DT INDUSTRIES, INC.
Report and Consolidated
Financial Statements
June 29, 1997


<PAGE>

Selected Consolidated Financial Data
(In thousands, except per share data)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Fiscal year ended

                                               June 29,       June 30,       June 25,       June 26,       June 30,
                                                 1997           1996           1995           1994           1993
                                              ----------     ----------     ----------     ----------     ----------
<S>                                           <C>            <C>            <C>            <C>            <C>
Statement of operations data

  Net sales                                   $  396,110     $  235,946     $  147,369     $  107,499     $   50,628

  Cost of sales                                  285,044        172,568        109,678         79,555         40,066
                                              ----------     ----------     ----------     ----------     ----------
  Gross profit                                   111,066         63,378         37,691         27,944         10,562

  Selling, general and administrative
    expenses                                      54,367         35,445         21,428         13,875          6,147
                                              ----------     ----------     ----------     ----------     ----------
  Operating income                                56,699         27,933         16,263         14,069          4,415

  Interest expense, net                           11,088          4,799          1,849          3,506          2,583

  Dividends on Company-obligated,
    mandatorily redeemable convertible
    preferred securities of subsidiary DT
    Capital Trust holding solely parent's                                                            
    convertible subordinated debentures              251            ---            ---            ---            ---
                                              ----------     ----------     ----------     ----------     ----------
  Income before income taxes and
    extraordinary loss                            45,360         23,134         14,414         10,563          1,832

  Provision for income taxes                      18,979          9,643          5,964          4,570          1,000
                                              ----------     ----------     ----------     ----------     ----------
  Income before extraordinary loss                26,381         13,491          8,450          5,993            832

  Extraordinary loss, net(1)                         324            ---            ---            179            428
                                              ----------     ----------     ----------     ----------     ----------
  Net income                                  $   26,057     $   13,491     $    8,450     $    5,814     $      404
                                              ----------     ----------     ----------     ----------     ----------
  Primary earnings per share
    before extraordinary loss                 $     2.42     $     1.50     $     0.94     $     1.10     $     0.19
                                              ==========     ==========     ==========     ==========     ==========
  Primary earnings per share                  $     2.39     $     1.50     $     0.94     $     1.07     $     0.09
                                              ==========     ==========     ==========     ==========     ==========
  Weighted average number of common and
    common equivalent shares outstanding          10,895          9,000          9,000          5,458          4,481
                                              ==========     ==========     ==========     ==========     ==========

Balance sheet data

  Working capital                             $   90,981     $   26,161     $   16,791     $    8,846     $      464

  Total assets                                   395,196        233,843        159,263         97,628         62,779

  Total debt                                      48,505         79,327         37,353            432         31,047

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

  Stockholders' equity                           185,267         87,884         75,020         67,234          6,054

</TABLE>

1    Reflects costs  incurred of $540,  less  applicable  income tax benefits of
     $216 in the fiscal year ended June 29, 1997,  costs incurred of $314,  less
     applicable  income tax  benefits  of $135 in the fiscal year ended June 26,
     1994,  and costs  incurred of $684, less applicable  income tax benefits of
     $256 in the fiscal year ended June 30, 1993,  related to the extinguishment
     and refinancing of debt by the Company.

                                       10
<PAGE>

OVERVIEW

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  accelerate  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 1994                  Advanced Assembly Automation, Inc. (AAA)

February 1995                Lakso Division of Package Machinery Company (Lakso)

February 1995                Armac Industries, Ltd. (Armac)

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)

On July 29, 1997,  after the close of fiscal  1997,  the Company  completed  the
acquisition  of  certain of the net assets of Lucas  Assembly  and Test  Systems
(LATS), a division of LucasVarity plc of England, for approximately $49 million.
LATS, which has been renamed  Assembly  Technology and Test (ATT), is a designer
and manufacturer of integrated  assembly and testing systems for automotive OEMs
and their tier-one suppliers with manufacturing facilities in the United States,
the United Kingdom and Germany.  As part of LucasVarity plc, LATS recorded sales
of  approximately  $112  million  for the  year  ended  January  31,  1997.  The
acquisition  of LATS will be  accounted  for as a purchase,  with the results of
operations of LATS included with those of the Company for periods  subsequent to
the date of acquisition.

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 as well as wear parts for
the textile industry.

Gross  margins 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  margins for the Special  Machines
segment.  Margins on revenues of ATT,  acquired  after the fiscal year end,  are
expected to be 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.

                                       11
<PAGE>

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

                                                  Fiscal year ended
                                     June 29,         June 30,         June 25,
                                       1997             1996             1995
                                    ----------       ----------       ----------
Net sales:
  Special Machines
    DTI Automation                  $  248,213       $  106,217       $   67,119
    DTI Packaging                      100,435           87,667           45,051
                                    ----------       ----------       ----------
      Total Special Machines           348,648          193,884          112,170

  Components                            47,462           42,062           35,199
                                    ----------       ----------       ----------
    Total                           $  396,110       $  235,946       $  147,369
                                    ----------       ----------       ----------

Gross profit:
  Special Machines                  $  100,215       $   53,299       $   29,015
    Gross margin                         28.7%            27.5%            25.9%

  Components                            10,851           10,079            8,676
    Gross margin                         22.9%            24.0%            24.6%
                                    ----------       ----------       ----------
      Total gross profit            $  111,066       $   63,378       $   37,691
      Total gross margin                 28.0%            26.9%            25.6%
                                    ==========       ==========       ==========

Operating income:
  Special Machines                  $   56,787       $   26,557       $   13,857
    Operating margin                     16.3%            13.7%            12.4%

  Components                             6,966            6,934            6,676
    Operating margin                     14.7%            16.5%            19.0%

  Corporate                            (7,054)          (5,558)          (4,270)
                                    ----------       ----------       ----------
      Total operating income        $   56,699       $   27,933       $   16,263
      Total operating margin             14.3%            11.8%            11.0%
                                    ==========       ==========       ==========

Depreciation and amortization expense:
  Special Machines                  $    8,891       $    4,683       $    3,452
  Components                             1,258            1,038              837
  Corporate                                904              395              272
                                    ----------       ----------       ----------
    Total                           $   11,053       $    6,116       $    4,561
                                    ==========       ==========       ==========

Capital expenditures:
  Special Machines                  $    7,424       $    6,145       $    4,127
  Components                             3,806            2,138            3,043
  Corporate                                620            1,966              548
                                    ----------       ----------       ----------
    Total                           $   11,850       $   10,249       $    7,718
                                    ==========       ==========       ==========

Identifiable assets:
  Special Machines                  $  357,337       $  203,210      $   135,328
  Components                            34,812           28,528           23,061
  Corporate                              3,047            2,105              874
                                    ----------       ----------       ----------
    Total                           $  395,196       $  233,843       $  159,263
                                    ==========       ==========       ==========

                                       12
<PAGE>

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:

                                                  Fiscal year ended
                                     June 29,         June 30,         June 25,
                                       1997             1996             1995
                                    ----------       ----------       ----------

Net sales                             100.0%           100.0%           100.0%
Cost of sales                          72.0             73.1             74.4
                                    ----------       ----------       ----------
Gross profit                           28.0             26.9             25.6
Selling, general and 
  administrative expenses              13.7             15.1             14.6
                                    ----------       ----------       ----------
Operating income                       14.3             11.8             11.0

Interest expense                        2.8              2.0              1.2

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

Provision for income taxes              4.8              4.1              4.1
                                    ----------       ----------       ----------
Income before extraordinary loss
                                        6.6              5.7              5.7
Extraordinary loss on debt 
  refinancing                           0.1              ---              ---
                                    ----------       ----------       ----------
Net income                              6.5              5.7              5.7
                                    ==========       ==========       ==========


                       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 30,  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  include  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  increase  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 segment
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  large  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.

                                       13
<PAGE>

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 margin improvements. 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.


SELLING, GENERAL AND ADMINISTRATIVE (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.
Approximately  $13.1  million  of the  increase  was  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 by the net proceeds of an offering of common stock in November  1996. The
Company's sale of Convertible Preferred Securities (as defined below) 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 HOLDING  SOLELY  PARENT'S  CONVERTIBLE
SUBORDINATED DEBENTURES

Dividends on the Company-obligated, mandatorily redeemable convertible preferred
securities of subsidiary DT Capital Trust holding  solely  parent's  convertible
subordinated debentures (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

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, or $2.39 per share. Primary earnings per
share before the extraordinary  loss were $2.42 for the year ended June 29, 1997
versus  $1.50 for the year ended June 30,  1996.  The  weighted  average  common
shares outstanding for the year ended June 29, 1997 were 10.9 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.

