FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 29, 1998
-------------------------------
Commission File Number: 0-23400
DT INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 44-0537828
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1949 E. Sunshine, Suite 2-300, Springfield, Missouri 65804
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(Address of principal executive offices)
(Zip Code)
(417) 890-0102
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(registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
The number of shares of Common Stock, $0.01 par value, of the registrant
outstanding as of May 1, 1998 was 11,372,612.
<PAGE>
DT INDUSTRIES, INC.
Index
Page 1
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Page
Number
Part I Financial Information
Item 1. Financial Statements (Unaudited, except as noted)
Consolidated Balance Sheet at March 29, 1998
and June 29, 1997 (Audited) 2
Consolidated Statement of Operations for the
three and nine months ended March 29, 1998 and
March 30, 1997 3
Consolidated Statement of Changes in
Stockholders' Equity for the nine months
ended March 29, 1998 4
Consolidated Statement of Cash Flows for the
nine months ended March 29, 1998 and
March 30, 1997 5-6
Notes to Consolidated Financial Statements 7-11
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 12-21
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 22
Signature
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Balance Sheet
(Dollars in Thousands Except Per Share Data)
Page 2
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<TABLE>
<CAPTION>
<S> <C> <C>
March 29, June 29,
1998 1997
(Unaudited)
------------------- --------------------
Assets
Current assets:
Cash and cash equivalents $ 4,543 $ 2,821
Accounts receivable, net 69,222 68,538
Costs and estimated earnings in excess
of amounts billed on uncompleted contracts 60,960 51,643
Inventories, net 60,708 42,198
Prepaid expenses and other 11,082 7,051
------------------- --------------------
Total current assets 206,515 172,251
Property, plant and equipment, net 67,109 51,132
Goodwill, net 184,965 168,401
Other assets, net 6,287 3,412
------------------- --------------------
$ 464,876 $ 395,196
------------------- --------------------
------------------- --------------------
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 57 $ 1,527
Accounts payable 31,121 31,353
Customer advances 30,200 18,404
Accrued liabilities 47,432 29,986
------------------- --------------------
Total current liabilities 108,810 81,270
------------------- --------------------
Long-term debt 68,666 46,978
Deferred income taxes 5,472 6,435
Other long-term liabilities 5,455 5,246
------------------- --------------------
Total long-term obligations 79,593 58,659
Commitments and contingencies (See Note 9)
Company-obligated, mandatorily redeemable convertible
preferred securities of subsidiary DT Capital Trust
holding solely convertible junior subordinated
debentures of the Company 70,000 70,000
------------------- --------------------
Stockholders' Equity:
Preferred stock, $0.01 par value; 1,500,000 shares
authorized; no shares issued and outstanding
Common stock, $0.01 par value; 100,000,000 shares
authorized; 11,360,362 and 11,300,875 shares issued
and outstanding at March 29, 1998 and June 29, 1997,
respectively 113 113
Additional paid-in capital 134,389 133,370
Retained earnings 72,383 51,784
Cumulative translation adjustment (412) ---
------------------- --------------------
Total stockholders' equity 206,473 185,267
------------------- --------------------
$ 464,876 $ 395,196
------------------- --------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Operations
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 3
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
<S> <C> <C> <C> <C>
March 29, March 30, March 29, March 30,
1998 1997 1998 1997
---------------- ------------- ------------- ------------
Net sales $ 132,561 103,359 380,756 286,687
Cost of sales 96,054 73,652 277,364 206,545
---------------- ------------- ------------- ------------
Gross profit 36,507 29,707 103,392 80,142
Selling, general and
administrative expenses 19,680 14,755 55,898 40,105
Loss on sale of assets of Knitting Elements
division (Note 10) 1,383 --- 1,383 ---
---------------- ------------- ------------- ------------
Operating income 15,444 14,952 46,111 40,037
Interest expense 1,546 2,538 5,102 8,825
Dividends on Company-obligated,
mandatorily redeemable convertible preferred
securities of subsidiary DT Capital Trust
holding solely convertible junior subordinated
debentures of the Company 1,253 --- 3,759 ---
---------------- ------------- ------------- ------------
Income before provision for
income taxes and
extraordinary loss 12,645 12,414 37,250 31,212
Provision for income taxes 4,931 5,198 14,773 13,085
---------------- ------------- ------------- ------------
Income before extraordinary
loss 7,714 7,216 22,477 18,127
Extraordinary loss on debt
refinancing less applicable
income tax benefits of $800 and $216,
respectively --- --- 1,200 324
---------------- ------------- ------------- ------------
Net income $ 7,714 $ 7,216 $ 21,277 $ 17,803
---------------- ------------- ------------- ------------
Basic earnings per common share:
Income before extraordinary loss $ 0.68 $ 0.64 $ 1.99 $ 1.81
Extraordinary loss --- --- 0.11 0.03
---------------- ------------- ------------- ------------
Net income $ 0.68 $ 0.64 $ 1.88 $ 1.78
---------------- ------------- ------------- ------------
Diluted earnings per common share:
Income before extraordinary loss $ 0.62 $ 0.61 $ 1.81 $ 1.70
Extraordinary loss --- --- 0.09 0.03
---------------- ------------- ------------- ------------
Net income $ 0.62 $ 0.61 $ 1.72 $ 1.67
---------------- ------------- ------------- ------------
Weighted average common shares outstanding:
Basic 11,341,028 11,267,771 11,321,735 10,033,769
Diluted 13,726,289 11,882,622 13,671,794 10,633,899
---------------- ------------- ------------- ------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months Ended March 29, 1998
(Dollars in Thousands Except Per Share Data)
Page 4
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Additional Cumulative
Common Paid-In Retained Translation
Stock Capital Earnings Adjustment Total
----------- ------------ ------------- ------------ ------------
Balance, June 29, 1997 $ 113 $ 133,370 $ 51,784 $ --- $ 185,267
Exercise of stock options (unaudited) 909
909
Payments on stock subscriptions
receivable (unaudited) 110 110
Net income for the nine months ended
March 29, 1998 (unaudited) 21,277 21,277
Cash dividend at $0.02 per common
share (unaudited) (678) (678)
Cumulative translation adjustment
(unaudited) (412) (412)
----------- ------------ ------------- ------------ ------------
Balance, March 29, 1998 (unaudited) $ 113 $ 134,389 $ 72,383 $ (412) $ 206,473
----------- ------------ ------------- ------------ ------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Cash Flows
(Dollars in Thousands)
(Unaudited)
Page 5
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<TABLE>
<CAPTION>
<S> <C> <C>
Nine months ended Nine months ended
March 29, 1998 March 30, 1997
--------------------- ---------------------
Cash flows from operating activities:
Net income $ 21,277 $ 17,803
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 6,448 4,448
Amortization 4,157 3,761
Deferred income tax provision (3,613) (449)
Loss on debt refinancing 2,000 540
Loss on sale of assets of Knitting Elements division 1,383 ---
Other (593) (235)
(Increase) decrease in current assets, excluding the
effect of acquisitions:
Accounts receivable 11,607 (5,234)
Costs and earnings in excess of amounts billed 13,423 (23,738)
Inventories (14,051) (9,677)
Prepaid expenses and other 927 5,167
Increase (decrease) in current liabilities,
excluding the effect of acquisitions:
Accounts payable (6,773) (9,576)
Accrued liabilities (256) (2,668)
Customer advances 6,996 (1,396)
Other (232) 638
--------------------- ---------------------
Net cash provided (used) by operating activities 42,700 (20,616)
--------------------- ---------------------
Cash flows from investing activities:
Capital expenditures (12,257) (8,194)
Acquisition of the stock of Mid-West Automation Enterprises, Inc.
