========     ===========    ===========    ===========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

                                      -23-
<PAGE>

                        CONSOLIDATED FINANCIAL STATEMENTS

                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended
                                                         June 28,       June 29,       June 30,
(In thousands)                                             1998           1997           1996
-----------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>   
Cash flows from operating activities:

   Net income                                          $  29,684      $  26,057      $  13,491

   Adjustments to reconcile net income to 
      net cash provided (used) by operating
      activities:

      Depreciation                                         8,279          5,955          3,411

      Amortization                                         5,471          5,098          2,705

      Deferred income tax provision                          203          2,612            981

      Loss on debt refinancing                             2,000            540

      Loss on sale of assets of Knitting 
         Elements division                                 1,383

      Other                                                 (190)          (155)           116

   (Increase) decrease in current assets, 
      excluding the effect of acquisitions:

      Accounts receivable                                  4,127        (26,482)         4,274

      Costs and earnings in excess of amounts billed        (979)        (2,935)        (8,520)

      Inventories                                         (3,083)        (7,212)         3,873

      Prepaid expenses and other                           1,604          3,171         (5,797)

   Increase (decrease) in current liabilities,
      excluding the effect of acquisitions:

      Accounts payable                                    (3,884)        (3,015)           838

      Accrued liabilities                                    981           (693)           189

      Customer advances                                   (2,460)        (4,300)        (3,765)

      Billings in excess of costs and earnings on
          uncompleted contracts                            1,047          2,115          3,351

      Other                                                 (356)        (1,463)           (62)
                                                       ----------     ----------     ----------
         Net cash provided (used) by 
            operating activities                          43,827           (707)        15,085
                                                       ----------     ----------     ----------
Cash flows from investing activities:

      Capital expenditures                               (17,314)       (11,850)       (10,249)

      Acquisition of Kalish net assets, Arrow net
         assets, Swiftpack stock and AMI stock, net 
         of cash acquired of $2,484                                                    (29,614)

      Acquisition of Mid-West stock and Hansford stock,
         net of cash acquired of $21,573                                (92,756)

      Acquisition of Lucas Assembly and Test Systems
         net assets, net of cash acquired of $91         (46,721)

      Proceeds from the sale of assets of Knitting 
         Elements division                                 9,375
                                                       ----------     ----------     ----------

         Net cash used in investing activities           (54,660)      (104,606)       (39,863)
                                                       ----------     ----------     ----------
</TABLE>
                                                                     (continued)
See accompanying Notes to Consolidated Financial Statements.

                                      -24-
<PAGE>

                       CONSOLIDATED FINANCIAL STATEMENTS

                CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended
                                                         June 28,       June 29,       June 30,
(In thousands)                                             1998           1997           1996
-----------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>   
Cash flows from financing activities:

   Proceeds from issuance of term debt                 $              $  96,708      $  37,031

   Payments on borrowings                                (49,220)      (129,518)       (14,063)
                                                                                   
   Net borrowings from revolving loans                    89,986            918          3,633

   Debt issuance costs                                      (947)        (2,510)          (632)

   Net proceeds from issuance of 
      Company-obligated, mandatorily redeemable
      convertible preferred securities of 
      subsidiary DT Capital Trust holding
      solely convertible junior subordinated
      debentures of the Company                                          67,750

   Payment for repurchase of stock                       (24,445)

   Net proceeds from issuance of common stock              1,119         74,175             17

   Payments on stock subscriptions receivable                119            213             76

   Dividends paid on common stock                           (907)          (812)          (720)
                                                       ----------     ----------     ----------
      Net cash provided by financing activities           15,705        106,924         25,342
                                                       ----------     ----------     ----------
Effect of exchange rate changes                             (778)          ---            ---
                                                       ----------     ----------     ----------
Net increase in cash                                       4,094          1,611            564

Cash and cash equivalents at beginning of period           2,821          1,210            646
                                                       ----------     ----------     ----------
Cash and cash equivalents at end of period             $   6,915      $   2,821      $   1,210
                                                       ==========     ==========     ==========

Supplemental disclosures of cash flow information:

   Cash paid during the period for:

      Interest                                         $   6,233      $  10,630      $   4,280

      Income taxes                                     $  11,447      $  16,497      $   6,369
</TABLE>

Supplemental disclosure of non-cash investing and financing activities:

The Company  purchased  Lucas Assembly and Test Systems,  which has been renamed
Assembly   Technology  and  Test  (ATT)  in  fiscal  1998,  Mid-West  Automation
Enterprises,  Inc. (Mid-West) and Hansford Manufacturing  Corporation (Hansford)
in fiscal 1997; and H.G. Kalish Inc. (Kalish),  Arrow Precision  Elements,  Inc.
(Arrow),  Swiftpack  Automation Limited (Swiftpack) and Assembly Machines,  Inc.
(AMI) in fiscal 1996. The following table  represents  summary  information with
respect to these acquisitions:

<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended
                                                         June 28,       June 29,       June 30,
(In thousands)                                             1998           1997           1996
-----------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>   
Fair value of assets acquired                          $  56,283      $  55,185      $  25,447

Fair value assigned to goodwill                           14,248         68,226         36,071

Cash paid                                                (46,721)       (92,756)       (29,614)
                                                       ----------     ----------     ----------
Liabilities assumed                                    $  23,810      $  30,655      $  31,904
                                                       ==========     ==========     ==========
</TABLE>

See accompanying Notes to consolidated Financial Statements.

                                      -25-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (dollars in thousands, except per share data)


NOTE 1 - BUSINESS

     DT  Industries,   Inc.  (DTI  or  the  Company)  is  a  leading   designer,
manufacturer  and integrator of automated  production  systems used to assemble,
test or package  industrial  and consumer  products.  The Company also  produces
precision metal  components,  tools and dies for a broad range of  applications.
The Company markets its products  through three product  groups:  DTI Automation
and DTI Packaging,  comprising the Special Machines segment,  and DTI Components
(Components segment).  The Company's operations are located in North America and
Europe, but its products are sold throughout the world.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accounting  policies  utilized by the Company in the preparation of the
financial  statements conform to generally accepted accounting  principles,  and
require that management make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual amounts could differ from these estimates.

     The significant  accounting  policies followed by the Company are described
below.


REVENUE RECOGNITION

     The percentage of completion  method of accounting is used by the Company's
Special  Machines  segment to recognize  revenues and related  costs.  Under the
percentage of  completion  method,  revenues are measured  based on the ratio of
engineering  and  manufacturing  labor hours  incurred to date compared to total
estimated  engineering and  manufacturing  labor hours or, for certain  customer
contracts,  the ratio of total costs incurred to date to total estimated  costs.
Any revisions in the estimated total costs or values of the contracts during the
course of the work are  reflected  when the facts  that  require  the  revisions
become known.  Revenue from the sale of products  manufactured  by the Company's
Components segment is recognized upon shipment to the customer.