                                       14
<PAGE>

                       FISCAL 1996 COMPARED TO FISCAL 1995

NET SALES

Consolidated net sales increased $88.5 million,  or 60.1%, to $235.9 million for
the year ended June 30,  1996,  from $147.4  million for the year ended June 25,
1995. The increase in consolidated net sales was a result of a $81.7 million, or
72.8%,  increase in sales by the Special Machines segment and a $6.8 million, or
19.5%, increase in sales by the Components segment.

The  increase  in  sales  by the  Special  Machines  segment  resulted  from the
incremental  effects of the  acquisitions of AAA in August 1994, Armac and Lakso
in February 1995,  Kalish in August 1995,  Swiftpack in November 1995 and AMI in
January 1996,  totalling  $46.5 million,  with the remaining  $35.2 million,  or
31.4%, increase relating to sales from existing businesses.  Sales from existing
businesses  were up  substantially,  primarily due to increased  sales of custom
automated production equipment and packaging equipment.  Approximately  one-half
of this  increase  can be  attributed  to the  increase  in  machine  sales to a
significant  customer.  The  remaining  increase  is a  result  of  several  new
substantial  projects with customers for integrated  production  systems.  These
increases  reflect  international   expansion  projects  by  certain  customers,
increased  penetration into new markets and benefits achieved from the Company's
cross-selling program.

The increase in sales by the  Components  segment is due to an increase in sales
from existing businesses of $4.4 million, or 12.5%, over the year ended June 25,
1995 and $2.4 million in sales related to the Arrow acquisition. The increase in
sales by  Components  was  primarily  the result of a new  customer  outside the
transportation  industry  obtained  in the latter part of fiscal  1995.  The new
business has offset the recent  reduction in sales  resulting from a slowdown in
demand for products provided to the transportation  industry.  This new business
was made possible  through capital  investments to expand stamping  capacity and
capabilities.


GROSS PROFIT

Gross profit  increased  $25.7 million,  or 68.2%, to $63.4 million for the year
ended June 30, 1996,  from $37.7  million for the year ended June 25, 1995, as a
result  of  the  sales  increases   discussed  above  and  gross  profit  margin
improvement.  Gross profit  increased $16.2 million as a result of acquisitions.
Excluding the effect of  acquisitions,  gross profit  increased  $9.5 million or
25.2%. The gross profit margin increased to 26.9% from 25.6%. The improvement in
gross margin was due to the higher margins obtained by the acquired  businesses.
Gross margin exclusive of acquired  operations  decreased to 25.2% due primarily
to gross profit margin declines in the Components segment. Gross profit margins,
exclusive  of acquired  operations,  for the  Components  segment were down from
prior year as a result of start-up  costs on new parts  business,  although such
gross profit margins have improved during fiscal 1996 as production efficiencies
were realized.


SG&A EXPENSES

SG&A expenses  increased $14.0 million,  or 65.4%, to $35.4 million for the year
ended June 30,  1996,  from  $21.4  million  for the year  ended June 25,  1995.
Approximately $10.9 million of the increase is due to the acquisitions discussed
above.  The  remaining  increase  of $3.1  million  is the  result of  personnel
additions and related recruiting and relocation fees, increased costs associated
with  compensation  and incentive  programs,  increased  investment in marketing
activities and increased professional and banking fees.


OPERATING INCOME

Operating  income  increased  $11.6 million,  or 71.8%, to $27.9 million for the
year ended June 30, 1996,  from $16.3  million for the year ended June 25, 1995,
as a result of the factors  noted above.  As a percentage  of  consolidated  net
sales, operating income increased to 11.8% from 11.0%.


INTEREST EXPENSE

Interest expense increased to $4.8 million for the year ended June 30, 1996 from
$1.8 million for the year ended June 25, 1995. The increase in interest  expense
resulted primarily from the increase in the debt level of the Company to finance
the recently acquired businesses.


INCOME TAXES

Provision for income taxes increased to $9.6 million for the year ended June 30,
1996 from $6.0  million for the year ended June 25, 1995,  reflecting  effective
tax rates of 41.7% and 41.4%,  respectively.  These rates differ from  statutory
rates due to permanent differences primarily related to non-deductible  goodwill
amortization arising from certain acquisitions.


NET INCOME

Net income  increased  to $13.5  million  for the year ended June 30,  1996,  an
increase  of $5.0  million,  or 59.7%,  over the  prior  year as a result of the
factors  noted above.  Earnings  per share  increased to $1.50 from $0.94 in the
prior year.

                                       15
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

During fiscal 1997, net cash used in operating activities was approximately $0.7
million.  During fiscal 1996 and 1995, net cash provided by operating activities
was approximately $15.1 million and $1.6 million,  respectively. Net income plus
non-cash  operating  charges  provided  $40.1  million,  $20.7 million and $17.0
million of operating cash flow in fiscal 1997, 1996 and 1995, respectively.

For the fiscal  year ended  June 29,  1997,  net  increases  in working  capital
balances used operating cash of $40.8 million. A substantial  portion of the net
increase  in working  capital  reflects  the  increased  level of  manufacturing
activity occurring at the Company, particularly in the Special Machines segment.
The Company has  experienced  a trend  towards  larger  dollar  value and longer
lead-time projects. The Special Machines segment received several such contracts
in fiscal 1997, many of which the customer advances or progress payments did not
match the revenue  stream under  percentage of completion  revenue  recognition.
These factors combined with the strong level of shipments in the final months of
fiscal year 1997 resulted in a $26.3 million increase in accounts receivable and
a $7.7 million  increase in  inventory.  Other factors  contributing  to the net
increase in working  capital  were  primarily  associated  with the Mid-West and
Hansford  acquisitions.  Acquisition  costs paid  subsequent to the closings for
both Mid-West and Hansford  amounted to  approximately  $2.0  million.  Also, as
anticipated   with  the   Hansford   acquisition,   the  Company  has   provided
approximately $5.0 million to meet existing working capital requirements.

In fiscal 1996, working capital balances increased $5.6 million primarily due to
the increased  investment in current  assets as a result of the increased  sales
and backlog,  a decrease in customer advances due to unusually large advances at
June 25, 1995 and large deposits to certain suppliers at June 30, 1996.

In fiscal 1995,  cash provided by operating  activities  was affected by a $15.4
million  increase in net working  capital.  Strong  year-end  sales,  orders and
backlog  resulted  in  a  significant   increase  in  accounts   receivable  and
inventories  at June 25,  1995.  An increase in customer  advances  and accounts
payable  partially  offset the  increase  in  working  capital  assets.  Accrued
liabilities  decreased  during the year reflecting  reductions in the income tax
payable balance and accrued acquisition costs.

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.

During the  fiscal  year ended June 29,  1997,  net cash of $106.9  million  was
provided by financing  activities and used primarily to fund the acquisitions of
Mid-West and  Hansford for $92.8  million,  net of cash  acquired.  The net cash
provided by financing  activities was also used to finance capital  expenditures
of $11.9  million,  pay  dividends  of $0.8  million  and fund  working  capital
requirements.  Financing  activities  consisted  of  the  renegotiation  of  the
Company's  credit  facility  and the  issuance of common  stock and  Convertible
Preferred  Securities as discussed  below.  The Company incurred $2.5 million of
financing costs in conjunction with the  renegotiation of the credit facility in
July 1996.

During  the  fiscal  year  ended  June  29,  1997,  the  Company  completed  the
acquisitions  of Mid-West  and  Hansford  for $75.2  million and $17.6  million,
respectively,  net of cash acquired.  These acquisitions were financed under the
Second Amended and Restated Credit Facilities Agreement.  This credit agreement,
which was replaced in July 1997 with a new multi-currency agreement as discussed
below,  provided a total credit line of $210  million,  including an $80 million
revolving  credit  facility,   a  $50.5  million  term  loan,  a  $58.5  million
acquisition  facility and a $21 million foreign currency  denominated  letter of
credit. The term and revolving borrowings were paid down in fiscal 1997 with the
proceeds  from the common stock  offering in November  1996 and the  Convertible
Preferred Securities offering in June 1997.  Borrowings under the agreement bore
interest at  floating  rates  based on the  lender's  base rate or LIBOR (at the
option of DTI) plus a specified  percentage based on the ratio of funded debt to
operating cash flow. At June 29, 1997, interest rates on these facilities ranged
from  6.5% to  8.5%.  Borrowing  availability  for the  revolver  was  based  on
percentages of the Company's  eligible accounts  receivable,  eligible inventory
and  outstanding   letters  of  credit.  The  credit  facility  was  secured  by
substantially  all of the  assets  of DTI and  its  subsidiaries  and  contained
certain  financial and other  covenants and  restrictions.  In conjunction  with
entering into this credit facility, the Company recognized an extraordinary loss
in July 1996 of $0.3  million  attributable  to the  write-off  of $0.5  million
unamortized deferred financing fees, net of related $0.2 million tax benefit.