and Hansford Manufacturing Corporation, net of cash acquired
of $21,573 (92,756)
Acquisition of Lucas Assembly and Test Systems net assets,
net of cash acquired of $91 (46,721)
--------------------- ---------------------
Net cash used by investing activities (58,978) (100,950)
--------------------- ---------------------
(Continued)
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Cash Flows
(Dollars in Thousands)
(Unaudited)
(continued)
Page 6
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<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ended Nine Months Ended
March 29, 1998 March 30, 1997
--------------------- ---------------------
Cash flows from financing activities:
Proceeds from issuance of term debt $ --- $ 96,708
Payments on borrowings (49,239) (90,151)
Net borrowings on revolving loans 68,225 43,805
Financing costs (915) (2,472)
Issuance of common stock --- 73,497
Exercise of stock options 909 285
Payments on stock subscriptions receivable 110 ---
Dividends (678) (586)
--------------------- ---------------------
Net cash provided by financing activities 18,412 121,086
--------------------- ---------------------
Effect of exchange rate changes on cash (412) ---
--------------------- ---------------------
Net increase (decrease) in cash 1,722 (480)
Cash and cash equivalents at beginning of period 2,821 1,210
--------------------- ---------------------
Cash and cash equivalents at end of period $ 4,543 730
--------------------- ---------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 7
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1. Unaudited consolidated financial statements
The accompanying unaudited consolidated financial statements of DT
Industries, Inc. (DTI or the Company) have been prepared in accordance with
the instructions for Form 10-Q and do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. However, in the opinion of management, such
information includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations
for the periods presented. Operating results for any quarter are not
necessarily indicative of the results for any other quarter or for the full
year. These statements should be read in conjunction with the consolidated
financial statements and notes to the consolidated financial statements
thereto included in the Company's Form 10-K Annual Report for the fiscal
year ended June 29, 1997.
2. Principles of consolidation and foreign currency translation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.
The accounts of the Company's foreign subsidiaries are maintained in their
respective local currencies. The accompanying consolidated financial
statements have been translated and adjusted to reflect U.S. dollars in
accordance with generally accepted accounting principles.
3. Acquisitions
On July 29, 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, in a transaction accounted for under the
purchase method of accounting. 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. The purchase price of approximately $46,721 was
financed by borrowings under the Company's multi-currency revolving credit
facility described in Note 4. The purchase price has been preliminarily
allocated to the acquired assets and assumed liabilities based on their
estimated fair value at the date of acquisition. The excess of purchase
price over the estimated fair value of net assets acquired has been
recorded as goodwill. The accompanying consolidated financial statements
include the results of ATT from the date of acquisition.
In July 1996 and September 1996, respectively, the Company acquired the
stock of Mid-West Automation Enterprises, Inc. (Mid-West) and Hansford
Manufacturing Corporation (Hansford). See the consolidated financial
statements and notes thereto included in the Company's Form 10-K Annual
Report for the fiscal year ended June 29, 1997 for additional information
relating to these acquisitions.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 8
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The following table sets forth pro forma information for DTI as if the
acquisitions of Mid-West, Hansford and ATT had taken place on June 30, 1997
and July 1, 1996, respectively. This information is unaudited and does not
purport to represent actual net sales, income before extraordinary loss and
earnings per share before extraordinary loss had the acquisitions actually
occurred on June 30, 1997 and July 1, 1996.
<TABLE>
<CAPTION>
PRO FORMA INFORMATION
FOR THE PERIODS
<S> <C> <C>
June 30, 1997 July 1, 1996
to to
March 29, 1998 March 30, 1997
------------------------- ------------------------
Net sales $ 390,778 $ 387,681
Income before extraordinary loss $ 22,562 $ 18,988
Basic earnings per share before extraordinary loss $ 1.99 $ 1.89
Basic weighted average shares outstanding 11,321,735 10,033,769
</TABLE>
4. Financing
As of March 29, 1998 and June 29, 1997, long-term debt consisted of the
following:
<TABLE>
<CAPTION>
<S> <C> <C>
March 29, 1998 June 29, 1997
(Unaudited)
------------------------- ------------------------
Term loans $ 10,000 $ 30,347
Revolving loans 58,527 17,639
Capital lease obligations and other
long-term debt 196 519
------------------------- ------------------------
68,723 48,505
Less - current portion of
long-term debt 57 1,527
------------------------- ------------------------
$ 68,666 $ 46,978
------------------------- ------------------------
</TABLE>
On July 21, 1997, the Company replaced its credit facilities with a
$175,000 multi-currency revolving and term credit facility. The
multi-currency facility provides a $10,000 Canadian term loan and a
$165,000 revolving credit facility, which includes an approximate $80,000
sublimit for multi-currency borrowings in Pounds Sterling and Deutsche
Marks. Borrowings under the multi-currency facility bear interest at
floating rates based on the agent bank's base rate or LIBOR (at the option
of DTI), plus a specified percentage based on the ratio of funded debt to
operating cash flow and the ratings of DTI's corporate debt. 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,
which the Company was in compliance with at March 29, 1998, 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.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 9
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The Company also maintains a separate revolving credit facility of
approximately Canadian $3,000 through its Canadian subsidiary. At March 29,
1998, total borrowings under such facility were approximately Canadian
$2,900.
5. Company-Obligated, Mandatorily Redeemable Convertible Preferred Securities
of Subsidiary Capital Trust Holding Solely Convertible Junior Subordinated
Debentures of the Company (Convertible Preferred Securities)
On June 12, 1997, the Company completed a private placement to
institutional investors of 1,400,000 7.16% Convertible Preferred Securities
(liquidation preference of $50 per Convertible Preferred Security). The
placement was made through the Company's wholly owned subsidiary, DT
Capital Trust (Trust), a newly-formed Delaware business trust. The
securities represent undivided beneficial ownership interests in the Trust.
The sole asset of the Trust is the $72,165 aggregate principal amount of
the 7.16% Convertible Junior Subordinated Deferrable Interest Debentures
Due 2012 of the Company which were acquired with the proceeds from the
offering as well as the sale of common securities of the Trust to the
Company. The Company's obligations under the Convertible Junior
Subordinated Debentures, the Indenture pursuant to which they were issued,
the Amended and Restated Declaration of Trust of the Trust and the
Guarantee of DTI, taken together, constitute a full and unconditional
guarantee by DTI of amounts due on the Convertible Preferred Securities.