     Costs and related expenses to manufacture the products are recorded as cost
of sales when the related revenue is recognized. Provisions for estimated losses
on  uncompleted  contracts  are made in the  period  in which  such  losses  are
determined.

     Cash  deposits  received  from  customers  on  contracts  in  progress  are
reflected  as customer  advances  in the  consolidated  balance  sheet until the
related revenue is recognized in accordance with the procedures described above.
Costs and  estimated  earnings  in excess of  amounts  billed on  percentage  of
completion  contracts represent costs incurred and earnings recognized in excess
of  customer  advances  received.  Billings  in  excess  of costs  incurred  and
estimated earnings on uncompleted contracts represent customer advances received
in excess of costs incurred and earnings recognized.


PRINCIPLES OF CONSOLIDATION

     The consolidated  financial  statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.


FOREIGN CURRENCY TRANSLATION

     The accounts of the Company's foreign  subsidiaries are maintained in their
respective local currencies.  The accompanying consolidated financial statements
have been translated and adjusted to reflect U.S. dollars on the basis presented
below.

     Assets  and  liabilities  are  translated  into U.S.  dollars  at  year-end
exchange  rates.  Income and expense  items are  translated  at average rates of
exchange prevailing during the year.  Adjustments  resulting from the process of
translating  the  consolidated  amounts into U.S.  dollars are  accumulated in a
separate  translation  adjustment  account,  included in  stockholders'  equity.
Common stock and additional  paid-in  capital are translated at historical  U.S.
dollar  equivalents  in  effect  at the date of  acquisition.  Foreign  currency
transaction  gains and  losses  are  included  in  earnings  currently.  Foreign
currency  transaction  gains  and  losses  were  not  material  for all  periods
presented.


CASH AND CASH EQUIVALENTS

     All highly liquid debt  instruments  purchased with original  maturities of
three months or less are classified as cash equivalents.

                                      -26-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONCENTRATIONS OF CREDIT RISK

     The Company  sells a majority  of its  special  machines to a wide range of
manufacturing  companies.  Products  of  the  components  segment  are  sold  to
customers  primarily  in the  agricultural  equipment,  heavy  truck  and  heavy
equipment  industries.  The Company performs  ongoing credit  evaluations of its
customers and generally does not require collateral,  although many customers of
the Special  Machines  segment pay deposits to the Company  prior to shipment of
its products.  The Company  maintains  reserves for potential  credit losses and
historically such losses have been within management's expectations. At June 28,
1998, the Company had no significant concentration of credit risk.


INVENTORIES

     Domestic inventories are stated at the lower of cost,  determined using the
last-in,  first-out (LIFO) method, or market, with the exception of raw material
inventories and the material component of work in process inventories at certain
subsidiaries,  including foreign  subsidiaries,  totaling  approximately $24,595
which are accounted for using the first-in, first-out method (FIFO). For various
tax and statutory reasons, inventories of the Company's foreign subsidiaries are
stated  at FIFO  costs.  The  effects  on  financial  position  and  results  of
operations  from  applying  the FIFO method for such  material  inventories  and
inventories  of  foreign  subsidiaries  are  immaterial.  For other  inventories
maintained  on a LIFO basis,  cost under the LIFO method  approximates  the FIFO
method.   Inventories   include  the  cost  of   materials,   direct  labor  and
manufacturing overhead.

     Obsolete  or  unsaleable  inventories  are  reflected  at  their  estimated
realizable values.


PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and equipment is recorded at cost and is depreciated using
the  straight-line  method over the  estimated  useful lives of the assets which
range from 3 to 39.5 years. Properties held under capital leases are recorded at
the present  value of the  non-cancelable  lease  payments  over the term of the
lease and are  amortized  over the  shorter of the lease  term or the  estimated
useful lives of the assets.

     Expenditures for repairs, maintenance and renewals are charged to income as
incurred.  Expenditures  which improve an asset or extend its  estimated  useful
life are capitalized.  When properties are retired or otherwise disposed of, the
related cost and accumulated  depreciation are removed from the accounts and any
gain or loss is included in income.


GOODWILL

     The excess of the purchase price over the fair value of net assets acquired
in  business   combinations   (goodwill)  is  capitalized  and  amortized  on  a
straight-line  basis  over  periods  ranging  from  15  to  40  years.  Goodwill
amortization charged to income for the years ended June 28, 1998, June 29, 1997,
and June 30, 1996, was approximately  $4,876,  $4,312 and $2,386,  respectively.
Accumulated amortization  at June 28, 1998, and June 29, 1997, was approximately
$13,914 and $9,916, respectively.

     The carrying value of goodwill is assessed for recoverability by management
based  on an  analysis  of  future  expected  cash  flows  from  the  underlying
operations of the Company.  Management  believes there has been no impairment at
June 28, 1998.


ENVIRONMENTAL LIABILITIES

     Environmental  expenditures that relate to current  operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past  operations,  and that do not  contribute  to  current  or future
revenue  generation,  are expensed.  Liabilities are recorded when environmental
assessments  and/or  remedial  efforts  are  probable,  and  the  costs  can  be
reasonably  estimated.  Generally,  the timing of these accruals  coincides with
completion of a feasibility  study or the Company's  commitment to a formal plan
of action.


FAIR VALUE OF FINANCIAL INSTRUMENTS

     For purposes of financial  reporting,  the Company has  determined the fair
value of financial  instruments  approximates book value at June 28, 1998, based
on terms currently available to the Company in financial markets.


INCOME TAXES

     The Company files a  consolidated  federal income tax return which includes
its  domestic  subsidiaries.  The  Company has adopted  Statement  of  Financial
Accounting  Standards No. 109,  "Accounting for Income Taxes" (SFAS 109).  Under
SFAS 109, the current or 

                                      -27-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

deferred  tax  consequences  of a  transaction  are  measured  by  applying  the
provisions of enacted laws to determine the amount of taxes payable currently or
in future years.  Deferred  income taxes are provided for temporary  differences
between  the  income  tax bases of assets and  liabilities,  and their  carrying
amounts for financial reporting purposes.


EARNINGS PER SHARE

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards  No. 128 (SFAS 128),  "Earnings  Per Share,"
which changed the method of computation  of earnings per share (EPS).  SFAS 128,
which was adopted by the Company in fiscal  1998,  requires the  computation  of
Basic EPS and Diluted EPS. Basic EPS is based on the weighted  average number of
outstanding  common shares during the period but does not consider  dilution for
potentially dilutive securities.  Diluted EPS reflects the effects of conversion
of the Company's Convertible Preferred Securities and elimination of the related
dividends, net of applicable income taxes, plus dilutive potential common shares
consisting of certain shares  subject to stock options and  contingent  purchase
price  payable in common  stock  related to an acquired  business.  The dilutive
potential  common shares  arising from the effect of  outstanding  stock options
were computed using the treasury stock method,  if dilutive.  Earnings per share
for fiscal 1997 and 1996 have been  restated in  accordance  with SFAS 128.  See
Note 13 for additional information.