In  connection  with the  acquisition  of Swiftpack  on November  23,  1995,  DT
Industries  (UK) Limited  (DTUK),  a wholly-owned  subsidiary,  entered into the
Credit Agreement,  Specific Counter-Indemnity and Debenture with a foreign bank.
The foreign credit  facility which was  denominated in Pounds  Sterling was used
for the cash portion of the purchase  price of Swiftpack  and the  redemption of
five fixed-rate  guaranteed  promissory  notes (Loan  Notes)  entered  into with
certain of the prior shareholders.  The Loan Notes, which bore interest at 5.3%,
were  redeemed by the  noteholders  between  November  25, 1996 and December 23,
1996.  The  aggregate  principal  amount  of the  foreign  credit  facility  was
approximately $21.0 million.  The facility,  which was subsequently  replaced in
July 1997 with a new multi-currency  agreement as discussed below, bore interest
at a variable  rate based upon LIBOR  (approximately  8.1%  including  letter of
credit fees at June 29, 1997).  Principal  payments were due quarterly  with the
remaining  principal balance due on August 16, 2000. The foreign credit facility
was secured by the letter of credit facility provided through the Second Amended
and Restated Credit Facilities Agreement.

                                       16
<PAGE>

On November 25, 1996, the Company  completed the sale of 2,250,000 shares of its
common  stock at a price to the public of $34.50 a share.  Net  proceeds  to the
Company were $73.5 million after  deducting  issuance  costs. In connection with
the offering by the Company,  certain selling stockholders sold 2,835,000 shares
for which the Company did not receive any proceeds. The proceeds received by the
Company were used to reduce indebtedness.

On June 12, 1997,  the Company  completed a private  placement to  institutional
investors of 1.4 million 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.

On July 21, 1997, the Company  replaced the Second  Amended and Restated  Credit
Facilities  Agreement and the foreign currency  denominated term facility with a
new  $175  million  multi-currency  revolving  and  term  credit  facility.  The
multi-currency facility will provide a $10 million Canadian term loan and a $165
million revolving credit facility, which will include an approximate $80 million
sublimit for  multi-currency  borrowings in Pounds  Sterling and Deutsche Marks.
Borrowings  under the  multi-currency  facility  will 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. 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.

On July 29, 1997,  the Company  completed the  acquisition of certain of the net
assets of LATS, a division of LucasVarity plc of England. LATS is a designer and
manufacturer of integrated assembly and testing systems for automotive OEMs  and
their tier-one suppliers with manufacturing facilities in the United States, the
United Kingdom and Germany.  The purchase price of approximately $49 million was
financed by borrowings under the new  multi-currency  revolving credit facility.
As part of LucasVarity  plc, LATS recorded sales of  approximately  $112 million
for the year ended January 31, 1997. As the transaction  occurred  subsequent to
the end of fiscal  1997,  LATS'  balance  sheet and  results of  operations  are
excluded  from the  fiscal  1997  consolidated  balance  sheet  and  results  of
operations of DTI.

The Company also maintains  revolving credit  facilities of  approximately  $3.0
million through its foreign  subsidiaries.  At June 29, 1997, total  outstanding
indebtedness under such facilities was approximately $1.6 million.

To manage its exposure to fluctuations  in interest  rates,  the Company entered
into an  interest  rate swap  agreement  in June 1995 for a  notional  principal
amount of $30 million,  maturing  June 29,  1998.  Swap  agreements  involve the
exchange  of  interest  obligations  on fixed and  floating  interest-rate  debt
without the exchange of the underlying  principal amount.  The differential paid
or received on the swap  agreement is  recognized  as an  adjustment to interest
expense. The swap agreement requires the Company to pay a fixed rate of 6.06% in
exchange for a floating rate payment  equal to the three month LIBOR  determined
on a quarterly basis with settlement occurring on specific dates.

Capital expenditures were $11.9 million in fiscal 1997.  Management  anticipates
that  capital  expenditures  for fiscal 1998 will range from  approximately  $17
million to $20 million.  This includes recurring replacement or refurbishment of
machinery  and  equipment,  and  purchases  to  improve  production  methods  or
processes or to expand manufacturing capabilities, all of which will approximate
fiscal 1997 capital  expenditures.  Incremental  capital  expenditures in fiscal
1998 are  expected  to  include  the first year  costs  estimated  to be over $4
million of an approximate $12 million four-year  implementation of an integrated
financial  and  operations  core  business  system and will also include  adding
additional capacity at certain automation and packaging facilities.  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 13,
1996,  December 13, 1996,  March 14, 1997 and June 13, 1997 to  stockholders  of
record on August 30, 1996,  November 22,  1996,  February 28, 1997,  and May 30,
1997, 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.

                                       17
<PAGE>

BACKLOG

The  Company's  backlog  is based upon  customer  purchase  orders  the  Company
believes are firm. As of June 29, 1997, the Company had $175.5 million of orders
in backlog,  which compares to a backlog of  approximately  $112.2 million as of
June 30, 1996. The  acquisitions of Mid-West and Hansford  increased the backlog
$60.4  million at June 29, 1997 in  comparison  to June 30, 1996.  Excluding the
effect of these acquisitions, backlog would have been $115.1 million at June 29,
1997, an increase of $2.9 million, or 2.6%, from a year ago.

The  backlog  for the  Special  Machines  segment  at June 29,  1997 was  $168.0
million,  an increase of $62.0 million from a year ago.  Excluding the effect of
acquisitions,  the Special Machines backlog increased $1.6 million.  The Special
Machines backlog reflects strong packaging orders offset by a drop in orders for
custom  build-to-print  machines.  Backlog for the  Components  segment was $7.5
million at June 29, 1997,  an increase  $1.3  million,  or 22.4%,  from the $6.2
million backlog a year ago.

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 1998.


FOREIGN OPERATIONS

The Company's primary foreign  operations are conducted through its subsidiaries
in Canada and the United  Kingdom.  The acquisition of certain of the net assets
of LATS will provide  additional  facilities in 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  7%  and  12%  of  the  Company's  net  sales  and
approximately  9% and 14% of the Company's  earnings  from  operations in fiscal
1997 and 1996, respectively.  The Company did not have any foreign operations in
fiscal  1995.  The  percentage  decrease  in  fiscal  1997  is a  result  of the
substantial domestic  acquisitions in fiscal 1997. Pro forma information for DTI
as if the LATS  acquisition  had  taken  place on July 1,  1996  indicates  that
foreign  operations would have accounted for  approximately 15% of the Company's
sales in fiscal  1997.  Fluctuations  in  currency  exchange  rates  can  impact
operating results, including net sales and operating expenses, when translations
of the subsidiary  financial  statements are made. The Company hedges certain of
its balance sheet exposure by borrowing in Pounds Sterling and Canadian  dollars
in the United  Kingdom  and  Canada,  respectively  (see  Liquidity  and Capital
Resources).  The Company does not enter into foreign  currency  forward exchange
contracts for speculative trading purposes.


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 February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128 (SFAS 128), "Earnings Per Share," which
will be effective for the Company for the quarter ended  December  1997. Had the
Company  adopted  SFAS 128 as of July 1, 1996,  weighted  average  basic  shares
outstanding  would have been  10,349,444 and basic earnings per share before the
extraordinary  item would  have been  $2.55 for the  fiscal  year ended June 29,
1997. Weighted average diluted shares outstanding would have been 11,022,080 and
diluted earnings per share before the  extraordinary  item would have been $2.41
for the year ended June 29, 1997. Diluted earnings per share reflect the effects
of conversion of the Company's  Convertible Preferred Securities and elimination
of the related dividends, net of applicable income taxes.


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"  and
"Foreign  Operations"  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;" and in the Corporation's other filings with
the Securities and Exchange Commission,  including its registration statement on
Form S-3  (Registration  No.  333-30909) and prospectus dated September 2, 1997,
including the section therein entitled "Risk Factors."

