<PAGE> 1
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 September 24, 2000
-------------------------------------
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
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(417) 890-0102
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(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 November 8, 2000 was 10,107,274.
---------------- ----------
<PAGE> 2
DT INDUSTRIES, INC.
INDEX
PAGE 1
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<TABLE>
<CAPTION>
Page
Number
<S> <C>
Part I Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at September 24, 2000
and June 25, 2000 2
Consolidated Statement of Operations for the three
months ended September 24, 2000 and September
26, 1999 3
Consolidated Statement of Changes in Stockholders'
Equity for the three months ended September 24,
2000 4
Consolidated Statement of Cash Flows for the three
months ended September 24, 2000 and September
26, 1999 5
Notes to Consolidated Financial Statements 6-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-19
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 19
Part II Other Information
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20-21
Signature
</TABLE>
<PAGE> 3
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 2
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 24, June 25,
2000 2000
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,634 $ 8,705
Accounts receivable, net
55,110 58,924
Costs and estimated earnings in excess of amounts billed on
uncompleted contracts 104,785 94,925
Inventories, net 56,248 52,926
Prepaid expenses and other 16,214 14,296
--------- ---------
Total current assets 241,991 229,776
Property, plant and equipment, net 71,419 73,218
Goodwill, net 171,843 173,823
Other assets, net 3,906 4,253
--------- ---------
$ 489,159 $ 481,070
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of other long-term debt $ 700 $ 713
Senior secured term and revolving credit facility (Note 4) 133,212 --
Accounts payable 44,196 47,189
Customer advances 22,697 22,411
Accrued liabilities 33,276 35,446
--------- ---------
Total current liabilities 234,081 105,759
--------- ---------
Senior secured term and revolving credit facility (Note 4) -- 116,928
Other long-term debt 8,792 9,216
Deferred income taxes 10,375 10,375
Other long-term liabilities 3,713 3,709
--------- ---------
Total long-term obligations 22,880 140,228
--------- ---------
Commitments and contingencies (See Note 10)
Company-obligated, mandatorily redeemable convertible preferred
securities of subsidiary DT Capital Trust holding solely
convertible junior subordinated debentures of the Company 70,000 70,000
--------- ---------
Stockholders' equity:
Preferred stock, $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; 10,107,274 shares outstanding 113 113
Additional paid-in capital 133,348 133,348
Retained earnings 61,254 64,378
Cumulative translation adjustment (1,739) (1,978)
Less - Treasury stock (1,268,488 shares), at cost (30,778) (30,778)
--------- ---------
Total stockholders' equity 162,198 165,083
--------- ---------
$ 489,159 $ 481,070
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 4
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
September 24, September 26,
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 116,451 $ 101,129
Cost of sales 96,446 81,078
------------ ------------
Gross profit 20,005 20,051
Selling, general and administrative expenses 19,721 19,846
------------ ------------
Operating income 284 205
Interest expense 3,462 1,798
Dividends on Company-obligated, mandatorily redeemable
convertible preferred securities of subsidiary DT Capital Trust
holding solely convertible junior subordinated debentures of the
Company, at 7.16% per annum 1,342 1,253
------------ ------------
Loss before benefit for income taxes (4,520) (2,846)
Benefit for income taxes (1,396) (709)
------------ ------------
Net loss $ (3,124) $ (2,137)
============ ============
Net loss per common share:
Basic $ (0.31) $ (0.21)
Diluted $ (0.31) $ (0.21)
============ ============
Weighted average common shares outstanding:
Basic 10,107,274 10,107,274
Diluted 10,107,274 10,107,274
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 5
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 24, 2000
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 4
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<TABLE>
<CAPTION>
Accumulated
other Additional
Retained comprehensive Common paid-in Treasury
earnings income (loss) stock capital stock Total
----------- ---------------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 25, 2000 $ 64,378 $ (1,978) $ 113 $ 133,348 $ (30,778) $ 165,083
Comprehensive loss:
Net loss (3,124)
Foreign currency translation 239
Total comprehensive loss (2,885)
--------------------------------------------------------------------------------
Balance, September 24, 2000 $ 61,254 $ (1,739) $ 113 $ 133,348 $ (30,778) $ 162,198
================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 6
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
PAGE 5