The Convertible Preferred Securities are convertible at the option of the
holders at any time into the common stock of DTI at an effective conversion
price of $38.75 per share 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.
6. Earnings per share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share",
which changed the method of computation of earnings per share (EPS). SFAS
128 requires the computation of Basic EPS and Diluted EPS. Basic EPS is
based on the weighted average number of outstanding common shares during
the period but does not consider dilution for potentially dilutive
securities. Diluted EPS reflects the effects of conversion of the Company's
Convertible Preferred Securities and elimination of the related dividends,
net of applicable income taxes, plus dilutive potential common shares
consisting of certain shares subject to stock options and contingent
purchase price payable in common stock related to an acquired business. The
dilutive potential common shares arising from the effect of outstanding
stock options were computed using the treasury stock method, if dilutive.
Earnings per share for the three and nine months ended March 30, 1997 have
been restated in accordance with SFAS 128.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 10
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7. Stock option plans
A summary of stock option transactions pursuant to the 1994 Employee Stock
Option Plan, the 1994 Directors Non-Qualified Stock Option Plan and the
1996 Long-Term Incentive Plan follows:
<TABLE>
<CAPTION>
<S> <C> <C>
AVERAGE SHARES SUBJECT
PRICE TO OPTION
------------------------- ------------------------
Options outstanding at June 29, 1997 $ 17.58 939,650
Options granted $ 30.06 219,000
Options exercised $ 15.28 (59,487)
Options forfeited $ 21.63 (42,800)
------------------------
Options outstanding at March 29, 1998 $ 20.13 1,056,363
------------------------
Exercisable at March 29, 1998 $ 13.69 152,613
------------------------
</TABLE>
8. Supplemental balance sheet information
<TABLE>
<CAPTION>
<S> <C> <C>
March 29, 1998 June 29, 1997
(Unaudited)
------------------------- ------------------------
Inventories, net:
Raw materials $ 21,476 $ 13,117
Work in process 29,585 22,053
Finished goods 9,647 7,028
------------------------- ------------------------
$ 60,708 $ 42,198
------------------------- ------------------------
Accrued liabilities:
Accrued employee compensation and benefits $ 12,048 $ 11,860
Taxes payable and related reserves 10,061 4,321
Product liability 1,566 1,558
Other 23,757 12,247
------------------------- ------------------------
$ 47,432 $ 29,986
------------------------- ------------------------
</TABLE>
9. Commitments and contingencies
The Company is a party to certain lawsuits involving employee matters,
product liability and other matters. Management and legal counsel do not
expect the outcome of any litigation to have a material adverse effect on
the Company's financial position, results of operations or liquidity.
As part of the H.G. Kalish Inc. (Kalish) and Swiftpack Automation Ltd.
(Swiftpack) acquisitions, DTI has agreed to make additional payments of up
to $3,000 and $4,700, respectively, to the sellers. The amount of the
additional purchase prices will be determined by formulae based on the
earnings of the acquired businesses. The additional purchase price
specified within the Kalish agreement, based on earnings for the three
years after closing of the acquisition, may be paid in DTI stock at the
Company's option. Any additional purchase price specified within the
Swiftpack agreement is payable in cash. Any additional purchase price paid
is expected to result in additional goodwill related to these acquisitions.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 11
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During December 1997, an agreement was reached with the former owner of
Hansford which finalized the purchase price and cancelled the earnout
provisions of the Hansford purchase agreement. No additional purchase price
was paid as a result of this agreement.
10. Sale of assets of Knitting Elements division
On May 1, 1998, subsequent to the end of the quarter, the Company completed
the sale of substantially all of the assets of its non-core Knitting
Elements division of Detroit Tool Metal Products Co., a wholly owned
subsidiary of DT Industries, Inc., for $9.4 million. The loss on the sale
estimated to be $1.4 million was recorded in the third quarter 1998
results. The loss, net of the estimated tax benefit, reduced diluted
earnings per share by $0.06.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 12
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GENERAL OVERVIEW
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of DT Industries,
Inc. (DTI or the Company) for the three and nine months ended March 29,
1998, compared to the three and nine months ended March 30, 1997,
respectively. This discussion should be read in conjunction with the
consolidated financial statements and notes to the consolidated financial
statements thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended June 29, 1997.
In fiscal year 1997, the Company acquired the stock of Mid-West Automation
Enterprises, Inc. (Mid-West) and Hansford Manufacturing Corporation
(Hansford). During the nine months ended March 29, 1998, the Company
acquired the assets of Lucas Assembly and Test Systems (LATS). LATS was
renamed Assembly Technology & Test (ATT). The acquisitions are elements of
a business strategy 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 allows it to broaden its product offerings
and to provide customers a single source for complete integrated automation
systems. The acquisitions also expand the Company's base of customers,
creating greater opportunities for cross-selling among the various
divisions of the Company.
The Company operates in two business segments, Special Machines and
Components. The Special Machines segment designs and builds integrated
systems, custom equipment, and proprietary machines which assemble, test
and/or package industrial and consumer products. The Components segment
stamps and fabricates a wide range of standard and custom metal components.
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.
Gross margins of the Special Machines segment may vary in a given period as
a result of the variations in profitability of contracts for large orders
of automated production systems or special machines. In addition, changes
in the product mix in a given period affect gross margins for the Special
Machines segment.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 13
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Certain information contained herein, particularly the information
appearing under the headings "Results of Operations", "Liquidity and
Capital Resources" and "Backlog" 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 business, 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. Actual results could differ
materially from those anticipated in any forward-looking statement 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, delays in
effectively correcting production inefficiencies and inadequate capacities
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".
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of consolidated net sales represented by certain items reflected in the
Company's consolidated statement of operations:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
March 29, March 30, March 29, March 30,
1998 1997 1998 1997
---------------- ------------- ------------- ------------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 72.5 71.3 72.8 72.0
---------------- ------------- ------------- ------------
Gross profit 27.5 28.7 27.2 28.0
Selling, general and
administrative expenses 14.8 14.3 14.7 14.0
Loss on sale of assets of Knitting
Elements division 1.0 --- 0.4 ---
---------------- ------------- ------------- ------------
Operating income 11.7 14.4 12.1 14.0
Interest expense 1.2 2.4 1.3 3.1
Dividends on Company-obligated,
mandatorily redeemable
convertible preferred
securities of subsidiary DT
Capital Trust 1.0 --- 1.0 ---
---------------- ------------- ------------- ------------
Income before provision
for income taxes and
extraordinary loss 9.5 12.0 9.8 10.9
Provision for income taxes 3.7 5.0 3.9 4.6
---------------- ------------- ------------- ------------
Income before extraordinary
loss 5.8 7.0 5.9 6.3
Extraordinary loss on debt
refinancing --- --- 0.3 0.1
================ ============= ============= ============
Net income 5.8% 7.0% 5.6% 6.2%
================ ============= ============= ============
</TABLE>
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 14
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THREE MONTHS ENDED MARCH 29, 1998
COMPARED TO THREE MONTHS ENDED MARCH 30, 1997
NET SALES
Consolidated net sales increased $29.2 million, or 28.3%, to $132.6 million
for the three months ended March 29, 1998 from $103.4 million for the three
months ended March 30, 1997. The increase in sales can be attributed to the
incremental sales of ATT which was acquired in July 1997 and an increase in
sales from existing businesses of $2.2 million or 2.2%.