                                       18
<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 Price Waterhouse LLP,
independent  accountants.  As part of their audit of the  Company's  fiscal 1997
consolidated financial statements, Price Waterhouse LLP considered the Company's
system on 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
Vice President, Finance and Secretary




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 29, 1997 and June 30, 1996, and
the  results  of their  operations  and their  cash  flows for each of the three
fiscal years in the period ended June 29, 1997,  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/ Price Waterhouse LLP

PRICE WATERHOUSE LLP
St. Louis, Missouri

August 8, 1997

                                       19
<PAGE>

                               DT INDUSTRIES, INC.

                           Consolidated Balance Sheets
                 (In thousands, except share and per share data)

                                                     June 29,         June 30,
                                                       1997             1996
                                                    ----------       ----------
Assets
  Current assets:
    Cash                                             $  2,821         $  1,210
    Accounts receivable, net                           68,538           32,092
    Costs and estimated earnings in excess 
      of amounts billed ($78,900 and $15,640,
      respectively) on uncompleted contracts           51,643           19,130
    Inventories, net                                   42,198           31,403
    Prepaid expenses and other                          7,051           10,153
                                                    ----------       ----------
      Total current assets                            172,251           93,988
  Property, plant and equipment, net                   51,132           36,713
  Goodwill, net                                       168,401          101,187
  Other assets, net                                     3,412            1,955
                                                    ----------       ----------
                                                     $395,196         $233,843
                                                    ==========       ==========
Liabilities and stockholders' equity
  Current liabilities:
    Current portion of long-term debt                $  1,527         $  8,481
    Accounts payable                                   31,353           19,621
    Customer advances                                  11,232           13,850
    Billings in excess of costs and estimated 
      earnings ($36,073 and $14,097,
      respectively) on uncompleted contracts            7,172            3,351
    Accrued liabilities                                29,986           22,524
                                                    ----------       ----------
      Total current liabilities                        81,270           67,827
                                                    ----------       ----------
  Long-term debt                                       46,978           70,846
  Deferred income taxes                                 6,435            4,756
  Other long-term liabilities                           5,246            2,530
                                                    ----------       ----------
                                                       58,659           78,132
                                                    ----------       ----------
  Commitments and contingencies (Notes 3 and 11)

  Company-obligated, mandatorily redeemable 
    convertible preferred securities of
    subsidiary DT Capital Trust holding 
    solely parent's convertible                    
    subordinated debentures                            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; 11,300,875 and 
      9,001,250 shares issued and outstanding,
      respectively                                        113               90
    Additional paid-in capital                        133,370           61,255
    Retained earnings                                  51,784           26,539
                                                    ----------       ----------
      Total stockholders' equity                      185,267           87,884
                                                    ----------       ----------
                                                     $395,196         $233,843
                                                    ==========       ==========


See accompanying Notes to Consolidated Financial Statements.

                                       20
<PAGE>

Consolidated Statement of Operations
(In thousands, except per share data)
--------------------------------------------------------------------------------

                                                  Fiscal year ended
                                    --------------------------------------------
                                     June 29,         June 30,         June 25,
                                       1997             1996             1995
                                    ----------       ----------       ----------

Net sales                            $396,110         $235,946         $147,369

Cost of sales                         285,044          172,568          109,678
                                    ----------       ----------       ----------

Gross profit                          111,066           63,378           37,691

Selling, general and 
  administrative expenses              54,367           35,445           21,428
                                    ----------       ----------       ----------
Operating income                       56,699           27,933           16,263

Interest expense, net                  11,088            4,799            1,849

Dividends on Company-obligated,  
  mandatorily redeemable  
  convertible preferred
  securities of subsidiary 
  DT Capital Trust holding 
  solely parent's convertible
  subordinated debentures,
  at 7.16% per annum                      251              ---             ---
                                    ----------       ----------       ----------
Income before provision for 
  income taxes and extraordinary
  loss                                 45,360           23,134           14,414

Provision for income taxes             18,979            9,643            5,964
                                    ----------       ----------       ----------
Income before extraordinary loss       26,381           13,491            8,450

Extraordinary loss on debt 
  refinancing, net of income
  tax benefit of $216                     324              ---              ---
                                    ----------       ----------       ----------
Net income                           $ 26,057         $ 13,491         $  8,450
                                    ==========       ==========       ==========

Primary earnings per common and 
  common equivalent share:
  Income before extraordinary loss   $   2.42         $   1.50         $   0.94
  Extraordinary loss                      .03              ---              ---
                                    ----------       ----------       ----------
  Net income                         $   2.39         $   1.50         $   0.94
                                    ==========       ==========       ==========

Weighted average number of common 
  and common equivalent shares 
  outstanding                          10,895            9,000            9,000
                                    ==========       ==========       ==========


<PAGE>

Consolidated Statement of
Changes in Stockholders' Equity
(In thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                               Additional
                                                  Common        paid-in         Retained
                                                  stock         capital         earnings         Total
                                                  ------       ----------       --------       ---------
<S>                                               <C>          <C>              <C>            <C>
Balance, June 26, 1994                            $   90       $   61,106       $  6,038       $  67,234

Payments on stock subscriptions receivable                             56                             56

Dividends declared and paid                                                         (720)           (720)

Net income                                                                         8,450           8,450
                                                  ------       ----------       --------       ---------
Balance, June 25, 1995                            $   90       $   61,162       $ 13,768       $  75,020
                                                  ------       ----------       --------       ---------
Exercise of stock options and tax benefits
  relating thereto                                                     17                             17

Payments on stock subscriptions receivable                             76                             76

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 and tax benefits
  relating thereto                                                    678                            678

Payments on stock subscriptions receivable                            213                            213

Issuance costs of Company-obligated, 
  mandatorily redeemable convertible
  preferred securities of subsidiary  
  DT Capital Trust holding solely parent's
  convertible subordinated debentures                              (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
                                                  ======       ==========       ========       =========
</TABLE>


See accompanying Notes to Consolidated Financial Statements.

                                       21
<PAGE>

Consolidated Statement of Cash Flows
(In thousands)
--------------------------------------------------------------------------------

                                                  Fiscal year ended
                                    --------------------------------------------
                                     June 29,         June 30,         June 25,
                                       1997             1996             1995
                                    ----------       ----------       ----------
Cash flows from operating activities:
  Net income                         $ 26,057         $ 13,491         $  8,450

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

    Depreciation                        5,955            3,411            2,738

    Amortization                        5,098            2,705            1,823

    Deferred income tax provision       2,612              981            3,921

    Other                                 385              116               36

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

    Accounts receivable               (26,482)           4,274          (13,503)

    Costs and earnings in excess 
      of amounts billed on
      uncompleted contract             (2,935)          (8,520)          (2,593)

    Inventories                        (7,212)           3,873           (3,937)

    Prepaid expenses and other          3,171           (5,797)            (634)

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

    Accounts payable                   (3,015)             838            2,444

    Accrued liabilities                  (693)             189           (3,068)

    Customer advances                  (4,300)          (3,765)           5,816

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

    Other                              (1,463)             (62)              61
                                    ----------       ----------       ----------
    Net cash (used in) provided 
      by operating activities            (707)          15,085            1,554
                                    ----------       ----------       ----------

Cash flows from investing activities:
  Capital expenditures                (11,850)         (10,249)          (7,718)

  Acquisition of AAA stock 
    and net assets of Lakso, 
    net of cash acquired of $530                                        (29,181)

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

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

  Other                                                                     113
                                    ----------       ----------       ----------
  Net cash used in investing 
    activities                       (104,606)         (39,863)         (36,786)
                                    ----------       ----------       ----------
(continued)
See accompanying Notes to Consolidated Financial Statements.