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<TABLE>
<CAPTION>
Three Months Ended
September 24, September 26,
2000 1999
----------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,124) $ (2,137)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 2,422 2,780
Amortization 1,596 1,395
(Increase) decrease in current assets, excluding
the effect of acquisitions:
Accounts receivable 3,814 (1,149)
Costs and earnings in excess of amounts billed (9,860) (6,720)
Inventories (3,322) (4,056)
Prepaid expenses and other (1,910) 2,255
Increase (decrease) in current liabilities, excluding
the effect of acquisitions:
Accounts payable (2,993) (8,025)
Customer advances 286 2,512
Accrued liabilities (2,170) (367)
Other 4 106
-------- --------
Net cash used by operating activities (15,257) (13,406)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (894) (1,750)
Acquisition of C. E. King net assets -- (2,116)
Other 14 (377)
-------- --------
Net cash used by investing activities (880) (4,243)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from revolving loans
18,196 15,697
Payments on borrowings (662) (559)
Financing costs -- (140)
-------- --------
Net cash provided by financing activities
17,534 14,998
-------- --------
Effect of exchange rate changes (468) 531
-------- --------
Net increase (decrease) in cash 929 (2,120)
Cash and cash equivalents at beginning of period 8,705 10,487
-------- --------
Cash and cash equivalents at end of period $ 9,634 $ 8,367
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 7
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 6
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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 accounting principles generally
accepted in the U.S. for complete financial statements. However, in the
opinion of management, the 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 included
in the Company's Annual Report on Form 10-K for the fiscal year ended
June 25, 2000.
2. 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.
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 accounting principles generally accepted in
the U.S.
3. ACQUISITIONS
In July 1999, the Company completed the acquisition of certain net
assets of C. E. King, Ltd. (King), a manufacturer of tablet counting,
liquid filling and capping equipment located in Chertsey, England. The
purchase price of $2,116 was primarily financed by borrowings under the
Company's revolving credit facility. The purchase price has been
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 and is being amortized over a 40 year period. The
accompanying consolidated financial statements include the results of
King from the date of acquisition.
The pro forma effect of the above acquisition is not material to the
Company's financial results for the three months ended September 26,
1999.
<PAGE> 8
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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4. FINANCING
As of September 24, 2000 and June 25, 2000, current and long-term debt
consisted of the following:
<TABLE>
<CAPTION>
September 24, June 25,
2000 2000
------------------- -----------------
<S> <C> <C>
Term and revolving loans under senior secured credit facility:
Term loan $ 10,000 $ 10,000
Revolving loans 123,212 106,928
Other long-term debt 9,492 9,929
------------------- -----------------
142,704 126,857
Less - senior secured credit facility maturing July 2, 2001 133,212 ---
Less - current portion of other long-term debt 700 713
------------------- -----------------
$ 8,792 $ 126,144
=================== =================
</TABLE>
The Company's credit facility includes a $130,000 revolving credit
facility and a $10,000 term credit facility and matures on July 2,
2001. Borrowings under the credit facility bore interest at floating
rates based on the prime rate plus 1 7/8% or LIBOR plus 3% (at the
option of DTI). Borrowings under the credit facility are secured by
substantially all of the assets of DTI and its domestic subsidiaries.
Total borrowing availability under the credit facility as of September
24, 2000 was $3,194.
As a result of the Company's fiscal 2000 financial results, the Company
was in default of a number of provisions of its senior credit agreement
and another agreement. The Company and the lenders amended the relevant
credit agreements effective October 10, 2000. The amendment to the
credit agreements includes provisions that amend the financial
covenants, waive certain existing defaults of covenants and breaches of
representations and warranties and increase the interest rate on
borrowings made pursuant to the facility. From October 10, 2000 until
February 14, 2001, all borrowings under the amended credit facility
will bear interest at a floating rate based on the prime rate plus 2
3/8%, except for foreign currency borrowings, which will bear interest
at a floating rate equal to LIBOR plus 3.5%. After February 15, 2001,
such borrowings will bear interest at floating rates based on the prime
rate plus 2 5/8% or LIBOR plus 3.75%, as applicable. The overall line
of credit and maturity were not amended.