Sales by the Special Machines segment increased $29.3 million due to an
increase in sales from existing businesses of $2.3 million, or 2.7%, over
the third quarter of fiscal 1997 and $27.0 million in incremental sales
from recently-acquired businesses. Existing Special Machines segment sales
reflected strong quarter sales of packaging systems, including
thermoforming and extrusion systems and tablet packaging lines. Sales of
assembly automation systems were down slightly from the prior year
reflecting lower revenues from an electronics industry customer
substantially offset by strong welding systems and build to print machine
sales. The order activity with this significant electronics customer is
expected to remain soft in the near term.
Sales by the Components segment, which were substantially equal to the
prior year's quarter, reflect the continued growth in sales to customers in
the agricultural equipment and transportation industries offset by the
reduction in sales to customers in other industries.
GROSS PROFIT
Gross profit increased $6.8 million, or 22.9%, to $36.5 million for the
three months ended March 29, 1998 from $29.7 million for the three months
ended March 30, 1997, as a result of the sales increases discussed above.
The gross margin decreased to 27.5% from 28.7% partially reflecting the
acquisition of ATT, whose margins are below the Company's historical
levels. Excluding the ATT acquisition, gross margin for the Company
declined to 28.0% primarily reflecting an unfavorable product mix in the
Special Machines segment and continuing production inefficiencies in the
Components segment. The Company has taken steps to bolster operating
management and implement systems and processes to improve productivity and
profitability at the Components business.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES
SG&A expenses increased $4.9 million, or 33.4%, to $19.7 million for the
three months ended March 29, 1998 from $14.8 million for the three months
ended March 30, 1997. The increase was primarily due to the recent
acquisition of ATT, with the remaining increase largely associated with the
overall growth of the Company, depreciation and sales commissions. As a
percentage of consolidated net sales, SG&A expenses increased to 14.8% from
14.3%.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 15
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LOSS ON THE SALE OF ASSETS OF KNITTING ELEMENTS DIVISION
On May 1, 1998, the Company sold substantially all of the assets of its
non-core Knitting Elements division for $9.4 million. DTI incurred a
non-recurring, non-cash operating charge of $1.4 million related to the
sale. The loss, net of the estimated tax benefit, lowered diluted earnings
per share by $0.06.
OPERATING INCOME
Operating income increased $0.5 million, or 3.3%, to $15.4 million for the
three months ended March 29, 1998 from $14.9 million for the three months
ended March 30, 1997, as a result of the factors noted above. Excluding the
Knitting Elements divestiture, the operating margin decreased to 12.7% from
14.4% in the prior year as a result of the lower operating margins of ATT
and the factors noted above.
INTEREST EXPENSE
Interest expense decreased to $1.5 million for the three months ended March
29, 1998 from $2.5 million for the three months ended March 30, 1997. The
decrease in interest expense is primarily the result of the Convertible
Preferred Securities (defined below) offering in June 1997 which allowed
the Company to retire debt.
DIVIDENDS ON COMPANY-OBLIGATED, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF SUBSIDIARY DT CAPITAL TRUST
Dividends on Company-obligated, mandatorily redeemable convertible
preferred securities of subsidiary DT Capital Trust (Convertible Preferred
Securities) were $1.3 million for the three months ended March 29, 1998.
The Convertible Preferred Securities offering was completed in June 1997.
INCOME TAXES
Provision for income taxes decreased to $4.9 million for the three months
ended March 29, 1998 from $5.2 million for the three months ended March 30,
1997, reflecting an effective tax rate of approximately 39.0% and 41.9% for
each period, respectively. This rate differs from statutory rates due to
permanent differences primarily related to non-deductible goodwill
amortization on certain acquisitions.
NET INCOME
Net income increased to $7.7 million for the three months ended March 29,
1998 from $7.2 million for the three months ended March 30, 1997 as a
result of the factors noted above. Diluted earnings per share were $0.62
for the three months ended March 29, 1998 versus $0.61 for the three months
ended March 30, 1997. On a diluted basis, the weighted average number of
common and dilutive potential common shares outstanding for the three
months ended March 29, 1998 was 13,726,289 versus 11,882,622 for the three
months ended March 30, 1997. The increase is primarily the result of the
Convertible Preferred Securities offering in June 1997. Basic earnings per
share were $0.68 for the three months ended March 29, 1998 compared to
$0.64 for the three months ended March 30, 1997. The basic weighted average
common shares outstanding for the three months ended March 29, 1998 were
11,341,028 versus 11,267,771 for the three months ended March 30, 1997. The
increase is primarily the result of stock option exercises. Prior year
earnings per share and weighted average common and dilutive potential
common shares outstanding have been restated to reflect Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share."
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 16
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NINE MONTHS ENDED MARCH 29, 1998
COMPARED TO NINE MONTHS ENDED MARCH 30, 1997
NET SALES
Consolidated net sales increased $94.1 million, or 32.8%, to $380.8 million
for the nine months ended March 29, 1998 from $286.7 million for the nine
months ended March 30, 1997. Of the $94.1 million increase in sales, $79.5
million was due to the incremental sales of recently acquired businesses,
with the remaining $14.6 million, or 5.1%, relating to increased sales from
existing businesses. Recently acquired businesses include Hansford in
September 1996 and ATT in July 1997.
Sales by the Special Machines segment increased $91.6 million and sales by
the Components segment increased $2.5 million. The increase in sales by the
Special Machines segment was due to an increase in sales from existing
businesses of $12.1 million, or 4.8%, over the nine months of fiscal 1997
and $79.5 million in incremental sales from recently acquired businesses.
Existing Special Machines segment sales reflected strong year to date sales
of packaging systems, including thermoforming and extrusion systems and
tablet packaging lines. Sales of assembly automation systems were up
slightly from the prior year reflecting strong welding systems and custom
medium speed assembly systems sales partially offset by lower sales to a
significant customer in the electronics industry.
The increase in sales by the Components segment of $2.5 million, or 7.3%,
for the nine month period resulted primarily from strong sales of parts to
customers in the transportation industry and the agricultural equipment
industry. This increase in sales was partially offset by the reduction in
sales to customers in other industries.
GROSS PROFIT
Gross profit increased $23.3 million, or 29.0%, to $103.4 million for the
nine months ended March 29, 1998 from $80.1 million for the nine months
ended March 30, 1997, as a result of the sales increases discussed above.