                                       22
<PAGE>

Consolidated Statement of Cash Flows (Continued)
(In thousands)
--------------------------------------------------------------------------------

                                                  Fiscal year ended
                                    --------------------------------------------
                                     June 29,         June 30,         June 25,
                                       1997             1996             1995
                                    ----------       ----------       ----------

Cash flows from financing activities:

  Proceeds from borrowings           $ 96,708         $ 37,031         $ 25,000

  Payments on borrowings             (129,518)         (14,063)          (1,493)

  Net borrowings from revolving loans     918            3,633           13,116

  Debt issuance costs                  (2,510)            (632)

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

  Net proceeds from issuance 
    of common stock                    74,175               17

  Payments on stock subscriptions 
    receivable                            213               76               56

  Dividends paid on common stock         (812)            (720)            (900)
                                    ----------       ----------       ----------
  Net cash provided by 
    financing activities              106,924           25,342           35,779
                                    ----------       ----------       ----------
  Net increase in cash                  1,611              564              547

  Cash at beginning of period           1,210              646               99
                                    ----------       ----------       ----------
  Cash at end of period              $   2,821        $  1,210  $           646
                                    ----------       ----------       ----------
Supplemental disclosures of 
  cash flow information:

  Cash paid during the period for:

    Interest                         $ 10,630         $  4,280         $  1,618

    Income taxes                     $ 16,497         $  6,369         $  3,282

Supplemental schedule of noncash investing and financing activities:

Fair value of assets acquired        $ 55,185         $ 25,447         $ 17,271

Fair value assigned to goodwill        68,226           36,071           25,255

Cash paid                             (92,756)         (29,614)         (29,181)
                                    ----------       ----------       ----------
Liabilities assumed and seller 
  financing (see Note 4)            $  30,655         $ 31,904         $ 13,345
                                    ==========       ==========       ==========

The Company  purchased  Mid-West  Automation  Enterprises,  Inc.  (Mid-West) and
Hansford  Manufacturing  Corporation (Hansford) in fiscal 1997; H.G. Kalish Inc.
(Kalish),  Arrow Precision Elements, Inc. (Arrow),  Swiftpack Automation Limited
(Swiftpack)  and Assembly  Machines,  Inc.  (AMI) in fiscal  1996;  and Advanced
Assembly Automation, Inc. (AAA), the Lakso Division of Package Machinery Company
(Lakso)  and Armac  Industries,  Ltd.  (Armac) in fiscal  1995.  The table above
represents summary information with respect to these acquisitions.

See accompanying Notes to consolidated Financial Statements.

                                       23
<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  predominantly  located in
North America, 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.

Prior to June 26, 1995,  revenues from certain customer contracts of the Special
Machines  segment  were  recognized  upon  shipment,  utilizing  the  "units  of
delivery"  modification  of the percentage of completion  method.  The change in
accounting  method in fiscal 1996  reflected the trend in the Company's  Special
Machines  business  for  increasing  engineering  services  provided on customer
contracts and did not have a material impact on the Company's financial position
and results of operations.

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

Cash deposits  received from customers on contracts in progress are reflected as
customer advances in the consolidated balance sheet until the related revenue is
recognized  in  accordance  with  the  procedures  described  above.  Costs  and
estimated  earnings  in excess of amounts  billed on  percentage  of  completion
contracts  represents  costs  incurred  and  earnings  recognized  in  excess of
customer advances  received.  Billings in excess of costs incurred and estimated
earnings on uncompleted contracts 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.  The cumulative
translation  adjustment  account balance and foreign currency  transaction gains
and losses are not material.

                                       24
<PAGE>

Cash and cash equivalents

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

Concentrations of credit risk

The  Company  sells a  majority  of its  special  machines  to a wide  range  of
manufacturing companies.  Components services are sold to customers primarily in
the transportation,  agricultural equipment and textile industries.  The Company
performs  ongoing  credit  evaluations  of its customers and generally  does not
require collateral,  although many customers of the Special Machines segment pay
deposits to the Company prior to shipment of its products. The Company maintains
reserves for  potential  credit  losses and  historically  such losses have been
within  management's  expectations.  At  June  29,  1997,  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  totaling  approximately  $16,030 which are accounted for using the
first-in,  first-out  method  (FIFO).  For  various tax and  statutory  reasons,
inventories of the Company's foreign  subsidiaries are stated at FIFO costs. The
effects on financial  position and results of operations  from applying the FIFO
method for such material inventories and inventories of foreign subsidiaries are
immaterial.  For other  inventories  maintained on a LIFO basis,  cost under the
LIFO  method  approximates  the FIFO  method.  Inventories  include  the cost of
materials, direct labor and manufacturing overhead.

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

Property, plant and equipment

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

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

Goodwill

The excess of the purchase  price over the fair value of net assets  acquired in
business combinations (goodwill) is capitalized and amortized on a straight-line
basis over periods ranging from 15 to 40 years. Goodwill amortization charged to
income for the years  ended June 29,  1997,  June 30, 1996 and June 25, 1995 was
approximately $4,312, $2,386 and $1,660, respectively.  Accumulated amortization
at June 29,  1997,  and  June 30,  1996 was  approximately  $9,916  and  $5,574,
respectively. Including the effect of the acquisitions of Mid-West, Hansford and
the assets of Lucas  Assembly  and  Test Systems  acquired on July 29,  1997  as
discussed in Note 16, the Company  estimates annual  amortization of goodwill to
be approximately $5,150.

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 29, 1997.

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.

Interest rate swap agreement

The Company is a party to an interest rate swap agreement used to hedge interest
rate  fluctuations  on a portion of its floating rate revolving  credit facility
and  term  loans.  This  agreement  is  accounted  for on the  accrual  basis of
accounting. Net cash payments or receipts under the agreement are recorded as an
adjustment to interest expense when such amounts become due or receivable.

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 29,  1997,  based on
terms currently available to the Company in financial markets.

                                       25
<PAGE>

Postretirement benefits

The Company has adopted the  provisions  of Statement  of  Financial  Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (OPEB or SFAS 106). This standard requires  recognition of the cost of
providing  postretirement  benefits during an employee's  period of service.  As
part of adopting the standard as of the acquisition of Detroit Tool Group,  Inc.
(DTG),  the  Company  recorded  an  accrual  of  approximately  $1,584  in other
long-term  liabilities in its balance sheet  representing the discounted present
value of expected  future  retiree  benefits  attributed to  employees'  service
rendered in periods prior to DTI's acquisition (see Note 8).

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 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

Primary  earnings  per share is  computed by dividing  net income  available  to
common  stockholders  by the  weighted  average  number  of  common  and  common
equivalent  shares  outstanding  during the  period.  Common  stock  equivalents
consist of certain shares subject to stock options and contingent purchase price
payable in common stock related to an acquired  business.  The common equivalent
shares arising from the effect of outstanding  stock options were computed using
the  treasury  stock  method,  if  dilutive.  The effects of  conversion  of the
Company's  Convertible  Preferred  Securities  (as  defined  in  Note 5) was not
dilutive in the computation of fully diluted earnings per share for fiscal 1997.

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128 (SFAS 128), "Earnings Per Share," which
will be effective for the Company for the quarter ended  December  1997. Had the
Company  adopted  SFAS 128 as of July 1, 1996,  weighted  average  basic  shares
outstanding  would have been  10,349,444 and basic earnings per share before the
extraordinary  item would  have been  $2.55 for the  fiscal  year ended June 29,
1997. Weighted average diluted shares outstanding would have been 11,022,080 and
diluted earnings per share before the  extraordinary  item would have been $2.41
for the year ended June 29, 1997. Diluted earnings per share reflect the effects
of conversion of the Company's  Convertible Preferred Securities and elimination
of the related dividends, net of applicable income taxes.

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 9 for additional discussion.

Fiscal year

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

                                       26
<PAGE>

Note 3 - Acquisitions

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

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

August 1994         Advanced Assembly Automation, Inc.               $ 22,100

February 1995       Lakso Division of Package Machinery Company         7,000

February 1995       Armac Industries, Ltd.                                ---

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

During the past three fiscal  years,  the Company made nine  acquisitions  which
have  significantly  expanded its product lines.  These  acquisitions  were each
accounted  for under the purchase  method of accounting  and financed  primarily
through bank borrowings, resulting in an increase in the Company's debt. Results
of  operations  of each  acquired  company have been  included in the  Company's
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.

As part of the Kalish,  Swiftpack and Hansford  acquisitions,  DTI has agreed to
made additional payments of up to $3,000, $4,700 and $20,000,  respectively,  to
the sellers.  The amount of the additional purchase prices will be determined by
a formula  based on the  earnings of the  acquired  businesses.  The  additional
purchase price specified  within the Kalish  agreement,  based on earnings three
years  after  closing  of the  acquisition,  may be  paid  in DTI  stock  at the
Company's option.  The additional  purchase price specified within the Swiftpack
and Hansford  agreements is payable in cash. Any additional  purchase price paid
is expected to result in additional goodwill related to these acquisitions.