Since the Company's credit facility matures on July 2, 2001, borrowings
of $133,212 under this facility have been presented within current
liabilities in the Company's September 24, 2000 consolidated balance
sheet. The Company has initiated discussions with several lenders for
purposes of refinancing borrowings under its credit facilities, and
expects to complete such refinancing prior to July 2, 2001, although
there can be no assurance that such refinancing will be completed by
this date. The Company has also implemented other cash management
initiatives for fiscal 2001, including a reduction in discretionary
capital expenditures, increased focus on collections of accounts
receivable, accelerated payment terms from customers, among other
things. On a longer term basis, the Company has engaged an investment
banking firm to assist it in the divestiture of one or more business
units. This program was initiated in the first quarter of fiscal 2001.
<PAGE> 9
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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5. COMPANY-OBLIGATED, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF SUBSIDIARY DT CAPITAL TRUST HOLDING SOLELY CONVERTIBLE
JUNIOR SUBORDINATED DEBENTURES OF THE COMPANY (CONVERTIBLE PREFERRED
SECURITIES)
On June 12, 1997, the Company completed a private placement to
institutional investors of 1,400,000 7.16% Convertible Preferred
Securities (liquidation preference of $50 per Convertible Preferred
Security). The placement was made through the Company's wholly owned
subsidiary, DT Capital Trust (Trust), a Delaware business trust. The
securities represent undivided beneficial ownership interests in the
Trust. The sole asset of the Trust is the $72,165 aggregate principal
amount of the 7.16% Convertible Junior Subordinated Deferrable Interest
Debentures Due 2012 of the Company, which were acquired by the Trust
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, are redeemable at DTI's option after June 1, 2000 and are
mandatorily redeemable in 2012. The net proceeds of the offering of
approximately $67,750 were used by DTI to retire indebtedness. In
conjunction with an amendment of its credit facility in September 1999,
the Company elected to defer interest payments on the Convertible
Junior Subordinated Debentures. As a result, quarterly distributions on
the Convertible Preferred Securities have also been deferred and DTI
will not declare or pay dividends on its common stock. Dividends on the
Convertible Preferred Securities in the amount of $6,488 have been
deferred and accrued as of September 24, 2000.
<PAGE> 10
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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6. BUSINESS SEGMENTS
Financial information for the Company's reportable segments consisted
of the following:
<TABLE>
<CAPTION>
Three Months Ended
September 24, 2000 September 26, 1999
------------------ ------------------
<S> <C> <C>
Net sales
Automation $ 84,358 $ 60,793
Packaging 22,811 31,869
Other 9,282 8,467
-------- --------
Consolidated total $116,451 $101,129
======== ========
</TABLE>
The reconciliation of segment operating income (loss) to consolidated
loss before income taxes consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended
September 24, 2000 September 26, 1999
------------------ ------------------
<S> <C> <C>
Automation $ 3,015 $ 157
Packaging (1,106) 2,193
------- -------
Operating income for reportable segments 1,909 2,350
Operating income for other business 402 223
Corporate (2,027) (2,368)
Interest expense (3,462) (1,798)
Dividends on Company-obligated, mandatorily redeemable
convertible preferred securities of subsidiary DT Capital
Trust holding solely convertible junior subordinated
debentures of the Company (1,342) (1,253)
------- -------
Consolidated loss before income taxes $(4,520) $(2,846)
======= =======
</TABLE>
<PAGE> 11
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. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
September 24, 2000 June 25, 2000
------------------ -------------
<S> <C> <C>
Inventories, net:
Raw materials $26,512 $26,776
Work in process 24,602 17,236
Finished goods 5,134 8,914
------- -------
$56,248 $52,926
======= =======
Accrued liabilities:
Accrued employee compensation and benefits $12,697 $14,747
Accrued warranty 2,190 2,566
Dividends on convertible preferred securities 6,488 5,146
Other 11,901 12,987
------- -------
$33,276 $35,446
======= =======
</TABLE>
8. 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>
WEIGHTED AVERAGE SHARES SUBJECT
EXERCISE PRICE TO OPTION
---------------- --------------
<S> <C> <C>
Options outstanding at June 25, 2000 $ 14.27 1,328,513
Options granted $ 9.50 9,000
Options exercised -- --
Options forfeited $ 30.43 (11,000)
----------
Options outstanding at September 24, 2000 $ 14.10 1,326,513
==========
Exercisable at September 24, 2000 676,121
==========
</TABLE>
<PAGE> 12
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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9. DERIVATIVES
Statement of Financial Accounting Standards No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities",
establishes accounting and reporting standards for derivative
instruments and for hedging activities and requires recognition of all
derivatives on the balance sheet at fair value. The Company adopted the
provisions of SFAS 133 in the quarter ended September 24, 2000. The
Company holds no material derivative financial instruments at or for
the three months ended September 24, 2000.