The gross margin decreased to 27.2% from 28.0%. Gross margin exclusive of
acquired operations was unchanged at 28.0%, reflecting improvement in the
Special Machines segment gross margin offset by a lower gross margin for
the Components segment.
The increase in gross margin for the Special Machines segment reflects
margin improvement resulting from implementation of project management
systems and several large duplicate systems having been manufactured during
the current year with favorable margins.
The Components segment's gross margin continues to remain below historical
levels as a result of production inefficiencies. The Company continues to
take steps to bolster operating management and implement systems and
processes to improve productivity and profitability.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 17
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SELLING, GENERAL AND ADMINISTRATION ("SG&A") EXPENSES
SG&A expenses increased $15.8 million, or 39.4%, to $55.9 million for the
nine months ended March 29, 1998 from $40.1 million for the nine months
ended March 30, 1997. The increase was primarily due to recent
acquisitions, with the remaining increase largely associated with the
overall grwoth of the Company, depreciation and sales commissions. As a
percentage of consolidated net sales, SG&A expenses increased to 14.7% from
14.0%.
LOSS ON THE SALE OF ASSETS OF KNITTING ELEMENTS DIVISION
On May 1, 1998, the Company sold substantially all of the assets of its
non-core Knitting Elements division for $9.4 million. DTI incurred a
non-recurring, non-cash operating charge of $1.4 million related to the
sale. The loss, net of the estimated tax benefit, lowered diluted earnings
per share by $0.06.
OPERATING INCOME
Operating income increased $6.1 million, or 15.2%, to $46.1 million for the
nine months ended March 29, 1998 from $40.0 million for the nine months
ended March 30, 1997, as a result of the factors noted above. Excluding the
Knitting Elements divestiture, the operating margin decreased to 12.5% from
14.0% in the prior year as a result of the lower operating margins of
recently acquired businesses and factors discussed above.
INTEREST EXPENSE
Interest expense decreased to $5.1 million for the nine months ended March
29, 1998 from $8.8 million for the nine months ended March 30, 1997. The
decrease in interest expense is primarily the result of the common stock
offering in November 1996 and the Convertible Preferred Securities offering
in June 1997 which allowed the Company to retire debt.
DIVIDENDS ON COMPANY-OBLIGATED, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF SUBSIDIARY DT CAPITAL TRUST
Dividends on Convertible Preferred Securities were $3.8 million for the
nine months ended March 29, 1998.
INCOME TAXES
Provision for income taxes increased to $14.8 million for the nine months
ended March 29, 1998 from $13.1 million for the nine months ended March 30,
1997, reflecting an effective tax rate of approximately 39.7% and 41.9% for
each period, respectively. This rate differs from statutory rates due to
permanent differences primarily related to non-deductible goodwill
amortization on certain acquisitions.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 18
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NET INCOME, EXTRAORDINARY LOSS AND EARNINGS PER SHARE
Income before extraordinary loss increased to $22.5 million for the nine
months ended March 29, 1998 from $18.1 million for the nine months ended
March 30, 1997 as a result of the factors noted above. An extraordinary
loss was recognized for costs incurred of $2.0 million, less applicable
income tax benefits of $0.8 million in July 1997 and costs incurred of $0.5
million, less applicable income tax benefits of $0.2 million in July 1996,
related to the extinguishment and refinancing of debt by the Company. As a
result, net income was $21.3 million for the nine months ended March 29,
1998 versus $17.8 million for the nine months ended March 30, 1997. Diluted
earnings per share before the extraordinary loss were $1.81 for the nine
months ended March 29, 1998 versus $1.70 for the nine months ended March
30, 1997. After the extraordinary loss, diluted earnings per share were
$1.72 and $1.67 for the nine months ended March 29, 1998 and March 30,
1997, respectively. On a diluted basis, weighted average shares outstanding
for the nine months ended March 29, 1998 were 13,671,794 versus 10,633,899
for the nine months ended March 30, 1997. The increase in weighted average
common and dilutive potential common shares outstanding reflects the
2,250,000 shares of common stock issued in a public offering in November
1996 and the assumed conversion of the Convertible Preferred Securities.
Basic earnings per share before the extraordinary loss were $1.99 for the
nine months ended March 29, 1998 versus $1.81 for the nine months ended
March 30, 1997. After the extraordinary loss, basic earnings per share were
$1.88 and $1.78 for the nine months ended March 29, 1998 and March 30,
1997, respectively. The basic weighted average common shares outstanding
for the nine months ended March 29, 1998 were 11,321,735 versus 10,033,769
for the nine months ended March 30, 1997. The increase is primarily the
result of the 2,250,000 shares of common stock issued in a public offering
in November 1996. Prior year earnings per share and weighted average common
and dilutive potential common shares outstanding have been restated to
reflect SFAS 128.
LIQUIDITY AND CAPITAL RESOURCES
Net income plus non-cash operating charges provided $31.1 million of
operating cash flow for the nine months ended March 29, 1998. Net decreases
in working capital balances provided operating cash of $11.6 million,
resulting in net cash provided by operating activities of $42.7 million for
the nine months ended March 29, 1998. The reduction in working capital from
June 29, 1997 reflects the manufacturing activity within the assembly
systems and packaging businesses. Several large dollar value, longer lead
time assembly systems have shipped. Also, the Company has experienced a
move towards smaller assembly systems projects requiring a smaller average
working capital investment. These situations resulted in the lower accounts
receivable and costs and earnings in excess of amounts billed balances. On
the other hand, the growth in the packaging businesses has required the
increased investment in inventory levels. This increased working capital
investment was partially offset by increased customer advances, a result of
the increased order activity.
During the nine months ended March 29, 1998, financing activities generated
$18.4 million, including an increase in net borrowings and $1.0 million
received from the exercise of stock options and payments on stock
subscriptions. Operating activities as discussed above generated $42.7
million. These funds were used primarily to finance the acquisition of ATT
for $46.7 million, net of cash acquired, pay dividends of $0.7 million and
finance capital expenditures of $12.3 million. The Company incurred $0.9
million of financing costs in renegotiating its credit facility in July
1997 as discussed below.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 19
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During the nine months ended March 30, 1997, net cash used by operating
activities was $20.6 million. Net income plus non-cash operating charges
provided $25.9 million of operating cash flow. A net unfavorable change in
working capital balances resulted in cash used of $46.5 million primarily
due to an increase in costs and earnings in excess of amounts billed of
$23.7 million and a $9.7 million increase in inventories. The increase
resulted from the increased manufacturing activity occurring in the Special
Machines segment including several large dollar value longer lead-time
projects which did not provide for advance or progress billings.
During the nine months ended March 30, 1997, net cash of $121.1 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 $8.2 million, pay dividends of $0.6 million
and fund working capital requirements. Financing activities consisted of
the renegotiation of the Company's credit facility and the issuance of
2,250,000 shares of common stock in a public offering in November 1996. The
Company incurred $2.5 million of financing costs in conjunction with the
renegotiation of the credit facility.