The following  table sets forth pro forma  information  for DTI as if all of the
previously  discussed  acquisitions had taken place on July 1, 1996 and June 26,
1995,  respectively.  This  information  is  unaudited  and does not  purport to
represent actual revenue, net income and earnings per share had the acquisitions
actually occurred on July 1, 1996 and June 26, 1995, respectively.

                                                       
                                                         Fiscal Year Ended
Pro Forma Information                                June 29,        June 30,
(unaudited)                                            1997            1996
--------------------------------------              ----------      -----------

Net sales                                           $  416,789      $  383,354

Net income                                          $   27,103      $   20,364

Primary earnings per common share                   $     2.49      $     2.26

Weighted average number of common and 
  common equivalent shares outstanding              10,895,497       9,000,257

                                       27
<PAGE>

Note 4 - Financing

During July 1996, the Company  entered into a Second Amended and Restated Credit
Facilities Agreement provided by various financial institutions.  The agreement,
which was subsequently  amended during the fiscal year in September and December
1996 and April and May 1997, provided a total credit line of $210,000, including
an $80,000 revolving credit facility, a $50,500 term loan, a $58,500 acquisition
facility and a $21,000 foreign currency denominated letter of credit, and was to
expire on July 23, 2001.  Borrowings  under the  agreement  bore interest at the
agent  lender's  base  rate or LIBOR (at the  option  of DTI)  plus a  specified
percentage based on the ratio of funded debt to operating cash flow. At June 29,
1997, interest rates on these facilities ranged from 6.5 percent to 8.5 percent.
Borrowing  availability  for  the  revolving  credit  facility  was  based  on a
percentage of the Company's eligible accounts receivable, eligible inventory and
outstanding  letters of credit. The credit facility was secured by substantially
all of the assets of DTI and its  subsidiaries and contained  certain  financial
and other  covenants and  restrictions.  The Company was in compliance with such
covenants and  restrictions at June 29, 1997. In conjunction  with entering into
this credit facility,  the Company recognized an extraordinary loss in July 1996
of $324  attributable to the write-off of $540  unamortized  deferred  financing
fees, net of related $216 tax benefit.

Long-term debt consisted of the following:
                                                    ----------------------------
                                                     June 29,         June 30,
                                                       1997             1996
                                                    ----------------------------
Notes payable to bank under a term and 
  revolving loan agreement, refinanced
  in July 1997:

  Term loan                                         $   10,000      $   41,550

  Revolving loan (including irrevocable 
    letter of credit)                                   16,068          14,983

Loan Notes, repaid in November/December 1996                            13,974

Foreign currency denominated term facility, 
  refinanced in July 1997                               20,347           6,367

Foreign currency denominated revolving 
  credit facilities                                      1,571           1,766

Other long-term debt (including capitalized 
  leases) maturing at various dates through
  fiscal 2002                                              519             687
                                                    ----------------------------
                                                        48,505          79,327
Less -  current portion                                  1,527           8,481
                                                    ----------------------------
                                                    $   46,978      $   70,846
                                                    ============================

The  acquisition  of Hansford in September  1996 was  financed  under the Second
Amended and Restated Credit Facilities Agreement. Of the $17,577 purchase price,
$8,543 was established as an irrevocable  letter of credit payable to the former
owner on June 30,  1997.  The letter of credit is  included in long term debt on
the consolidated balance sheet.

In  connection  with the  acquisition  of Swiftpack  on November  23,  1995,  DT
Industries  (UK) Limited  (DTUK),  a wholly-owned  subsidiary,  entered into the
Credit Agreement,  Specific Counter-Indemnity and Debenture with a foreign bank.
The foreign credit facility denominated in Pounds Sterling was used for the cash
portion of the purchase price of Swiftpack and the redemption of five fixed-rate
guaranteed  promissory notes (Loan Notes) entered into with certain of the prior
shareholders.  The aggregate  principal amount of the Loan Notes  denominated in
U.S.  dollars was $13,974.  The Loan Notes,  which bore  interest at 5.3%,  were
redeemed by the noteholders between November 25, 1996 and December 23, 1996. The
aggregate  principal  amount of the foreign  credit  facility was  approximately
$21,000. The foreign credit facility bore interest at a variable rate based upon
LIBOR  (approximately  8.1%  including  letter of credit fees at June 29, 1997).
Principal payments  thereunder ranging from $320 to $405 were due quarterly with
the remaining principal due August 16, 2000.

In connection  with the issuance of the Loan Notes,  the Company  entered into a
foreign exchange forward contract to offset exchange gains and losses related to
the Loan Notes  recorded  by the foreign  subsidiary.  The  contract  matured on
November  26, 1996 and provided  the  purchase of the  equivalent  of $13,974 of
Pounds  Sterling  at  a  rate  of  $1.5457  per  Pound  Sterling.  The  contract
effectively  hedged any foreign currency exchange  fluctuation from the date the
Loan Notes were issued.  No foreign  currency  transaction  gains or losses were
recorded.

In addition,  the Company has revolving  credit  facilities  through its foreign
subsidiaries  of  approximately   $3,000,  of  which  approximately  $1,571  was
outstanding at June 29, 1997.

                                       28
<PAGE>

To manage its exposure to  fluctuations in interest rates, on June 28, 1995, the
Company  entered into an interest rate swap  agreement for a notional  principal
amount of $30,000,  maturing June 29, 1998. Swap agreements involve the exchange
of interest  obligations  on fixed and floating  interest-rate  debt without the
exchange of the underlying  principal amount.  The differential paid or received
on the swap  agreement is recognized as an adjustment to interest  expense.  The
swap agreement provides a fixed rate of 6.06% with a floating rate payment equal
to the three  month  LIBOR  determined  on a  quarterly  basis  with  settlement
occurring on specific dates.

A summary  of the  minimum  annual  repayments  of  long-term  debt  (borrowings
primarily  refinanced  in July 1997 as discussed in Note 16) as of June 29, 1997
was as follows:

               Fiscal year:
                   1998                 $  1,527
                   1999                    1,420
                   2000                    1,663
                   2001                   16,208
                   2002                   27,687
                                       ==========
                                        $ 48,505
                                       ==========

The book value of long-term debt at June 29, 1997 approximates fair value.

See Note 16 for information regarding the replacement in July 1997 of the Second
Amended and  Restated  Credit  Facilities  Agreement  and the  foreign  currency
denominated  term facility with a renegotiated  $175,000  multi-currency  credit
facility.


Note 5 - Company-Obligated,   Mandatorily   Redeemable   Convertible   Preferred
         Securities  of  Subsidiary  DT Capital Trust  Holding  Solely  Parent's
         Convertible Subordinated Debentures (Convertible Preferred Securities)

On June 12, 1997,  the Company  completed a private  placement to  institutional
investors of  1,400,000  7.16%  Convertible  Preferred  Securities  (liquidation
preference of $50 per Convertible  Preferred  Security).  The placement was made
through the  Company's  wholly owned  subsidiary,  DT Capital Trust  (Trust),  a
newly-formed   Delaware  business  trust.  The  securities  represent  undivided
beneficial  ownership interests in the Trust. The sole asset of the Trust is the
$72,165 aggregate  principal amount of the 7.16% Convertible Junior Subordinated
Deferrable  Interest  Debentures  Due 2012 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.

                                       29
<PAGE>

Note 6 - Income Taxes

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

                                               Fiscal year ended
                                  June 29,         June 30,         June 25,
                                    1997             1996             1995
                                 ----------       ----------       ----------
   Domestic                       $ 42,630         $ 20,539         $ 14,414
   Foreign                           2,730            2,595              ---
                                 ==========       ==========       ==========
                                   $45,360         $ 23,134         $ 14,414
                                 ==========       ==========       ==========

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

                                               Fiscal year ended
                                  June 29,         June 30,         June 25,
                                    1997             1996             1995
                                 ----------       ----------       ----------
Current:
   U.S. Federal                   $ 12,564         $  6,474         $  1,641
   State                             2,789            1,373              402
   Foreign                           1,014              815              ---
                                 ----------       ----------       ----------
      Total current                 16,367            8,662            2,043
                                 ----------       ----------       ----------
Deferred:
   U.S. Federal                      2,111              734            3,203
   State                               397              125              718
   Foreign                             104              122              ---
                                 ----------       ----------       ----------
      Total deferred                 2,612              981            3,921
                                 ----------       ----------       ----------
Total Provision                   $ 18,979         $  9,643         $  5,964
                                 ==========       ==========       ==========

The provision for income taxes for the fiscal year ended June 29, 1997 is net of
income tax  benefits of $216 related to the  extraordinary  loss as described in
Note 4.