10. COMMITMENTS AND CONTINGENCIES
Following the Company's announcements in August and September 2000
regarding the restatements of previously reported financial statements,
the Company, its Kalish subsidiary and certain of their officers have
been named as defendants in at least five complaints in purported class
action lawsuits as of November 3, 2000. The complaints received by the
Company allege that, among other things, as a result of accounting
irregularities, the Company's previously issued financial statements
were materially false and misleading and thus constituted violations of
federal securities laws by the Company and certain officers. The
actions allege that the defendants violated Section 10(b) and Section
20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder (the "Securities Actions"). The Securities Actions
complaints seek damages in unspecified amounts. These Securities
Actions purport to be brought on behalf of purchasers of the Company's
common stock during various periods, all of which fall between
September 29, 1997 and August 23, 2000. The Company believes that
additional purported class action lawsuits similar to those described
above may be filed. The Company is currently evaluating these claims
and possible defenses thereto and intends to defend these suits
vigorously.
While it is not feasible to predict or determine the final outcome of
the Securities Actions or similar proceedings, or to estimate the
amounts or potential range of loss with respect to these matters,
management believes the Company and its officers and directors have
adequate liability insurance to cover the liabilities, costs and
expenses arising out of the Securities Actions, although there can be
no assurance that the insurance proceeds will be adequate to cover any
such losses. Further, there can be no assurance that an adverse outcome
with respect to the Securities Actions will not have a material adverse
impact on the Company's financial condition, results of operations or
cash flow.
In November 1998, DTI made an additional payment to the sellers of
Kalish as determined by formulae based on the earnings of the acquired
business for each of the three years after the closing of the
acquisition, prior to the restatement described above. The additional
purchase price specified within the Kalish agreement, based on earnings
from the acquisition date to June 28, 1998, amounted to $3,000 and was
paid through a combination of stock and cash. This additional purchase
price was recorded as goodwill. Mr. Lewis, a former director of the
Company, was the controlling shareholder of Kalish prior to its
acquisition by the Company. Because of the overstatement of certain
asset accounts of the acquired business and the resulting restatement
of the Company's financial statements for fiscal years 1997 and 1998,
the additional purchase price was recalculated to be zero. In
connection with the termination of Mr. Lewis' employment with the
Company as of October 5, 2000, the Board of Directors requested Mr.
Lewis' immediate resignation from the Board and the Company demanded
the return of the additional purchase price and any bonuses deemed
unearned as a result of the restatements. No amounts with respect
thereto have been reflected in the June 25, 2000 or September 24, 2000
consolidated financial statements. Mr. Lewis resigned from the Board
effective November 2, 2000.
<PAGE> 13
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 12
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The Company is also a party to certain lawsuits involving employee
matters, product liability and other matters. Management does not
expect the outcome of any such litigation to have a material adverse
effect on the Company's financial position, results of operations or
liquidity.
<PAGE> 14
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 13
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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 months ended September 24, 2000 compared to
the three months ended September 26, 1999. This discussion should be read in
conjunction with the consolidated financial statements and notes to the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the fiscal year ended June 25, 2000.
The Company primarily operates in two business segments, Automation and
Packaging. The Automation segment designs and builds integrated systems for the
assembly, test and handling of discrete products. The Packaging segment
manufactures tablet processing, counting and liquid filling systems and plastics
processing equipment including thermoforming, blister packaging, heat-sealing
and foam extrusion.
The percentage of completion method of accounting is used by the Company 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. For contracts not accounted for under the percentage of completion
method, revenue is recognized upon shipment to unaffiliated customers.
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 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.
Certain information contained in this report, particularly the information
appearing under the headings "Results of Operations", "Liquidity and Capital
Resources", "Backlog", "Seasonality and Fluctuations in Quarterly Results", and
"Market Risk", includes forward-looking statements. These statements, comprising
all statements 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 or
markets served, delays or cancellations of customer orders, delays in shipping
dates of products, significant cost overruns on certain projects, excess product
warranty expenses, collectability of past due customer receivables, significant
restructuring or other special, non-recurring charges, foreign currency exchange
rate fluctuations, delays in achieving anticipated cost savings or in fully
implementing project and information management systems, availability of
financing at acceptable terms, changes in interest rates, increased inflation,
the outcome of pending litigation related to the previously announced accounting
irregularities, and the Company's ability to implement operational and financial
systems to manage the Company's decentralized operations. Additional information
regarding important factors that could cause actual results of operations or
outcomes of other events to differ materially from any such forward-looking
statement also appears elsewhere herein, including under the headings "Results
of Operations", "Liquidity and Capital Resources", "Backlog", "Seasonality and
Fluctuations in Quarterly Results", and "Market Risk".