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.
On July 21, 1997, the Company replaced the Second Amended and Restated
Credit Facilities Agreement and the foreign currency denominated term
facility which were outstanding at that time with a $175 million
multi-currency revolving and term credit facility. The multi-currency
facility provides a $10 million Canadian term loan and a $165 million
revolving credit facility, which includes an approximate $80 million
sublimit for multi-currency borrowings in Pounds Sterling and Deutsche
Marks. Borrowings under the multi-currency facility bear interest at
floating rates based on the agent bank's base rate or LIBOR (at the option
of the Company) plus a specified percentage based on the ratio of funded
debt to operating cash flow and the ratings of the Company'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 the Company. The agreement contains
certain financial and other covenants and restrictions and matures in July
2002. In conjunction with entering into the new credit facility, the
Company recognized an extraordinary loss in July 1997 of $1.2 million
attributable to the write-off of $2.0 million of unamortized deferred
financing fees, net of related $0.8 million tax benefit. The acquisition of
certain of the net assets of LATS, a division of LucasVarity plc of
England, on July 29, 1997 was financed by borrowings under the new
multi-currency revolving credit facility.
The Company also maintains revolving credit facility of approximately
Canadian $3.0 million through its Canadian subsidiary. At March 29, 1998,
total borrowings under such facility were approximately Canadian $2.9
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.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 20
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On May 1, 1998, the Company sold substantially all of the assets of its
non-core Knitting Elements division for $9.4 million. Proceeds of the sale
were used to reduce outstanding indebtedness.
Management anticipates that capital expenditures in the current fiscal year
will range from approximately $18 million to $22 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, in the aggregate, are expected to
approximate fiscal 1997 capital expenditures. Incremental capital
expenditures in the current fiscal year will include the first year costs,
estimated to be approximately $6 million, of an approximate four-year
implementation of an integrated core business system and will also include
adding capacity at certain automation and packaging facilities. Funding for
capital expenditures will be provided by cash from operating activities and
through the Company's credit facilities.
The Company paid quarterly cash dividends of $0.02 per share on September
15, 1997, December 5, 1997 and March 14, 1998 to stockholders of record on
September 2, 1997, November 28, 1997 and February 27, 1998, respectively.
Based on its ability to generate funds from operations and the availability
of funds under its current credit facilities, the Company believes that it
will have sufficient funds available to meet its currently anticipated
operating and capital expenditure requirements.
BACKLOG
The Company's backlog is based upon customer purchase orders that the
Company believes are firm. As of March 29, 1998, the Company had $239.4
million of orders in backlog, which compares to a backlog of approximately
$180.2 million as of March 30, 1997. The acquisition of ATT increased the
backlog $68.3 million at March 29, 1998 in comparison to March 30, 1997.
The backlog for the Special Machines segment at March 29, 1998 was $230.7
million, an increase of $60.4 million from a year ago. Excluding the
acquisition effect of ATT, the Special Machines segment backlog decreased
$8.0 million, or 4.7%, primarily as a result of the drop in orders with
certain electronics customers.
Backlog for the Components segment decreased $1.1 million, or 11.0%, to
$8.7 million from the $9.8 million backlog a year ago. The lower Components
segment backlog is a result of the Company's efforts to discontinue
production of certain low margin parts, including certain customers who had
placed orders equal to twelve months production.
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 approximately
one-half of the orders in the backlog will be recognized as sales during
the current fiscal year.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 21
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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.
YEAR 2000 COMPLIANCE
The Company utilizes software and related computer technologies essential
to its operations and to certain products that use two digits rather than
four to specify the year, which could result in a date recognition problem
with the transition to the year 2000. The Company has established a plan,
utilizing internal and external resources, to assess the potential impact
of the year 2000 on the Company's systems and operations and to implement
solutions to address this issue. The Company is presently in the assessment
phase of its year 2000 plan which includes surveying the Company's
suppliers, vendors and service providers for year 2000 compliance. The
Company's plan for remediation includes a combination of repair and
replacement of affected systems. For substantially all of the Company's
internal systems, this remediation is an incidental consequence of the
ongoing implementation of a new integrated core business system. The
Company expects that all critical systems will be year 2000 compliant by
December 31, 1999. As the Company is presently in the assessment phase of
its year 2000 plan, the costs of remediation cannot be quantified at this
time. The cost of implementation of an integrated core business system
which is year 2000 compliant has been included in the Company's capital
expenditures plan. The Company is diligently quantifying issues and
developing contingency sources to mitigate the risks associated with
interruptions in its supply chain due to Year 2000 problems. However, there
can be no assurance that the Company will not experience unanticipated
costs and/or business interruptions due to year 2000 problems in its
internal systems, its supply chain or from customer product migration
issues, or that such costs and/or interruptions will not have a material
adverse effect on the Company's consolidated results of operation.
<PAGE>
DT INDUSTRIES, INC.
PART II. Other Information
Page 22
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ITEM 6. Exhibits and Reports on Form 8-K
Exhibit 10 - First Amendment to Fourth Amended and
Restated Credit Facilities Agreement, dated
as of December 31, 1997, among NationsBank,
N.A., as Administrative Agent, and
NationsBank, N.A. and the other Lenders
listed therein, and DT Industries, Inc. and
the other Borrowers listed therein.
Exhibit 11 - Statement Regarding Computation of Earnings Per
Share
Exhibit 27 - Financial Data Schedule (EDGAR version only)
<PAGE>
DT INDUSTRIES, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DT INDUSTRIES, INC.
Date: May 12, 1998 /s/ Bruce P. Erdel
------------------------- -----------------------------------
(Signature)
Bruce P. Erdel
Vice President - Finance and Secretary
(Principal Financing and Accounting
Officer)
FIRST AMENDMENT
to
FOURTH AMENDED AND RESTATED CREDIT FACILITIES AGREEMENT
among
NATIONSBANK, N.A., as "Administrative Agent"
and
NATIONSBANK, N.A.
and
THE OTHER LENDERS LISTED ON THE SIGNATURE PAGES HEREOF,
as "Lenders"
and
DT INDUSTRIES, INC.
and
THE OTHER BORROWERS LISTED ON THE SIGNATURE PAGES HEREOF,
as "Borrowers"
This FIRST AMENDMENT to FOURTH AMENDED AND RESTATED CREDIT FACILITIES
AGREEMENT (this "Amendment") is entered into as of December 31, 1997, by and
among DT INDUSTRIES, INC., a Delaware corporation, DT INDUSTRIES (UK) II
LIMITED, ASSEMBLY TECHNOLOGIE & AUTOMATION GMBH, KALISH CANADA INC., and DT
CANADA INC. (separately and collectively, "Borrower"), NATIONSBANK, N.A.
("NationsBank"), as administrative agent ("Administrative Agent"), and the
Lenders.