EMPLOYEE STOCK-BASED COMPENSATION

     The  Company  accounts  for  employee  stock  options  in  accordance  with
Accounting  Principles Board No. 25,  "Accounting for Stock Issued to Employees"
(APB 25).  Under APB 25, the  Company  applies  the  intrinsic  value  method of
accounting.  For employee stock options  accounted for using the intrinsic value
method,  no compensation  expense is recognized  because the options are granted
with an  exercise  price  equal to the market  value of the stock on the date of
grant. During fiscal 1997,  Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based  Compensation"  (SFAS 123), became effective for the
Company.  SFAS 123 prescribes the recognition of  compensation  expense based on
the fair  value of  options  or stock  awards  determined  on the date of grant.
However,  SFAS 123 allows  companies to continue to apply the valuation  methods
set forth in APB 25. For companies that continue to apply the valuation  methods
set forth in APB 25, SFAS 123 mandates  certain pro forma  disclosures as if the
fair value method had been utilized. See Note 8 for additional information.


FISCAL YEAR

     The  Company  uses a 52-53 week fiscal year that ends on the last Sunday in
June.


NOTE 3 - ACQUISITIONS AND DISPOSITION

     The following table summarizes certain information  regarding the Company's
acquisitions during the past three years:

                                                                      NET CASH
                                                                      PURCHASE
     DATE                          BUSINESS                            PRICE
--------------       -------------------------------------         -------------

August 1995          H.G. Kalish Inc.                                 $ 16,400

September 1995       Arrow Precision Elements, Inc.                      3,000

November 1995        Swiftpack Automation Ltd.                          18,400

January 1996         Assembly Machines, Inc.                             6,700

July 1996            Mid-West Automation Enterprises, Inc.              75,179

September 1996       Hansford Manufacturing Corporation                 17,577

July 1997            Lucas Assembly and Test Systems                    46,721

     During the past three fiscal  years,  the Company  made seven  acquisitions
which have  significantly  expanded its product lines.  These  acquisitions were
each  accounted  for  under  the  purchase  method of  accounting  and  financed
primarily  through bank  borrowings,  resulting in an increase in the  Company's
debt.  Results of operations of each acquired  company have been included in the
Company's  consolidated  financial statements from the date of acquisition.  The
purchase price of each  acquisition  was allocated to the assets and liabilities
acquired,  based on their estimated fair value at the date of  acquisition.  The
excess of purchase  price over the estimated  fair value of net assets  acquired
was, in each instance, recorded as goodwill.

                                      -28-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     As part of the Kalish and  Swiftpack  acquisitions,  DTI has agreed to make
additional  payments to the sellers determined by formulae based on the earnings
of the acquired  businesses.  The additional purchase price specified within the
Kalish  agreement,  based upon  earnings from the  acquisition  date to June 28,
1998,  amounted to $3,000  payable in stock or cash and was  recorded in accrued
liabilities as of June 28, 1998. The additional  purchase price accrued resulted
in additional goodwill related to this acquisition.  The Company does not expect
to make any payments related to the Swiftpack agreement.

     During  December  1997,  an agreement  was reached with the former owner of
Hansford which finalized the purchase price and cancelled the earnout provisions
of the purchase agreement.  No additional purchase price was paid as a result of
this agreement.

     On May 1, 1998, the Company  completed the sale of substantially all of the
assets of its non-core Knitting Elements division of Detroit Tool Metal Products
Co., a wholly owned subsidiary of DT Industries,  Inc., for $9,375.  The loss on
the sale was approximately  $1,383.  The loss, net of the estimated tax benefit,
reduced diluted earnings per share by $0.06.

     The following  table sets forth pro forma  information for DTI as if all of
the previously discussed acquisitions had taken place on June 30, 1997, and July
1, 1996, respectively.  The effect of the sale of the Knitting Elements division
is immaterial.  This  information is unaudited and does not purport to represent
actual revenue, net income and earnings per share had the acquisitions  actually
occurred on June 30, 1997 and July 1, 1996, respectively.

                                                    Pro Forma Information
                                                         (unaudited)
                                                  -------------------------
                                                   June 28,       June 29,
Fiscal Year Ended                                    1998           1997
-----------------                                 ----------     ----------

Net sales                                         $ 529,364      $ 525,627

Income before extraordinary loss                  $  30,969      $  27,293

Earnings per common share:

     Basic                                        $    2.74      $    2.64
     Diluted                                      $    2.50      $    2.49


NOTE 4 - FINANCING

     Long-term debt consisted of the following:

                                                   June 28,       June 29,
                                                     1998           1997
                                                  ----------     ----------
Notes payable to bank under a term
   and revolving loan agreement:

   Term loan                                      $  10,000      $  10,000

   Revolving loan                                    78,420         16,068

Foreign currency denominated term facility, 
   refinanced in July 1997                                          20,347

Foreign currency denominated revolving 
   credit facilities                                  1,400          1,571

Other long-term debt (including capitalized 
   leases) maturing at various dates through
   fiscal 2003                                          191            519
                                                  ----------     ----------
                                                     90,011         48,505

Less -  current portion                                  55          1,527
                                                  ----------     ----------
                                                  $  89,956      $  46,978
                                                  ==========     ==========

     On July 21, 1997 the Company replaced its credit facilities with a $175,000
multi-currency revolving and term credit facility.  The multi-currency  facility
provides a $10,000 Canadian term loan and a $165,000  revolving credit facility,
which includes an approximate $80,000 sublimit for multi-currency  borrowings in
Pounds Sterling and Deutsche Marks. Borrowings under the multi-currency facility
bear interest at floating rates based on the agent bank's base rate or LIBOR (at
the option of DTI),  plus a  specified  percentage  based on the ratio of funded
debt to operating cash flow and the ratings of DTI's corporate debt. At June 28,
1998,  interest rates on the  multi-currency  facility ranged from 4.1% to 8.5%.
The  facility  requires  commitment  fees of  0.125%  to  0.25%  per  annum  (as
determined by the Company's ratio of funded debt to operating cash flow) payable
quarterly on any unused portion of the multi-currency facility. The agreement is
secured by the capital stock of each of the  significant  domestic  subsidiaries
and 65% of the capital stock of each significant foreign subsidiary of DTI.  The
agreement,  which  matures in July 2002,  contains  certain  financial and other
covenants and restrictions.  The Company

                                      -29-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

was in  compliance  with such  covenants at June 28, 1998. In  conjunction  with
entering into the new credit facility,  the Company  recognized an extraordinary
loss  in July  1997  of  $1,200  attributable  to the  write-off  of  $2,000  of
unamortized  deferred  financing  fees,  net of related  $800 tax  benefit.  The
Company also recognized an extraordinary  loss in July 1996 of $324 attributable
to the write-off of $540  unamortized  deferred  financing  fees, net of related
$216 tax benefit.