<PAGE> 15
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 14
--------------------------------------------------------------------------------
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>
Three Months Ended
September 24, 2000 September 26, 1999
------------------ ------------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 82.8 80.2
------- -----
Gross profit 17.2 19.8
Selling, general and administrative expenses 16.9 19.6
------- -----
Operating income 0.3 0.2
Interest expense 3.0 1.8
Dividends on Company-obligated, mandatorily redeemable convertible
preferred securities of subsidiary DT Capital Trust 1.2 1.2
------- -----
Loss before benefit for income taxes (3.9) (2.8)
Benefit for income taxes (1.2) (0.7)
------- -----
Net loss (2.7)% (2.1)%
======= =====
</TABLE>
<PAGE> 16
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 15
--------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 24, 2000
COMPARED TO THREE MONTHS ENDED SEPTEMBER 26, 1999
Consolidated net sales for the three months ended September 24, 2000 were $116.5
million, an increase of $15.4 million, or 15.2%, from $101.1 million for the
three months ended September 26, 1999. Net sales by segment were as follows (in
millions):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Increase
September 24, 2000 September 26, 1999 (Decrease)
------------------ ------------------ -------------
<S> <C> <C> <C>
Automation $ 84.4 $ 60.8 $ 23.6
Packaging 22.8 31.8 (9.0)
Other 9.3 8.5 0.8
-------- -------- -------
$ 116.5 $ 101.1 $ 15.4
======== ======== =======
</TABLE>
Automation segment sales increased $23.6 million, or 38.8%, to $84.4 million
during the three months ended September 24, 2000. The increase in sales is
primarily the result of the substantial order activity over the last 15 months
from a significant electronics customer. Revenue recognition on these orders
began in the last half of fiscal 2000. The Company expects strong revenue
recognition from its substantial electronics backlog throughout fiscal 2001,
with the manufacturing being distributed across several of the Automation
segment businesses.
Packaging segment sales decreased $9.0 million, or 28.4%, to $22.8 million
during the three months ended September 24, 2000. Plastics-related equipment
sales decreased $1.5 million or 16% primarily related to extrusion systems where
the Company has struggled to achieve expected profitability levels. The Company
is analyzing the profitability of its extrusion business and is studying various
strategic alternatives. The extrusion backlog as of September 24, 2000 was
minimal and the Company is forecasting minimal sales in fiscal 2001. Extrusion
equipment sales in fiscal 2000 were $11.4 million. Sales from the Company's
other packaging businesses also decreased substantially in the first quarter of
fiscal 2001 versus the first quarter of fiscal 2000. The decrease in sales was
across several product lines including presses, counters, fillers and line
integration primarily to pharmaceutical and nutritional markets. Orders for the
Company's Stokes brand name presses were very soft throughout fiscal 2000. Sales
of counters, fillers and line integration services are expected to exceed prior
year levels for the remainder of fiscal 2001.
Sales from the Company's other businesses increased primarily due to increased
stamping and fabrication sales to the agricultural equipment market and the
incremental sales to a new customer in the light truck market, partially offset
by lower sales to the heavy trucking market. The Company expects lower stamping
and fabrication sales for the remainder of fiscal 2001 from the softness in its
heavy trucking markets.
Gross profit was substantially unchanged at $20.0 million for the three months
ended September 24, 2000 versus $20.1 million for the three months ended
September 26, 1999. The gross margin decreased to 17.2% from 19.8%. The decrease
reflects lower gross margins in the Automation and Packaging segments in the
first quarter of fiscal 2000.
The lower gross margins in the Automation segment primarily reflect the
significant mix of electronics business in the first quarter of fiscal 2001 and
the lower margins being achieved on this new business. The lower margins are the
result of a number of contributing factors including the significant ramp up of
manufacturing headcount, the heavier use of contract labor and the substantial
engineering being incurred on the first of multiple systems.