The provision for income taxes differs from the amount of income tax  determined
by applying the  applicable  U.S.  statutory  federal income tax rate to pre-tax
income as a result of the following differences:

                                                  Fiscal year ended
                                     June 29,         June 30,         June 25,
                                       1997             1996             1995
                                    ----------       ----------       ----------

U.S. statutory rate                  $ 15,876         $  8,097         $  4,901
Increase in rate resulting from:
  Non-deductible goodwill amortization    997              410              304
  State taxes                           2,071              974              739
  Other                                    35              162               20
                                    ----------       ----------       ----------
                                     $ 18,979         $  9,643         $  5,964
                                    ==========       ==========       ==========

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

                                                     June 29,         June 30,
                                                       1997             1996
                                                    ----------       ----------
Deferred tax liabilities:
  Depreciation                                       $  5,331         $  3,995
  LIFO inventory and costing capitalization, net        1,157              759
  Earnings recognized under percentage of completion    3,207            1,249
  Goodwill and intangibles amortization                 2,401            1,440
  Other                                                   239              347
                                                    ----------       ----------
  Total deferred tax liabilities                       12,335            7,790
                                                    ----------       ----------
Deferred tax assets:
  Postretirement benefit accrual                         (714)            (701)
  Inventory reserves                                    1,680)            (795)
  Product liability reserves                             (678)            (750)
  Bad debt reserves                                      (632)            (521)
  Other accruals                                       (3,435)          (2,863)
  Other                                                (2,068)          (1,394)
                                                    ----------       ----------
  Total deferred tax assets                            (9,207)          (7,024)
                                                    ----------       ----------
  Deferred tax assets valuation allowance               1,029            1,029
                                                    ----------       ----------
  Total net deferred tax liability                      4,157            1,795

  Current portion included in prepaid expenses 
    and other                                           2,278            2,961
                                                    ----------       ----------
  Long-term deferred tax liability                   $  6,435         $  4,756
                                                    ==========       ==========

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

                                       30
<PAGE>

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 29,  1997,  June  30,  1996 and June  25,  1995,  the  Company  made
contributions of approximately $2,377, $1,596 and $1,224, respectively.


Note 8 - Postretirement Benefits

DTI provides  health care and life  insurance  benefits for former DTG employees
who retired prior to September 1, 1992. Management plans to fund the premiums as
incurred, net of reimbursements received by plan participants.

For measurement  purposes, a 10% annual rate of increase in health care premiums
was  assumed  for 1998;  this rate was  assumed to decrease 1% per year to 6% in
2002 and remain at that level thereafter. An increase in the assumed health care
cost  trend  rates  of  1%  in  each  year  would   increase   the   accumulated
postretirement  benefit  obligation  (APBO) as of June 29, 1997 by approximately
$55 and the interest cost  comprising the periodic  postretirement  benefit cost
for the period then ended by approximately $5.

The  weighted   average   discount  rate  used  to  determine  the   accumulated
postretirement benefit obligation was 8% at June 29, 1997 and June 30, 1996.

The periodic  postretirement benefit cost for fiscal 1997, 1996 and 1995 charged
to income was approximately $25, $41 and $41, respectively.

The  following  table  sets  forth  the  status  of  the  postretirement  plans,
reconciled  to the  APBO  presented  in the  accompanying  consolidated  balance
sheets:

                                                     June 29,         June 30,
                                                       1997             1996
                                                    ----------       ----------

APBO                                                 $    994         $  1,025

Unrecognized net gain                                     551              639
                                                    ----------       ----------
Net APBO                                             $  1,545         $  1,664
                                                    ==========       ==========

                                       31
<PAGE>

Note 9 - Stock Option Plans

The  Company  has three stock  option  plans:  the  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).

A summary of the status of the Company's stock option plans as of June 29, 1997,
June 30, 1996 and June 25,  1995,  and  changes  during the years then ended are
presented below:

                                                     Weighted Average
                                       Shares         Exercise Price
                                      --------       ----------------
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                 
                                      ========                

Fiscal 1995:
Outstanding at beginning of year      373,000             $13.70
Granted                               115,250             $13.70
Exercised                             
Forfeited                             (22,500)            $13.50
                                      --------                
Outstanding at end of year            465,750             $13.71
                                      ========                
Exercisable at end of year                 --
                                      ========

                                       32
<PAGE>

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 29,  1997  entitle the holders to
purchase  common  stock at prices  ranging  between  $10.25 and $33.75.  Options
outstanding  become exercisable with respect to one-fourth of the shares covered
thereby  on each  anniversary  of the date of grant,  commencing  on the  second
anniversary of the date granted.  The right to exercise the options  expires ten
years  from the date of  grant or  earlier  if an  option  holder  ceases  to be
employed by the Company.

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 29, 1997  entitle the
holders to purchase common stock at prices ranging between $13.50 and $30.25 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 became  effective on November 11, 1996 upon its approval by
the stockholders at the annual meeting.  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 200,000 shares in the aggregate,  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 and 100,000 shares in the aggregate. LTIP grants to date
consist only of  nonqualified  stock  options  entitling the holders to purchase
common stock at prices ranging  between $30.50 and $37.50.  Options  outstanding
become  exercisable  with respect to one-fourth of the shares covered thereby on
each anniversary of the date of grant,  commencing on the second  anniversary of
the date granted.  The right to exercise the options  expires ten years from the
date of grant or  earlier  if an  option  holder  ceases to be  employed  by the
Company.

The  following  table  summarizes  certain  information  for  options  currently
outstanding and exercisable at June 29, 1997:

<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             446,400                7                $13.36             103,713           $13.27

 $15-19             362,350                8                $17.26              18,912           $15.76

 $20-30              15,900                9                $23.84                --

 $31-38             115,000                9                $34.55                --
                  -----------                                                -----------
                    939,650                                                    122,625           $13.65
                  ===========                                                ===========
</TABLE>

                                       33
<PAGE>

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 1997 and 1996.  Because  future
stock  option  awards may be granted,  the pro forma  impact for fiscal 1997 and
1996 is not necessarily indicative of the impact in future years.

Pro Forma Disclosures            Fiscal 1997        Fiscal 1996
---------------------            -----------        -----------
Net Income:
  As reported                      $26,057            $13,491
  Pro forma                        $25,276            $13,351

Primary earnings 
per share:       
  As reported                      $  2.39            $  1.50
  Pro forma                        $  2.31            $  1.46

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 1997        Fiscal 1996
                                 -----------        -----------
Expected life of options             5 years            5 years
Risk-free interest rates        6.07 - 6.64%       5.36 - 6.48%
Expected volatility of stock             40%                36%
Expected dividend yield                 0.3%               0.5%

The weighted  average fair value of options  granted during the years ended June
29, 1997 and June 30, 1996 was $10.40 and $5.60 per share, respectively.


Note 10 - 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, $783 and $459 in fiscal
1997, 1996 and 1995,  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.,  charge the Company for direct
management and administrative  services provided to the Company based on actual,
direct  costs of such  services.  The  charges,  which are  included in selling,
general  and  administrative  expenses  in  the  financial  statements,  totaled
approximately $393, $285 and $372 for the fiscal years ended June 29, 1997, June
30, 1996 and June 25, 1995, respectively.

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.

                                       34
<PAGE>

Note 11 - Commitments and Contingencies

The Company leases land,  buildings,  machinery,  equipment and furniture  under
various  noncancelable  operating  lease  agreements.  At June 29, 1997,  future
minimum lease payments under noncancelable operating leases were as follows:

               Fiscal year:
               1998                     $  5,708
               1999                        5,009
               2000                        4,239
               2001                        3,731
               2002                        3,629
               2003 and thereafter        20,812
                                       ----------
                                        $ 43,128
                                       ----------

Total lease  expense  under  noncancelable  operating  leases was  approximately
$5,652,  $3,103, and $2,098 for the years ended June 29, 1997, June 30, 1996 and
June  25,  1995,   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 or results of operations of
the Company.


Note 12 - Dependence on Significant Customers

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.  Total  net  sales to a  customer  in the
transportation industry were $14,754 in fiscal 1995 from the Components segment.

Trade receivables  recorded for significant  customers at June 29, 1997 and June
30, 1996 were $29,449 and $381,  respectively.  No other customers accounted for
10% or more of their  respective  total segment's sales in fiscal 1997, 1996 and
1995.