     In  addition,  the  Company has  revolving  credit  facilities  through its
foreign subsidiaries of approximately  $3,000, of which approximately $1,400 was
outstanding at June 28, 1998.


NOTE 5 - COMPANY-OBLIGATED,   MANDATORILY   REDEEMABBE   CONVERTIBLE   PREFERRED
SECURITIES OF SUBSIDIARY DT CAPITAL  TRUST  HOLDING  SOLELY  CONVERTIBLE  JUNIOR
SUBORDINATED DEBENTURES OF THE COMPANY (CONVERTIBLE PREFERRED SECURITIES)

     On  June  12,  1997,   the  Company   completed  a  private   placement  to
institutional  investors of 1,400,000  7.16%  Convertible  Preferred  Securities
(liquidation  preference  of  $50  per  Convertible  Preferred  Security).   The
placement was made through the  Company's  wholly owned  subsidiary,  DT Capital
Trust (Trust),  a Delaware  business trust. The securities  represent  undivided
beneficial  ownership interests in the Trust. The sole asset of the Trust is the
$72,165 aggregate  principal amount of the 7.16% Convertible Junior Subordinated
Deferrable  Interest  Debentures  Due 2012 which were acquired with the proceeds
from the offering as well as the sale of common  securities to the Company.  The
Company's obligations under the Convertible Junior Subordinated Debentures,  the
Indenture  pursuant  to  which  they  were  issued,  the  Amended  and  Restated
Declaration  of Trust of the Trust and the  Guarantee  of DTI,  taken  together,
constitute  a full and  unconditional  guarantee  by DTI of  amounts  due on the
Convertible  Preferred  Securities.  The  Convertible  Preferred  Securities are
convertible  at the option of the  holders at any time into the common  stock of
DTI at an effective  conversion  price of $38.75 per share and are redeemable at
DTI's  option after June 1, 2000, and  mandatorily redeemable  in 2012.  The net
proceeds of the  offering of  approximately  $67,750  were used by DTI to retire
indebtedness.  A registration  statement relating to resales of such Convertible
Preferred  Securities  was  declared  effective by the  Securities  and Exchange
Commission on September 2, 1997.


NOTE 6 - INCOME TAXES

     Income before provision for income taxes and extraordinary losses was taxed
under the following jurisdictions:

                                June 28,       June 29,       June 30,
For the fiscal years ended        1998           1997           1996
-----------------------------------------------------------------------

   Domestic                    $  45,895      $  42,630      $  20,539

   Foreign                         5,171          2,730          2,595
                               ----------     ----------     ----------
                               $  51,066      $  45,360      $  23,134
                               ==========     ==========     ==========

The provision for income taxes charged to operations was as follows:

                                          Fiscal Year Ended
                               ----------------------------------------
                                June 28,       June 29,       June 30,
                                  1998           1997           1996
                               ----------     ----------     ----------
Current

   U.S. Federal                $  12,416      $  12,564      $   6,474
   State                             673          2,789          1,373
   Foreign                         1,835          1,014            815
                               ----------     ----------     ----------
      Total current               14,924         16,367          8,662
                               ----------     ----------     ----------

Deferred

   U.S. Federal                    4,809          2,111            734
   State                             333            397            125
   Foreign                           116            104            122
                               ----------     ----------     ----------
      Total deferred               5,258          2,612            981
                               ----------     ----------     ----------
Total Provision                $  20,182      $  18,979      $   9,643
                               ----------     ----------     ----------

     The  provision  for income  taxes for the fiscal years ended June 28, 1998,
and June 29, 1997, is net of income tax benefits of $800 and $216  respectively,
related to the extraordinary losses as described in Note 4.

                                      -30-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax liabilities (assets) are comprised of the following:

<TABLE>
<CAPTION>
                                                             June 28,       June 29,
                                                               1998           1997
                                                            ----------     ----------
<S>                                                         <C>            <C>
Deferred tax liabilities

   Depreciation                                             $   5,592      $   5,331

   Inventory costing capitalization, net                          833          1,157

   Earnings recognized under percentage of completion           2,432          3,207

   Goodwill and intangibles amortization                        2,797          2,401

   Other                                                          484            239
                                                            ----------     ----------
Total deferred tax liabilities                                 12,138         12,335
                                                            ----------     ----------
Deferred tax assets

   Postretirement benefit accrual                                (634)          (714)

   Project and inventory reserves                              (3,900)        (1,680)

   Product liability reserves                                    (488)          (678)

   Bad debt reserves                                             (862)          (632)

   Other accruals                                              (3,000)        (3,435)

   Other                                                         (636)        (2,068)
                                                            ----------     ----------
Total deferred tax assets                                      (9,520)        (9,207)
                                                            ----------     ----------
Deferred tax assets valuation allowance                           998          1,029
                                                            ----------     ----------
Total net deferred tax liability                                3,616          4,157

Current portion included in prepaid expenses and other          4,211          2,278
                                                            ----------     ----------
Long-term deferred tax liability                            $   7,827      $   6,435
                                                            ==========     ==========
</TABLE>

     The deferred tax assets  valuation  allowance  has been recorded to reflect
the potential non-realization of certain deductible temporary differences.

     The  effective tax rates differ from the U.S.  Federal  income tax rate for
the following reasons:

<TABLE>
<CAPTION>
                                                                  Fiscal year ended
                                                       ----------------------------------------
                                                         June 28,       June 29,       June 30,
                                                           1998           1997           1996
                                                       ----------     ----------     ----------
<S>                                                       <C>            <C>            <C>   
U.S. statutory rate                                       35.0%          35.0%          35.0%

Increase in rate resulting from:

   Non-deductible goodwill amortization                    2.2            2.2            1.8

   State taxes                                             1.3            4.5            4.2

   Other                                                   1.0            0.1            0.7
                                                       ----------     ----------     ----------
                                                          39.5%          41.8%          41.7%
                                                       ==========     ==========     ==========
</TABLE>


NOTE 7 - RETIREMENT PLANS

     The Company offers  substantially all of its employees a retirement savings
plan under Section 401(k) of the Internal  Revenue Code. Each employee may elect
to enter a written  salary  deferral  agreement  under which a maximum of 15% of
their salary,  subject to aggregate  limits required under the Internal  Revenue
Code, may be contributed to the plan. The Company will match a percentage of the
employee's contribution up to a specified maximum percentage of their salary. In
addition, the Company generally is required to make a mandatory contribution and
may make a  discretionary  contribution  from  profits.  During the fiscal years
ended  June 28,  1998,  June 29,  1997, and June  30,  1996,  the  Company  made
contributions of approximately $3,023, $2,377 and $1,596, respectively.