<PAGE> 17
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 16
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Several businesses in the Packaging segment recognized lower gross margins in
the first quarter of fiscal 2001. Kalish and Sencorp recognized low gross
margins in the first quarter as a result of the ongoing low profitability from
certain larger, custom packaging projects and the disruptions from the
investigations of accounting irregularities and the resultant management
changes. Internal and external resources have been assigned to these businesses
to understand expected profitability on projects in backlog. The Company expects
both of these businesses to show improving margins in the remainder of fiscal
2001 compared to the first quarter. The Company is making significant changes in
both of these businesses including restructuring resources and improving costing
systems, risk assessment methodologies, and project management processes. Gross
margins of the Company's other businesses in the Packaging segment were lower
than the prior year due primarily to the softness in the Company's press markets
and the resulting unfavorable manufacturing variances due to the lower volume.
SG&A expenses were $19.7 million for the three months ended September 24, 2000
compared to $19.8 million for the three months ended September 26, 1999. The
Company continues to maintain operating expenses at the lower levels achieved in
fiscal 2000. The Company expects to incur incremental legal and professional
expenses in fiscal 2001 related to the effects of the investigations at Kalish
and Sencorp. Due to the higher sales and flat expenses as compared to the prior
year, SG&A expenses as a percentage of consolidated net sales decreased to 16.9%
from 19.6%.
Operating income was $0.3 million for the three months ended September 24, 2000
versus $0.2 million for the three months ended September 26, 1999, as a result
of the factors noted above.
Interest expense increased $1.7 million, or 92.5%, to $3.5 million for the three
months ended September 26, 1999. The substantial increase primarily pertains to
the increase in the Company's interest rate on borrowings pursuant to the senior
secured credit facility. Average interest rates have increased from
approximately 6% to 11%. The Company's debt levels have also increased during
fiscal 2000 and the first quarter of fiscal 2001 to fund working capital
requirements. Dividends on the convertible preferred securities were $1.3
million for each of the three months ended September 24, 2000 and September 26,
1999. The dividends are currently being deferred and accrued as a result of the
September 1999 amendment to the credit facility.
The provision for income taxes reflects book income plus permanent differences,
primarily non-deductible goodwill amortization related to certain acquisitions,
multiplied by statutory federal and applicable state tax rates.
Net loss was $3.1 million for the three months ended September 24, 2000 compared
to a net loss of $2.1 million for the three months ended September 26, 1999.
Basic and diluted loss per share were $0.31 for the three months ended September
24, 2000 compared to basic and diluted loss per share of $0.21 for the three
months ended September 26, 1999. Basic and diluted weighted average shares
outstanding were 10.1 million shares for the three months ended September 24,
2000 and September 26, 1999.
<PAGE> 18
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 17
--------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Non-cash operating charges less the net loss provided $0.9 million of operating
cash flow for the quarter ended September 24, 2000. Net increases in working
capital balances used operating cash of $16.2 million, resulting in net cash
used by operating activities of $15.3 million for the quarter ended September
24, 2000. The higher working capital balances primarily reflect increased
inventory and costs and earnings in excess of amounts billed and decreased
accounts payable and accrued liabilities. The increase in inventory and costs
and earnings in excess of amounts billed was largely in the Automation segment
and resulted primarily from the increase in project activity and the timing of
customer progress billings. The Company's domestic automation facilities are
near capacity with the significant electronics work and the recent increase in
automotive-related work. Accounts payable decreased from the balance at June 25,
2000 due to the efforts at that time to lower debt by extending payables.
Accruals decreased primarily from the payment of fiscal 2000 incentive bonuses
in the first quarter of fiscal 2001.
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 three months ended September 24, 2000, the Company borrowed $18.2
million under its revolving credit facility. The funds were used for working
capital requirements and capital expenditures of $0.9 million.
During the three months ended September 26, 1999, the Company borrowed $15.7
million on its revolving credit facility. The funds were used primarily for
working capital requirements, the acquisition of C. E. King for $2.1 million and
capital expenditures of $1.8 million.
In November 1998, DTI made an additional payment to the sellers of Kalish as
determined by formulae based on the earnings of the acquired business for each
of the three years after the closing of the acquisition, prior to the
restatement described above. The additional purchase price specified within the
Kalish agreement, based on earnings from the acquisition date to June 28, 1998,
amounted to $3.0 million and was paid through a combination of stock and cash.