RECITALS:
A. Borrower and Lenders are party to that certain Fourth Amended and Restated
Credit Facilities Agreement dated as of July 21, 1997 (the "Original Loan
Agreement").
B. DT Industries, Inc. (referred to herein and in the Original Loan Agreement
as "Domestic Borrower") desires to have the ability to repurchase its
common stock from time to time with the proceeds of Revolving Loan
Advances.
C. The Required Lenders have agreed to amend the Original Loan Agreement to
permit such stock repurchases on the terms and conditions contained herein.
AMENDMENT
Therefore, in consideration of the mutual agreements herein and other sufficient
consideration, the receipt of which is hereby acknowledged, Borrower and Lenders
hereby amend the Original Loan Agreement as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein have
the meanings given them in the Loan Agreement. All references to the "Agreement"
or the "Loan Agreement" in the Original Loan Agreement and in this Amendment
shall be deemed to be references to the Original Loan Agreement as it is
<PAGE>
amended hereby and as it may be further amended, restated, extended, renewed,
replaced, or otherwise modified from time to time.
2. Conditions to Effectiveness of Amendment. This Amendment shall become
effective as of December 31, 1997 (the "Amendment Effective Date"), but only if
this Amendment has been executed by Borrower and the Required Lenders.
3. Amendments to Original Loan Agreement.
3.1. Use of Proceeds. Section 13.1 of the Original Loan Agreement is hereby
amended by inserting the following words after the words "Permitted
Acquisition": ", to pay all or any part of the consideration payable by Domestic
Borrower for any Permitted Stock Repurchase".
3.2. Investments. Section 14.1 of the Original Loan Agreement is hereby
amended by inserting the following Section 14.1.8:
"14.1.8. Any Investments that are Permitted Stock Repurchases."
3.3. Transactions with Affiliates. Section 14.7 of the Original Loan
Agreement is hereby amended by inserting the following sentence at the end of
the section: "Notwithstanding the foregoing two sentences, Domestic Borrower may
make any Permitted Stock Repurchase."
3.4. Minimum Net Worth. The text of Section 15.2 of the Original Loan
Agreement is hereby deleted in its entirety and the following is substituted in
lieu thereof:
"Domestic Borrower's Net Worth as of the end of each fiscal quarter of
Domestic Borrower shall at no time be less than an amount equal to (i)
90% of the amount which is (a) Domestic Borrower's Net Worth as of
June 29, 1997, reduced by (b) one Dollar for each Dollar paid by
Domestic Borrower, on a cumulative basis, to repurchase its common
stock in Permitted Stock Repurchases which have been consummated as of
the date of calculation, plus (ii) 50% of Domestic Borrower's
cumulative Net Income (but not any net loss) for the period commencing
June 29, 1997 and extending through and including the end of the
applicable fiscal quarter, plus (iii) 75% of the amount of the
cumulative net proceeds received by Domestic Borrower for the period
commencing June 29, 1997 and extending through and including the end
of the applicable fiscal quarter from the issuance of equity
securities of any Covered Person (other than in connection with any
employee benefit plan or employee compensation arrangement)."
3.5. Glossary. Exhibit 2.1 of the Original Loan Agreement is hereby amended
by inserting the following definition in proper alphabetical order:
"Permitted Stock Repurchase - any purchase by Domestic Borrower of its
own common stock made on reasonable terms in an arm's length
transaction (including open market purchases) which does not cause the
total expenditures by Domestic Borrower in all such transactions, in
the aggregate, to exceed $35,000,000."
2
<PAGE>
The definition of "Affiliate" in Exhibit 2.1 of the Original Loan Agreement is
hereby further amended by replacing the word "stockholder" in clause (a) of the
definition with the words "beneficial owner of 5% or more of the outstanding
capital stock".
3.6. Compliance Certificate. Schedule II of Exhibit 13.13 of the Original
Loan Agreement is hereby amended by deleting Section I (Minimum Net Worth) and
substituting in lieu thereof the Section I attached hereto as Exhibit A.
4. Effect of Amendment. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of
Administrative Agent or Lenders under the Loan Agreement or any of the other
Loan Documents, nor constitute a waiver of any provision of the Loan Agreement,
any of the other Loan Documents or any existing Default or Event of Default, nor
act as a release or subordination of the Security Interests of Administrative
Agent or Lenders under the Security Documents. Each reference in the Loan
Agreement to "the Agreement", "hereunder", "hereof", "herein", or words of like
import, shall be read as referring to the Loan Agreement as amended by this
Amendment.
5. Reaffirmation. Borrower hereby acknowledges and confirms that (i) except as
expressly amended hereby the Loan Agreement remains in full force and effect,
(ii) the Loan Agreement is in full force and effect, (iii) Borrower has no
defenses to its obligations under the Loan Agreement and the other Loan
Documents, (iv) the Security Interests of Administrative Agent and Lenders under
the Security Documents secure all the Loan Obligations under the Loan Agreement
as amended by this Amendment, continue in full force and effect and have the
same priority as before this Amendment, and (v) Borrower has no claim against
Administrative Agent or any Lender arising from or in connection with the Loan
Agreement or the other Loan Documents.
6. Governing Law. This Amendment has been executed and delivered in St. Louis,
Missouri, and shall be governed by and construed under the laws of the State of
Missouri without giving effect to choice or conflicts of law principles
thereunder.
7. Section Titles. The section titles in this Amendment are for convenience of
reference only and shall not be construed so as to modify any provisions of this
Amendment.
8. Counterparts; Facsimile Transmissions. This Amendment may be executed in
one or more counterparts and on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. Signatures to this Amendment may be given by facsimile or other
electronic transmission, and such signatures shall be fully binding on the party
sending the same.
9. Incorporation By Reference. Lenders and Borrower hereby agree that all of
the terms of the Loan Documents are incorporated in and made a part of this
Amendment by this reference.
10. Statutory Notice. The following notice is given pursuant to Section 432.045
of the Missouri Revised Statutes; nothing contained in such notice will be
deemed to limit or modify the terms of the Loan Documents or this Amendment:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
3
<PAGE>
PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU
(BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT,
ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS
WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
BORROWER AND LENDERS HEREBY AFFIRM THAT THERE IS NO UNWRITTEN ORAL CREDIT
AGREEMENT BETWEEN BORROWER AND LENDERS WITH RESPECT TO THE SUBJECT MATTER OF
THIS AMENDMENT.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date
first above written.