     In  connection  with the  acquisition  of ATT in fiscal  1998,  the Company
recorded an  aggregate  net  liability  of $417  representing  the excess of the
estimated  projected benefit obligation (PBO) over the fair value of plan assets
relative  to the  defined  benefit  plans for its  international  division.  The
following  sets forth  reconciliations  of the PBO and fair value of plan assets
from the date of acquisition to June 28, 1998.

                                          Reconciliation of Projected
                                          Benefit Obligation from the
                                            Date of Acquisition to
                                                 June 28, 1998
                                          ---------------------------
As of the acquisition date                         $ 13,874

     Service cost                                       863

     Interest cost                                    1,030

     Actuarial loss                                   1,664

     Other                                              253
                                          ---------------------------
As of June 28, 1998                                $ 17,684
                                          ===========================


                                          Reconciliation of the Fair
                                           Value of Plan Assets from
                                          the Date of Acquisition to
                                                 June 28, 1998
                                          ---------------------------
As of the acquisition date                         $ 13,457

     Return on plan assets                            2,740

     Employer contribution                              716

     Other                                              253
                                          ---------------------------
As of June 28, 1998                                $ 17,166
                                          ===========================

                                      -31-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The following sets forth the funded status of the defined  benefit plans as
of June 28, 1998:

Projected benefit obligation                       $ 17,684

Fair value of plan assets                            17,166
                                          ---------------------------
Excess of projected benefit obligation
     over plan assets                                   518

Unrecognized net loss                                    49
                                          ---------------------------
Net pension liability                              $    469
                                          ---------------------------

     The following  sets forth the defined  benefit  pension plans' net periodic
pension cost for the period from the date of acquisition to June 28, 1998:

                                          For the Period from the Date of
                                           Acquisition to June 28, 1998
                                          -------------------------------
     Service cost                                  $    863

     Interest cost                                    1,030

     Gain on net assets                              (2,094)

     Other                                              253
                                          -------------------------------
     Net periodic pension cost                     $     52
                                          ===============================

     The  weighted-average  assumptions used to determine the PBO as of June 28,
1998 are as follows:

     Discount rate                                     6.5%

     Expected return on plan assets                    8.5%

     Rate of compensation increase                     4.0%


NOTE 8 - STOCK OPTION PLANS

     The Company has three stock option plans:  the 1994  Employee  Stock Option
Plan  (Employee  Plan),  the 1994  Directors  Non-Qualified  Stock  Option  Plan
(Directors Plan) and the 1996 Long-Term Incentive Plan (LTIP Plan).

     The Employee  Plan  provides  for the granting of options to the  Company's
executive  officers  and key  employees  to purchase  shares of common  stock at
prices equal to the fair market value of the stock on the date of grant. Options
to  purchase  up to  900,000  shares of common  stock may be  granted  under the
Employee  Plan.  Options  outstanding  at June 28, 1998,  entitle the holders to
purchase  common  stock at prices  ranging  between  $10.25 and $34.50.  Options
outstanding become exercisable over five years from the date of grant. The right
to exercise  the options  expires ten years from the date of grant or earlier if
an option holder ceases to be employed by the Company.

     The  Directors  Plan  provides for the granting of options to the Company's
directors,  who are not employees of the Company,  to purchase  shares of common
stock  at  prices  equal to the fair  market  value of the  stock on the date of
grant.  Options to purchase up to 100,000  shares of common stock may be granted
under the Directors  Plan.  Options  outstanding  at June 28, 1998,  entitle the
holders to purchase  common stock at prices  ranging  between $13.50 and $31.625
per share.  Options become  exercisable with respect to one-fourth of the shares
covered,  thereby on each  anniversary  of the date of grant,  commencing on the
second  anniversary of such date.  All options  granted under the Directors Plan
expire ten years  from the date of grant or  earlier  if a  director  leaves the
board of directors of the Company.

     On September  18, 1996,  the Board of Directors of the Company  adopted the
LTIP Plan.  The LTIP Plan provides for the granting of four types of awards on a
stand-alone, combination,  or a tandem basis,  specifically,  nonqualified stock
options,  incentive  stock  options,  restricted  shares and  performance  stock
awards.  The LTIP Plan  provides  for the  granting  of up to 600,000  shares of
common  stock,  provided  that the total  number of shares with respect to which
awards  are  granted  in any one  year  may not  exceed  100,000  shares  to any
individual employee, and the total number of shares with respect to which grants
of restricted stock and performance  stock awards are made in any year shall not
exceed 50,000 shares to any individual employee.

                                      -32-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Grants to date consist only of non-qualified stock options entitling the holders
to purchase  common  stock at prices  ranging  between  $27.75 and  $37.50.  The
exercise price of such  non-qualified  stock options is equal to the fair market
value  of the  stock  on the  date  of the  grant.  Options  outstanding  become
exercisable  over five years from the date of grant.  The right to exercise  the
options  expires ten years from the date of grant or earlier if an option holder
ceases to be employed by the Company.

     A summary of the status of the Company's  stock option plans as of June 28,
1998,  June 29, 1997, and June 30, 1996, and changes during the years then ended
are presented below:

                                                       Weighted Average
                                         Shares         Exercise Price 
-----------------------------------------------------------------------
Fiscal 1998:

Outstanding at beginning of year          939,650           $ 17.58

Granted                                   236,500           $ 29.72

Exercised                                 (74,887)          $ 14.95

Forfeited                                 (87,300)          $ 19.15
                                       -----------              
Outstanding at end of year              1,013,963           $ 20.47
                                       ===========              
Exercisable at end of year                206,338               
                                       ===========              

Fiscal 1997:

Outstanding at beginning of year          662,250           $ 13.86

Granted                                   376,950           $ 23.34

Exercised                                 (49,625)          $ 13.66

Forfeited                                 (49,925)          $ 15.62
                                       -----------              
Outstanding at end of year                939,650           $ 17.58
                                       ===========              
Exercisable at end of year                122,625               
                                       ===========              

Fiscal 1996:

Outstanding at beginning of year          465,750           $ 13.71

Granted                                   239,000           $ 14.06

Exercised                                  (1,250)          $ 13.50

Forfeited                                 (41,250)          $ 13.36
                                       -----------               
Outstanding at end of year                662,250           $ 13.86
                                       ===========               
Exercisable at end of year                 88,250
                                       ===========               