This additional purchase price was recorded as goodwill. Mr. Lewis, a former
director of the Company, was the controlling shareholder of Kalish prior to its
acquisition by the Company. Because of the overstatement of certain asset
accounts of the acquired business and the resulting restatement of the Company's
financial statements for fiscal years 1997 and 1998, the additional purchase
price was recalculated to be zero. In connection with the termination of Mr.
Lewis' employment with the Company as of October 5, 2000, the Board of Directors
requested Mr. Lewis' immediate resignation from the Board and the Company
demanded the return of the additional purchase price and any bonuses deemed
unearned as a result of the restatements. No amounts with respect thereto have
been reflected in the June 25, 2000 or September 24, 2000 consolidated financial
statements. Mr. Lewis resigned from the Board effective November 2, 2000.
The Company's credit facility includes a $130 million revolving credit facility
and a $10 million term credit facility and matures on July 2, 2001. Borrowings
under the amended credit facility bore interest at floating rates based on the
prime rate plus 1 7/8% or LIBOR plus 3% (at the option of DTI). Borrowings under
the credit facility are secured by substantially all of the assets of DTI and
its domestic subsidiaries. Total borrowing availability under the credit
facility as of September 24, 2000 was $3.2 million.
<PAGE> 19
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 18
--------------------------------------------------------------------------------
As a result of the Company's fiscal 2000 financial results, the Company was in
default of a number of provisions of its senior credit agreement and another
agreement. The Company and the lenders amended the credit agreements effective
October 10, 2000. The amendment to the credit agreements includes provisions
that amend the financial covenants, waive certain existing defaults of covenants
and breaches of representations and warranties and increase the interest rate on
borrowings made pursuant to the facility. From October 10, 2000 until February
14, 2001, all borrowings under the amended credit facility will bear interest at
a floating rate based on the prime rate plus 2 3/8%, except for foreign currency
borrowings, which will bear interest at a floating rate equal to LIBOR plus
3.5%. After February 15, 2001, such borrowings will bear interest at floating
rates based on the prime rate plus 2 5/8% or LIBOR plus 3.75%, as applicable.
The overall line of credit and maturity were not amended.
Since the Company's credit facility matures on July 2, 2001, borrowings of
$133.2 million under this facility have been presented within current
liabilities in the Company's September 24, 2000 consolidated balance sheet. The
Company has initiated discussions with several lenders for purposes of
refinancing borrowings under its credit facilities, and expects to complete such
refinancing prior to July 2, 2001, although there can be no assurance that such
refinancing will be completed by this date. The Company has also implemented
other cash management initiatives for fiscal 2001, including a reduction in
discretionary capital expenditures, increased focus on collections of accounts
receivable, accelerated payment terms from customers, among other things. On a
longer term basis, the Company has engaged an investment banking firm to assist
it in the divestiture of one or more business units with the proceeds being used
to help pay down debt. This program was initiated in the first quarter of fiscal
2001.
In conjunction with an amendment to the credit facility in September 1999, the
Company elected to defer interest payments on its convertible junior
subordinated debentures. The credit facility requires that the deferral continue
until the maturity of the credit facility. As a result, quarterly distributions
on the Convertible Preferred Securities are also being deferred and DTI is not
declaring or paying any dividends on its common stock. Dividends on the
Convertible Preferred Securities in the amount of $6.5 million have been
deferred and accrued as of September 24, 2000.
Management anticipates that capital expenditures in the current fiscal year will
be approximately $6.0 million to $8.0 million. This includes recurring
replacement or refurbishment of machinery and equipment, and purchases to
improve production methods or processes or to expand manufacturing capabilities.
Funding for capital expenditures is expected to be provided by cash from
operating activities and through the Company's credit facilities.
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 through the remainder of fiscal 2001.
BACKLOG
The Company's backlog is based upon customer purchase orders that the Company
believes are firm. As of September 24, 2000, the Company had $311.1 million of
orders in backlog, which compares to a backlog of approximately $206.3 million
as of September 26, 1999.
The backlog for the Automation segment at September 24, 2000 was $267.1 million,
an increase of $106.1 million, or 65.8%, from a year ago. The increase is
primarily a result of the substantial order activity in the Company's
electronics markets, fueled by strong demand for end products and product
development. The Company also booked a significant project in the diesel engine
market related to material handling. The order outlook, particularly in
electronics and automotive fuel systems, remains solid to support revenue growth
in fiscal 2001. Backlog for the Packaging segment was $35.6 million at September
24, 2000, a decrease of $3.9 million, or 10.0%, from the backlog at September
26, 1999. The decrease in backlog is primarily due to the soft order activity
for Kalish and Sencorp in the first quarter.