                                       35
<PAGE>

Note 13 - Supplemental Balance Sheet Information

                                                         Fiscal year ended
                                                     June 29,         June 30,
Supplemental Balance Sheet                             1997             1996
--------------------------                          ----------       ----------

Accounts receivable:
  Trade receivables                                  $ 70,387         $ 33,336
  Less - allowance for doubtful accounts                1,849            1,244
                                                    ----------       ----------
                                                     $ 68,538         $ 32,092
                                                    ==========       ==========
Inventories, net:
  Raw materials                                      $ 13,117         $ 14,814
  Work in process                                      22,053           12,145
  Finished goods                                        7,028            4,444
                                                    ----------       ----------
                                                     $ 42,198         $ 31,403
                                                    ==========       ==========
Property, plant and equipment:
  Machinery and equipment                            $ 44,557         $ 28,233
  Buildings and improvements                           18,599           14,282
  Land and improvements                                 2,348            2,147
  Construction-in-progress                              1,181            1,759
                                                    ----------       ----------
                                                       66,685           46,421
  Less - accumulated depreciation                      15,553            9,708
                                                    ----------       ----------
                                                     $ 51,132         $ 36,713
                                                    ==========       ==========
Accrued liabilities:
  Accrued employee compensation and benefits         $ 11,860         $  6,030
  Taxes payable and related reserves                    4,321            5,120
  Product liability                                     1,558            1,711
  Other                                                12,247            9,663
                                                    ----------       ----------
                                                     $ 29,986         $ 22,524
                                                    ==========       ==========


Note 14 - Quarterly Financial Data (unaudited)

Summarized  quarterly  financial  data for fiscal  1997,  1996 and 1995  appears
below:

<TABLE>
<CAPTION>
                               Net Sales                             Gross Profit
                   ----------------------------------     ----------------------------------
                     1997         1996         1995         1997         1996         1995
<S>                <C>          <C>          <C>          <C>          <C>          <C>
First quarter      $ 82,635     $ 44,788     $ 25,054     $ 22,765     $ 11,241     $  6,733
Second quarter      100,693       60,143       34,470       27,670       15,157        8,937
Third quarter       103,359       59,866       40,461       29,707       16,434        9,351
Fourth quarter      109,423       71,149       47,384       30,924       20,546       12,670
                   --------     --------     --------     --------     --------     --------
                   $396,110     $235,946     $147,369     $111,066     $ 63,378     $ 37,691
                   --------     --------     --------     --------     --------     --------
</TABLE>
<TABLE>
<CAPTION>
                                                                  Primary Earnings
                               Net Income                             Per Share
                   ----------------------------------     ----------------------------------
                      1997         1996         1995         1997         1996         1995  
<S>                <C>          <C>          <C>          <C>          <C>          <C>
First quarter      $  4,549     $  2,226     $  1,263       $ .48        $ .25        $ .14
Second quarter        6,038        3,072        1,590         .58          .34          .18
Third quarter         7,216        3,396        1,977         .61          .38          .22
Fourth quarter        8,254        4,797        3,620         .70          .53          .40
                   --------     --------     --------
                   $ 26,057     $ 13,491     $  8,450
                   --------     --------     --------
</TABLE>

The net income and primary  earnings  per share for the first  quarter of fiscal
1997 include the effect of the extraordinary  loss on the refinancing of debt as
described in Note 4.

                                       36
<PAGE>

Note 15 - Segment Information

Worldwide  operations  data,  as required by Statement  of Financial  Accounting
Standards No. 14, "Financial  Reporting for Segments of a Business  Enterprise,"
are  listed  below.   Profitability  of  the  Company's  foreign  operations  by
geographic  area  was  determined   based  on  ultimate  sales  to  unaffiliated
customers.  Total  Company  profit was  included in the  geographic  area of the
entity  transacting the final sale.  Transfers  between  geographic areas are at
prices  established  by agreement  between the affected  parties.  The Company's
foreign operations, as discussed in Note 3, were acquired in fiscal 1996 and are
located in Canada and the United Kingdom.

<TABLE>
<CAPTION>
                                             Domestic       Foreign        Eliminations       Consolidated
                                             --------       --------       ------------       ------------
<S>                                          <C>            <C>            <C>                <C>
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
                                             --------       --------       ------------       ------------

For the fiscal year ended June 30, 1996:

  Net sales to unaffiliated customers        $217,380       $ 18,566         $    ---            $235,946

  Transfers between geographic areas              ---         10,723          (10,723)                ---
                                             --------       --------       ------------       ------------
  Total revenue                              $217,380       $ 29,289         $(10,723)           $235,946
                                             ========       ========       ============       ============
  Earnings from operations                   $ 24,327       $ 3,819          $   (213)           $ 27,933
                                             ========       ========       ============       ============
  Identifiable assets                        $192,383       $ 41,673         $   (213)           $233,843
                                             ========       ========       ============       ============
</TABLE>

During  fiscal 1997,  1996 and 1995,  export  revenues  included in domestic net
revenues to  unaffiliated  customers were  approximately  $108,756,  $34,803 and
$14,905, respectively.

                                       37
<PAGE>

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.

Financial information by business segment is as follows:

<TABLE>
<CAPTION>
                                                                                                          Depreciation
                                      Net sales to       Earnings                                              &
                                      unaffiliated         from         Identifiable       Capital        amortization
                                       customers        operations         assets        expenditures       expense
                                      ------------     ------------     ------------     ------------     ------------
<S>                                    <C>              <C>              <C>              <C>              <C>
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
                                      ============     ============     ============     ============     ============
Fiscal year ended June 25, 1995
   Special Machines                    $  112,170       $   13,857       $  135,328       $    4,127       $    3,452
   Components                              35,199            6,676           23,061            3,043              837
   Corporate                                  ---           (4,270)             874              548              272
                                      ------------     ------------     ------------     ------------     ------------
                                       $  147,369       $   16,263       $  159,263       $    7,718       $    4,561
                                      ============     ============     ============     ============     ============
</TABLE>

                                       38
<PAGE>

Note 16 - Subsequent Events

On July 21, 1997, the Company  replaced the Second  Amended and Restated  Credit
Facilities  Agreement and the foreign currency  denominated term facility with a
new  $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 sub-limit for
multi-currency  borrowings  in Pounds  Sterling and Deutsche  Marks.  Borrowings
under the multi-currency  facility will 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. 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 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 $1,200  attributable  to the  write-off  of
$2,000 of unamortized deferred financing fees, net of related $800 tax benefit.

On July 29, 1997, the Company  completed the  acquisition of the assets of Lucas
Assembly and Test Systems (LATS), a division of LucasVarity plc of England. LATS
is a designer and  manufacturer  of integrated  assembly and testing systems for
automotive OEMs and their tier-one  suppliers with  manufacturing  facilities in
the United  States,  the United  Kingdom  and  Germany.  The  purchase  price of
approximately  $49,000 was financed by borrowings  under the new  multi-currency
credit   facility.   As  part  of  LucasVarity   plc,  LATS  recorded  sales  of
approximately  $112,000 for the year ended January 31, 1997. As the  transaction
occurred  subsequent to the end of fiscal 1997, the balance sheet and results of
operations  of the  LATS  business  (operated  by DTI as the ATT  business)  are
excluded  from the  fiscal  1997  consolidated  balance  sheet  and  results  of
operations  of  DTI.  The pro  forma  effects  of the  LATS  acquisition  on the
Company's  fiscal 1997  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 29, 1997, the number of record holders of the Common
Stock was 59. 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.

                                                            Quarterly
                                 High           Low           Cash
                              Sale Price     Sale Price     Dividends
                              ----------     ----------     ---------
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

Fiscal 1996
  Fourth quarter               $ 23 1/4       $ 18 1/4       $ 0.02
  Third quarter                  19             13           $ 0.02
  Second quarter                 14             12 3/4       $ 0.02
  First quarter                  14             10 1/2       $ 0.02


NOTICE OF ANNUAL MEETING

The annual meeting of stockholders  of DT Industries,  Inc. will be held Monday,
November 10,  1997,  10:00 a.m.,  at the  University  Plaza  Hotel,  333 John Q.
Hammons Parkway, Springfield, Missouri 65804, (417) 864-7333.


INDEPENDENT ACCOUNTANTS

Price Waterhouse 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  Shareholder Services,  L.L.C., 85 Challenger Road, Overpeck Centre,
Ridgefield Park, New Jersey 07660.


FORM 10-K

A copy of the annual  report on Form 10-K for the year ended June 29,  1997,  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.

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