                                      -33-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The following table summarizes  certain  information for options  currently
outstanding and exercisable at June 28, 1998:

<TABLE>
<CAPTION>
                                     Options Outstanding                             Options Exercisable
                      --------------------------------------------------          --------------------------
                                         Weighted Average       Weighted                            Weighted
    Range of                                Remaining           Average                             Average
    Exercise              Number           Contractual          Exercise             Number         Exercise
     Prices            Outstanding             Life              Price            Exercisable        Price
    --------           -----------       ----------------       --------          -----------       --------
    <S>                <C>               <C>                    <C>               <C>               <C>

     $10-14              384,488                 6              $  13.30            171,763         $  13.26

     $15-19              290,975                 7              $  17.35             33,450         $  15.98

     $20-30              148,000                 9              $  28.00              1,125         $  20.75

     $31-38              190,500                 8              $  33.17                --
                      -----------                                                 -----------
                       1,013,963                                                    206,338         $  13.74
                      ===========                                                 ===========
</TABLE>

PRO FORMA DISCLOSURES

     The Company  applies APB 25 and related  interpretations  in accounting for
its stock option plans.  Accordingly,  no compensation  cost has been recognized
for the stock  options  because the options were granted with an exercise  price
equal to the stock price on the date of grant.  Had  compensation  costs for the
Company's  stock  option  plans been  determined  based on the fair value of the
options on the grant dates  consistent with the  methodology  prescribed by SFAS
123, the  Company's net income and earnings per share would have been reduced to
the pro forma amounts  indicated  below.  Due to the adoption of the methodology
prescribed  by SFAS 123,  the pro forma  results  shown  below only  reflect the
impact of stock option awards  granted in fiscal 1998 and 1997.  Because  future
stock  option  awards may be granted,  the pro forma  impact for fiscal 1998 and
1997 is not necessarily indicative of the impact in future years.

                                                 Fiscal           Fiscal
                                                  1998             1997
--------------------------------------------------------------------------
Net income                As reported           $ 29,684         $ 26,057
                          Pro forma             $ 28,220         $ 25,276

Diluted earnings          As reported           $   2.40         $   2.38
   per common share       Pro forma             $   2.30         $   2.31

     The fair value of the options  granted  (which is amortized over the option
vesting period in determining the pro forma impact), is estimated on the date of
grant using the Black-Scholes  multiple  option-pricing model with the following
weighted average assumptions:

                                                 Fiscal             Fiscal
                                                  1998               1997
----------------------------------------------------------------------------
Expected life of options                        5 years            5 years

Risk-free interest rates                      5.49 - 6.11%       6.07 - 6.64%

Expected volatility of stock                      39%                40%

Expected dividend yield                           0.3%               0.3%

     The weighted  average fair value of options  granted during the years ended
June 28, 1998, and June 29, 1997, was $12.74 and $10.40 per share, respectively.

                                      -34-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - RELATED PARTIES

     Affiliates of Harbour Group  Investments II, L.P. (HGI,  L.P.) were holders
of  approximately  32.2% of the  Company's  common  stock prior to their sale of
2,835,000  shares in a stock offering in November 1996,  reducing their holdings
to less than 4.1%.

     Under the terms of a management consulting and advisory services agreement,
the Company paid  affiliates  of HGI, L.P. fees totaling $847 and $783 in fiscal
1997 and 1996, respectively,  related to corporate development services provided
in identifying,  negotiating and consummating the Company's  acquisitions.  Fees
paid to affiliates of HGI, L.P. related to corporate  development  services were
included in the costs of the related acquisitions.

     Under terms of  management  consulting  and advisory  services  agreements,
Harbour Group Ltd. and Harbour Group Industries,  Inc.,  charged the Company for
direct management and  administrative  services provided to the Company based on
actual,  direct  costs of such  services.  The  charges,  which are  included in
selling,  general  and  administrative  expenses  in the  financial  statements,
totaled  approximately  $393 and $285 for the fiscal  years ended June 29, 1997,
and June 30, 1996, respectively.

     In prior years,  the Company issued 443,250 shares of the Company's  common
stock at prices which  approximated  estimated  fair value ranging from $1.26 to
$2.57 per share to members of management under agreements which allow management
to pay for the stock with cash and/or recourse notes  receivable to the Company.
The recourse notes receivable were issued with interest rates ranging from 5.84%
to 6.28% and become due between  September  2003 and January 2004. The notes are
reflected  as a reduction  to  additional  paid-in  capital in the  accompanying
consolidated financial statements.


NOTE 10 - COMMITMENTS AND CONTINGENCIES

     The Company  leases land,  buildings,  machinery,  equipment  and furniture
under various noncancelable operating lease agreements. At June 28, 1998, future
minimum lease payments under noncancelable operating leases were as follows:

          Fiscal year:

              1999                        $   5,988

              2000                            5,224

              2001                            4,341

              2002                            3,971

              2003                            3,589

       2004 and thereafter                   15,344
                                         -----------
                                          $  38,457
                                         ===========

     Total lease expense under noncancelable  operating leases was approximately
$7,372,  $5,652 and $3,103 for the years ended June 28, 1998, June 29, 1997, and
June  30,  1996,   respectively.   Commitments  under  capital  leases  are  not
significant to the consolidated financial statements.

     The Company is a party to various claims and lawsuits arising in the normal
course of business.  It is the opinion of management,  after  consultation  with
legal counsel,  that those claims and lawsuits,  when resolved,  will not have a
material  adverse effect on the financial  position,  cash flows,  or results of
operations of the Company.

                                      -35-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - DEPENDENCE ON SIGNIFICANT CUSTOMERS

     Total net sales to a customer in the  electronics  industry were $85,241 in
fiscal 1998 from the Special Machines  segment.  Total net sales to customers in
the  agricultural  equipment  industry,  the heavy truck  industry and the heavy
equipment  industry  were  $13,681,  $12,564 and $9,078,  respectively  from the
Components Segment.

     Total net sales to a customer in the electronics  industry were $89,062 and
total net sales to a customer in the automotive  industry were $43,179 in fiscal
1997 from the  Special  Machines  segment.  Total net sales to a customer in the
agricultural  equipment  industry were $11,116 and total net sales to a customer
in the  transportation  industry were $10,023 in fiscal 1997 from the Components
segment.

     Total net sales to a customer in the tire  industry  were $23,653 in fiscal
1996 from the Special Machines segment.

     Trade receivables recorded for significant  customers at June 28, 1998, and
June 29,  1997,  were  $11,051 and  $29,449,  respectively.  No other  customers
accounted for 10% or more of their  respective  total  segment's sales in fiscal
1998, 1997 and 1996.