<PAGE> 20
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 19
--------------------------------------------------------------------------------
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 that most of the orders in the backlog will
be recognized as sales during the current fiscal year.
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 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Management's Discussion and Analysis of Financial Condition and Results of
Operations - Market Risk of the Company's Annual Report on Form 10-K for the
year ended June 25, 2000. There has been no material change to that information
that is required to be disclosed in this Quarterly Report on Form 10-Q.
<PAGE> 21
DT INDUSTRIES, INC.
PART II. OTHER INFORMATION
PAGE 20
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ITEM 1. LEGAL PROCEEDINGS
Following the Company's announcements in August and September 2000
regarding the restatements of previously reported financial statements,
the Company, its Kalish subsidiary and certain of their officers have
been named as defendants in at least five complaints in purported class
action lawsuits as of November 3, 2000. The complaints received by the
Company allege that, among other things, as a result of accounting
irregularities, the Company's previously issued financial statements
were materially false and misleading and thus constituted violations of
federal securities laws by the Company and certain officers. The
actions allege that the defendants violated Section 10(b) and Section
20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder (the "Securities Actions"). The Securities Actions
complaints seek damages in unspecified amounts. These Securities
Actions purport to be brought on behalf of purchasers of the Company's
common stock during various periods, all of which fall between
September 29, 1997 and August 23, 2000. The Company believes that
additional purported class action lawsuits similar to those described
above may be filed. The Company is currently evaluating these claims
and possible defenses thereto and intends to defend these suits
vigorously.
While it is not feasible to predict or determine the final outcome of
the Securities Actions or similar proceedings, or to estimate the
amounts or potential range of loss with respect to these matters,
management believes the Company and its officers and directors have
adequate liability insurance to cover the liabilities, costs and
expenses arising out of the Securities Actions, although there can be
no assurance that the insurance proceeds will be adequate to cover any
such losses. Further there can be no assurance that an adverse outcome
with respect to the Securities Actions will not have a material adverse
impact on the Company's financial condition, results of operations or
cash flow.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11 - Statement Regarding Computation of Earnings Per
Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
On June 28, 2000, a Current Report on Form 8-K was filed to
report, pursuant to Item 5 thereof, the date of the Company's
2000 Annual Meeting of Stockholders and the deadline under the
Company's Amended and Restated Bylaws for submitting proposals
for consideration or proposing nominations for director at the
Annual Meeting.
On August 24, 2000, a Current Report on Form 8-K was filed to
report, pursuant to Items 5 and 7 thereof, the investigation
regarding an overstatement of certain asset accounts at Kalish
Inc., the Company's wholly-owned subsidiary in Montreal,
Canada; the hiring of Brown, Gibbons, Lang & Company to
explore the possible divestiture of one or more business units
with the aim of reducing the Company's debt; and the
resignation of Bruce P. Erdel, Senior Vice President-Finance
and Administration.
On August 30, 2000, a Current Report on Form 8-K was filed to
report, pursuant to Items 5 and 7 thereof, the announcement
that Louis Pallay, the President of Kalish Inc., the Company's
wholly-owned subsidiary in Montreal, Canada, and Graham Lewis,
the Company's President-Packaging Machinery Group, had been
placed on administrative leave pending the results of the
investigation of an overstatement of certain asset accounts at
Kalish.
<PAGE> 22
DT INDUSTRIES, INC.
PART II. OTHER INFORMATION
PAGE 21
--------------------------------------------------------------------------------
On September 19, 2000, a Current Report on Form 8-K was filed
to report, pursuant to Items 5 and 7 thereof, the announcement
of the restructuring of the Company's senior management, the
expansion of the investigation of accounting irregularities
and the consideration and rejection of the Plaster Group's
proposal regarding management of the Company.
<PAGE> 23
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
11 Statement Regarding Computation of Earnings Per-
Share
23 Financial Data Schedule
<PAGE> 24
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: November 8, 2000 /s/ Wayne W. Schultz
---------------------------------------
(Signature)
Wayne W. Schultz
Interim Senior Vice President - Finance
(Principal Financial and Accounting
Officer)