DT INDUSTRIES, INC. a Delaware KALISH CANADA INC., a New Brunswick,
Corporation Canada corporation
By: /s/ Bruce P. Erdel By: /s/ Bruce P. Erdel
---------------------------------- ---------------------------------
Bruce P. Erdel, Vice President - Bruce P. Erdel, Vice President,
Finance and Secretary Treasurer, and Secretary
DT CANADA INC. a New Brunswick, ASSEMBLY TECHNOLOGIE & AUTOMATION
Canada corporation GMBH, a German limited liability
company
By: /s/ Bruce P. Erdel By: /s/ Bruce P. Erdel
---------------------------------- ---------------------------------
Bruce P. Erdel, Vice President, Bruce P. Erdel,
Treasurer and Secretary Geschaftsfuhrer
DT INDUSTRIES (UK) II LIMITED, a
corporation of England and Wales
By: /s/ Bruce P. Erdel
----------------------------------
Bruce P. Erdel, Director
4
<PAGE>
NATIONSBANK, N.A., as Administrative DRESDNER BANK AG NEW YORK AND
Agent and a Lender GRAND CAYMAN BRANCHES
By: /s/ Juan A. Cazorla By: /s/ Brigitte Sacin
---------------------------------- ---------------------------------
Juan A. Cazorla Brigitte Sacin
Vice President Assistant Treasurer
By: /s/ John W. Sweeney
---------------------------------
John W. Sweeney
V.P.
THE BANK OF NEW YORK THE BANK OF NOVA SCOTIA
By: /s/ William O'Daly By: /s/ F.C.H. Ashby
---------------------------------- ---------------------------------
William O'Daly F.C.H. Ashby
Vice President Senior Manager Loan Operations
THE SAKURA BANK, LIMITED BANK OF TOKYO-MITSUBISHI
NEW YORK BRANCH
By: /s/ Yukiharu Sakumoto By: /s/ Friedrich N. Wilms
---------------------------------- ---------------------------------
Yukiharu Sakumoto Friedrich N. Wilms
Joint General Manager Attorney In Fact
THE LONG-TERM CREDIT BANK OF THE SUMITOMO BANK, LIMITED
JAPAN, LTD.
By: /s/ Armund J. Schoen, Jr. By: /s/ Teresa A. Lekich
---------------------------------- ---------------------------------
Armund J. Schoen, Jr. Teresa A. Lekich
Senior Vice President Vice President
By: /s/ Michael F. Murphy
---------------------------------
Michael F. Murphy
Vice President & Manager
5
<PAGE>
NATIONAL CITY BANK
By: /s/ Barry C. Robinson
----------------------------------
Barry C. Robinson
Vice President
6
<PAGE>
Exhibit A
I. Minimum Net Worth (Section 15.2)
A. Total Assets $___________
B. Total Liabilities (Excludes Convertible Preferred
Securities) $___________
C. Net Worth (Item 1.A. minus 1.B) $___________
D. Minimum Net Worth Required
1. Net Worth at June 29, 1997 $255,267,000
2. Total expended by Domestic Borrower since June 29,
1997 in Permitted Stock Repurchases $___________
3. Adjusted Net Worth (D.1 minus D.2) $___________
4. Minimum percentage to maintain 90%
5. Minimum Net Worth Required Prior to
Adjustment for Net Income (D.3*D.4) $___________
6. Adjustments for Net Income
(i) 50% of Net Income in Prior Fiscal Years $___________
(ii) 50% of Net Income in Current Fiscal Year $___________
(iii) Total Adjustments for Net Income (D.6.(i)
plus D.6.(ii)) $___________
7. 75% of Cumulative Net Proceeds of Equity
Issuances Since Effective Date $___________
8. Minimum Net Worth Required by Section 15.2
(Sum of Items I.D.5, I.D.6.(iii), and I.D.7) $___________
7
<TABLE>
<CAPTION>
Exhibit 11
DT INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
---------------------------------- -----------------------------
<S> <C> <C> <C> <C>
March 29, March 30, March 29, March 30,
1998 1997 1998 1997
---------------- ------------- ------------- ------------
Income before extraordinary loss $ 7,714 $ 7,216 $ 22,477 $ 18,127
Extraordinary loss --- --- 1,200 324
---------------- ------------- ------------- ------------
Net income $ 7,714 $ 7,216 $ 21,277 $ 17,803
---------------- ------------- ------------- ------------
Basic:
Basic weighted average shares outstanding $ 11,341 $ 11,268 $ 11,322 $ 10,034
---------------- ------------- ------------- ------------
Basic earnings per share before
extraordinary loss $ 0.68 $ 0.64 $ 1.99 $ 1.81
Extraordinary loss --- --- 0.11 0.03
---------------- ------------- ------------- ------------
Basic net income per share $ 0.68 $ 0.64 $ 1.88 $ 1.78
---------------- ------------- ------------- ------------
Income before extraordinary loss $ 7,714 $ 7,216 $ 22,477 $ 18,127
Extraordinary loss --- --- 1,200 324
---------------- ------------- ------------- ------------
Net income 7,714 7,216 21,277 17,803
Interest expense on mandatorily redeemable
convertible preferred securities, net of
applicable income taxes 752 --- 2,256 ---
---------------- ------------- ------------- ------------
Net income, adjusted $ 8,466 $ 7,216 $ 23,533 $ 17,803
---------------- ------------- ------------- ------------
Diluted:
Weighted average number of shares
outstanding 11,341 11,268 11,322 10,034
Add dilutive effect of stock options
based on treasury stock method using
average market price 456 485 421 470
Add shares contingently issuable to the
former owner of Kalish assuming
maximum future earnings 123 130 123 130
Assumed conversion of convertible preferred
securities 1,806 --- 1,806 ---
---------------- ------------- ------------- ------------
13,726 11,883 13,672 10,634
---------------- ------------- ------------- ------------
Diluted earnings per share before
extraordinary loss $ 0.62 0.61 1.81 1.70
Extraordinary loss --- --- 0.09 0.03
---------------- ------------- ------------- ------------
Diluted net income per share $ 0.62 0.61 1.72 1.67
---------------- ------------- ------------- ------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information (in thousands except per
share data) extracted from the Consolidated Balance Sheet as of March 29, 1998
and the Consolidated Statement of Operations for the Nine Months Ended March 29,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Jun-28-1998
<PERIOD-END> Mar-29-1998
<EXCHANGE-RATE> 1
<CASH> 4,543
<SECURITIES> 0
<RECEIVABLES> 70,864
<ALLOWANCES> 1,642
<INVENTORY> 60,708
<CURRENT-ASSETS> 206,515
<PP&E> 89,445
<DEPRECIATION> 22,336
<TOTAL-ASSETS> 464,876
<CURRENT-LIABILITIES> 108,810
<BONDS> 68,666
0
0
<COMMON> 113
<OTHER-SE> 206,360
<TOTAL-LIABILITY-AND-EQUITY> 464,876
<SALES> 380,756
<TOTAL-REVENUES> 380,756
<CGS> 277,364
<TOTAL-COSTS> 277,364
<OTHER-EXPENSES> 57,086
<LOSS-PROVISION> 195
<INTEREST-EXPENSE> 8,861
<INCOME-PRETAX> 37,250
<INCOME-TAX> 14,773
<INCOME-CONTINUING> 22,477
<DISCONTINUED> 0
<EXTRAORDINARY> 1,200
<CHANGES> 0
<NET-INCOME> 21,277
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 1.72
</TABLE>