NOTE 12 - SUPPLEMENTAL BALANCE SHEET INFORMATION

                                                   June 28,       June 29,
                                                     1998           1997
                                                  ----------     ----------
Accounts receivable

   Trade receivables                              $  77,776      $  70,387

   Less - allowance for doubtful accounts             2,142          1,849
                                                  ----------     ----------
                                                  $  75,634      $  68,538
                                                  ==========     ==========
Inventories, net

   Raw materials                                  $  18,285      $  13,117

   Work in process                                   22,749         22,053

   Finished goods                                     7,721          7,028
                                                  ----------     ----------
                                                  $  48,755      $  42,198
                                                  ==========     ==========
Property, plant and equipment

   Machinery and equipment                        $  57,148      $  44,557

   Buildings and improvements                        26,391         18,599

   Land and improvements                              5,664          2,348

   Construction-in-progress                           3,659          1,181
                                                  ----------     ----------
                                                     92,862         66,685
   Less - accumulated depreciation                   23,679         15,553
                                                  ----------     ----------
                                                  $  69,183      $  51,132
                                                  ==========     ==========
Accrued liabilities

   Accrued employee compensation and benefits     $  13,645      $  11,860

   Taxes payable and related reserves                 2,703          4,321

   Other                                             26,884         13,805
                                                  ----------     ----------
                                                  $  43,232      $  29,986
                                                  ==========     ==========

     During fiscal 1998,  the Company  repurchased  873,000 shares of its common
stock. The shares have been reflected in the stockholders' equity section of the
consolidated  balance sheet as of June 28, 1998 at cost of $24,445.  The Company
completed  the  repurchase  of an aggregate 1 million  shares of common stock in
July 1998 at a total cost of $27,541.  In August 1998,  the  Company's  Board of
Directors  authorized  purchases  of up to 1  million  additional  shares of the
Company's  common  stock.  The  repurchased  shares will be used  primarily  for
employee stock option programs.

                                      -36-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - EARNINGS PER SHARE OF COMMON STOCK

     In accordance with SFAS 128, the following  represents  reconciliations  of
income before extraordinary loss and weighted average shares outstanding between
basic and diluted earnings per share for the years ended June 28, 1998, June 29,
1997, and June 30, 1996:

<TABLE>
<CAPTION>
                                                                    For the Year Ended
                              ----------------------------------------------------------------------------------------------
                                     June 28, 1998                    June 29, 1997                    June 30, 1996
                              ----------------------------     ----------------------------     ----------------------------
                              Income before                    Income before                    Income before
                              extraordinary       Shares       extraordinary       Shares       extraordinary       Shares
                                  loss                             loss                             loss
                              -------------     ----------     -------------     ----------     -------------     ----------
<S>                              <C>              <C>             <C>              <C>             <C>
Basic                            $30,884          11,297          $26,381          10,349          $13,491           9,001

Effect of dilutive
securities:

   Manditorily redeemable
      convertible preferred
      securities                   3,008           1,806              151              80

   Stock options                                     394                              472

   Contingent issuable
      shares                                         124                              121
                              -------------     ----------     -------------     ----------     -------------     ----------
Diluted                          $33,892          13,621          $26,532          11,022          $13,491           9,001
                              =============     ==========     =============     ==========     =============     ==========
</TABLE>


NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)

     Summarized  quarterly financial data for fiscal 1998, 1997 and 1996 appears
below.

     The net  income and  diluted  earnings  per share for the first  quarter of
fiscal  1998 and 1997  include  the  effect of the  extraordinary  losses on the
refinancing  of debt as  described  in Note 4.  Also,  net  income  and  diluted
earnings per share for the third  quarter of fiscal 1998 include the loss on the
sale of assets of the Knitting  Elements  division  ($844 after tax or $0.06 per
diluted share).

<TABLE>
<CAPTION>
                         Net sales                               Gross profit             
           -------------------------------------     -------------------------------------
              1998          1997          1996          1998          1997          1996  
<S>        <C>           <C>           <C>           <C>           <C>           <C>      
First      $ 115,764     $  82,635     $  44,788     $  30,908     $  22,765     $  11,241
quarter

Second       132,431       100,693        60,143        35,977        27,670        15,157
quarter

Third        132,561       103,359        59,866        36,507        29,707        16,434
quarter

Fourth       138,586       109,423        71,149        35,824        30,924        20,546
quarter
           ---------     ---------     ---------     ---------     ---------     ---------
           $ 519,342     $ 396,110     $ 235,946     $ 139,216     $ 111,066     $  63,378
           ---------     ---------     ---------     ---------     ---------     ---------

                                                             Diluted earnings
                        Net income                              per share
           -------------------------------------     -------------------------------
              1998          1997          1996         1998        1997        1996
<S>        <C>           <C>           <C>           <C>         <C>         <C>
First      $   5,335     $   4,549     $   2,226     $  0.44     $  0.48     $  0.25
quarter

Second         8,228         6,038         3,072        0.66        0.58        0.34
quarter

Third          7,714         7,216         3,396        0.62        0.61        0.38
quarter

Fourth         8,407         8,254         4,797        0.68        0.69        0.53
quarter
           ---------     ---------     ---------     
           $  29,684     $  26,057     $  13,491
           ---------     ---------     ---------
</TABLE>

                                      -37-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - SEGMENT INFORMATION

     Worldwide operations data, as required by Statement of Financial Accounting
Standards No. 14, "Financial  Reporting for Segments of a Business  Enterprise,"
are  listed  below.   Profitability  of  the  Company's  foreign  operations  by
geographic  area  was  determined   based  on  ultimate  sales  to  unaffiliated
customers.  Total  Company  profit was  included in the  geographic  area of the
entity  transacting the final sale.  Transfers  between  geographic areas are at
prices  established  by agreement  between the affected  parties.  The Company's
foreign operations are located in Canada, the United Kingdom and Germany.

     The Company operates in two business segments,  Special Machines (including
the Automation Group and Packaging  Group) and Components.  The Special Machines
segment designs and builds custom equipment, proprietary machines and integrated
systems.  The  Components  segment stamps and fabricates a range of standard and
custom metal components.

     Due to the significant acquisitions in recent years by the Special Machines
segment and the sale of the Knitting Elements division, as of and for the fiscal
year ended June 28, 1998, the Components  segment has become less significant to
the  Company  as a whole and no longer  qualifies  for  separate  disclosure  as
specified  by Statement of Financial  Accounting  Standards  No. 14,  "Financial
Reporting  for  Segments of a Business  Enterprise."  The  Company has  included
certain  separate  disclosures  for the  Components  segment in the fiscal  1998
consolidated financial statements to enhance comparability with prior periods.

<TABLE>
<CAPTION>
                                                    Domestic         Foreign        Eliminations     Consolidated
                                                  ------------     ------------     ------------     ------------
<S>                                                <C>              <C>              <C>              <C>
For the fiscal year ended June 28, 1998

Net sales to unaffiliated customers                $  455,216       $   64,126       $     ---        $  519,342

Transfers between geographic areas                       ---            31,952          (31,952)            ---
                                                  ------------     ------------     ------------     ------------
Total revenue                                      $  455,216       $   96,078       $  (31,952)      $  519,342
                                                  ============     ============     ============     ============
Earnings from operations                           $   53,770       $    8,817       $     ---        $   62,587
                                                  ============     ============     ============     ============
Identifiable assets                                $  367,825       $   92,177       $     ---        $  460,002
                                                  ============     ============     ============     ============

For the fiscal year ended June 29, 1997

Net sales to unaffiliated customers                $  384,619       $   11,491       $     ---        $  396,110

Transfers between geographic areas                       ---            16,473          (16,473)            ---
                                                  ------------     ------------     ------------     ------------
Total revenue                                      $  384,619       $   27,964       $  (16,473)      $  396,110
                                                  ============     ============     ============     ============
Earnings from operations                           $   51,334       $    5,365       $     ---        $   56,699
                                                  ============     ============     ============     ============
Identifiable assets                                $  351,104       $   44,092       $     ---        $  395,196
                                                  ============     ============     ============     ============
</TABLE>

During  fiscal 1998,  1997 and 1996,  export  revenues  included in domestic net
revenues to unaffiliated  customers were  approximately  $115,461,  $108,756 and
$34,803, respectively.

                                      -38-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial information by business segment is as follows:

<TABLE>
<CAPTION>
                                                                                                                   Depreciation
                                       Net sales to         Earnings                                                   and
                                       unaffiliated           from           Identifiable         Capital          amortization
                                        customers          operations           assets          expenditures         expense
                                      --------------     --------------     --------------     --------------     --------------
<S>                                      <C>                <C>                <C>                <C>                <C>
Fiscal year ended June 28, 1998       

   Special Machines                      $ 471,855          $  68,237          $ 428,039          $  12,754          $  11,507

   Components                               47,487              3,391             25,170              3,459              1,491

   Corporate                                  ---              (9,041)             6,793              1,101                752
                                      --------------     --------------     --------------     --------------     --------------
                                         $ 519,342          $  62,587          $ 460,002          $  17,314          $  13,750
                                      ==============     ==============     ==============     ==============     ==============
Fiscal year ended June 29, 1997

   Special Machines                      $ 348,648          $  56,787          $ 357,337          $   7,424          $   8,891

   Components                               47,462              6,966             34,812              3,806              1,258

   Corporate                                  ---              (7,054)             3,047                620                904
                                      --------------     --------------     --------------     --------------     --------------
                                         $ 396,110          $  56,699          $ 395,196          $  11,850          $  11,053
                                      ==============     ==============     ==============     ==============     ==============
Fiscal year ended June 30, 1996

   Special Machines                      $ 193,884          $  26,557          $ 203,210          $   6,145          $   4,683

   Components                               42,062              6,934             28,528              2,138              1,038

   Corporate                                  ---              (5,558)             2,105              1,966                395
                                      --------------     --------------     --------------     --------------     --------------
                                         $ 235,946          $   27,933         $ 233,843          $  10,249          $   6,116
                                      ==============     ==============     ==============     ==============     ==============
</TABLE>

Earnings from  operations in fiscal 1998 for the Components  segment include the
$1,383 loss on the sale of assets of its Knitting Elements division.


NOTE 16 - SUBSEQUENT EVENT

     In August 1998, the Company completed the acquisition of certain of the net
assets of Scheu & Kniss,  Inc., a Louisville,  Kentucky  based  manufacturer  of
tablet  press  replacement  parts and rebuild  services  serving  primarily  the
pharmaceutical,  nutritional, battery and confectionery industries. The purchase
price of approximately  $10.2 million was primarily financed by borrowings under
the  Company's  revolving  credit  facility.  Annualized  sales of Scheu & Kniss
approximate $7.5 million.  As the transaction  occurred subsequent to the end of
fiscal 1998,  the balance  sheet and results of  operations of Scheu & Kniss are
excluded  from the  fiscal  1998  consolidated  balance  sheet  and  results  of
operations of DTI. The pro forma effects of the Scheu & Kniss acquisition on the
Company's  fiscal 1998  financial  position  and results of  operations  are not
material.

                                      -39-
<PAGE>

                       CORPORATE AND INVESTOR INFORMATION

COMMON STOCK INFORMATION

     The  Company's  Common Stock trades on the Nasdaq  National  Market  System
under the symbol "DTII."  As of August 28, 1998, the number of record holders of
the  Common  Stock was 65. The  following  table sets  forth,  for the  quarters
indicated, the high and low sales prices for the Common Stock as reported by The
Nasdaq  Stock  Market and the cash  dividends  per share  declared  during  such
periods.

                               Sales Prices                Quarterly Cash
                          High               Low             Dividends
----------------     --------------     --------------     --------------

Fiscal 1998

Fourth quarter          $39                $25  5/8            $0.02
Third quarter            38 3/4             32  1/8            $0.02
Second quarter           34 1/4             27  1/2            $0.02
First quarter            35 3/4             27 15/16           $0.02

Fiscal 1997

Fourth quarter          $37                $24  5/8            $0.02
Third quarter            38 1/4             25  1/2            $0.02
Second quarter           42 1/2             32  1/4            $0.02
First quarter            34 1/2             17  3/4            $0.02


NOTICE OF ANNUAL MEETING

     The annual  meeting of  stockholders  of DT  Industries,  Inc. will be held
Thursday,  November 5, 1998,  at 10:00 a.m.,  at the Clarion  Hotel,  3333 South
Glenstone Avenue, Springfield, Missouri 65804, (417) 883-6550.


INDEPENDENT ACCOUNTANTS

     PricewaterhouseCoopers LLP, St. Louis, Missouri.


LEGAL COUNSEL

     Dickstein Shapiro Morin & Oshinsky LLP, Washington, D.C.


INVESTOR RELATIONS

     The Financial Relations Board, Inc., Chicago, Illinois.


TRANSFER AND DIVIDEND DISBURSING AGENT

     ChaseMellon Shareholders Services, L.L.C.
     85 Challenger Road, Overpeck Centre
     Ridgefield Park, New Jersey 07660.
     888-213-0965


FORM 10-K

     A copy of the annual  report on Form 10-K for the year ended June 28, 1998,
as filed with the  Securities  and Exchange  Commission,  may be obtained by any
stockholder  of the  company at no charge upon  request in writing to:  Bruce P.
Erdel, DT Industries,  Inc.,  Corporate  Centre,  Suite 2-300, 1949 E. Sunshine,
Springfield, Missouri 65804.

                                      -40-