<PAGE> 1
FORM 10-Q/A No. 1
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 December 26, 1999
-------------------------------------------------
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 January 28, 2000 was 10,107,274.
<PAGE> 2
DT INDUSTRIES, INC.
THE UNDERSIGNED REGISTRANT HEREBY AMENDS, AS AND TO THE EXTENT SET FORTH BELOW,
THE FOLLOWING ITEMS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
EXHIBITS OF ITS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
DECEMBER 26, 1999 FILED PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. EXCEPT FOR ITEMS 1, 2 AND 6 AND EXHIBITS 11 AND 27, NO
OTHER INFORMATION INCLUDED IN THE ORIGINAL REPORT ON FORM 10-Q IS AMENDED BY
THIS AMENDMENT.
INDEX
PAGE 1
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
Part I Financial Information
Item 1. Financial Statements (Unaudited, except as noted)
Consolidated Balance Sheets at December 26, 1999
and June 27, 1999 (Audited), as restated 2
Consolidated Statement of Operations for the three and
six months ended December 26, 1999 and December
27, 1998, as restated 3
Consolidated Statement of Changes in Stockholders'
Equity for the six months ended December 26,
1999, as restated 4
Consolidated Statement of Cash Flows for the six
months ended December 26, 1999 and December
27, 1998, as restated 5-6
Notes to Consolidated Financial Statements 7-16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17-26
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 27
Signature
</TABLE>
<PAGE> 3
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
PAGE 2
<TABLE>
<CAPTION>
December 26,
1999 June 27,
As Restated 1999
(Notes 1 and 12) As Restated
(Unaudited) (Notes 1 and 12)
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,798 $ 10,487
Accounts receivable, net 62,077 50,006
Costs and estimated earnings in excess of amounts
billed on uncompleted contracts 62,582 65,806
Inventories, net 52,628 49,377
Prepaid expenses and other 12,762 16,070
--------- ---------
Total current assets 207,847 191,746
Property, plant and equipment, net 75,455 77,402
Goodwill, net 178,804 180,066
Other assets, net 4,341 4,051
--------- ---------
$ 466,447 $ 453,265
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 686 $ 384
Accounts payable 29,178 37,507
Customer advances 26,326 21,924
Accrued liabilities 33,699 35,123
--------- ---------
Total current liabilities 89,889 94,938
--------- ---------
Long-term debt 125,390 104,209
Deferred income taxes 10,442 10,442
Other long-term liabilities 3,330 3,400
--------- ---------
Total long-term obligations 139,162 118,051
--------- ---------
Commitments and contingencies (See Note 11)
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 65,944 68,968
Cumulative translation adjustment (1,231) (1,375)
Less -
Treasury stock (1,268,488 shares), at cost (30,778) (30,778)
--------- ---------
Total stockholders' equity 167,396 170,276
--------- ---------
$ 466,447 $ 453,265
========= =========
</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
<TABLE>
<CAPTION>
Three months ended Six months ended
December 26, December 27, December 26, December 27,
1999 1998 1999 1998
As Restated As Restated As Restated As Restated
(Notes 1 and 12) (Notes 1 and 12) (Notes 1 and 12) (Notes 1 and 12)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 107,982 $ 111,627 $ 209,111 $ 224,534
Cost of sales 85,588 86,768 166,666 172,522
------------ ----------- ------------ -----------
Gross profit 22,394 24,859 42,445 52,012
Selling, general and
administrative expenses 19,372 20,524 39,218 39,305
------------ ----------- ------------ -----------
Operating income 3,022 4,335 3,227 12,707
Interest expense 2,642 2,023 4,440 4,059
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 1,275 1,253 2,528 2,506
------------ ----------- ------------ -----------
Income (loss) before provision for
income taxes (895) 1,059 (3,741) 6,142
Provision (benefit) for income
taxes (8) 412 (717) 2,374
------------ ----------- ------------ -----------
Net income (loss) $ (887) $ 647 $ (3,024) $ 3,768
============ =========== ============ ===========
Net earnings (loss) per common share:
Basic $ (0.09) $ 0.06 $ (0.30) $ 0.37
Diluted $ (0.09) $ 0.06 $ (0.30) $ 0.36
============ =========== ============ ===========
Weighted average common shares outstanding:
Basic 10,107,274 10,066,888 10,107,274 10,191,387
Diluted 10,107,274 10,190,146 10,107,274 10,354,495
============ =========== ============ ===========
</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 SIX MONTHS ENDED DECEMBER 26, 1999
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
PAGE 4
<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 27, 1999 - As Restated
(Notes 1 and 12) $ 68,968 $(1,375) $113 $133,348 $(30,778) $170,276
Comprehensive loss:
Net loss (unaudited) (3,024)
Foreign currency translation (unaudited) 144
Total comprehensive loss (unaudited) (2,880)
-------- ------- ---- -------- -------- --------
Balance, December 26, 1999 - As Restated
(Notes 1 and 12) (unaudited) $ 65,944 $(1,231) $113 $133,348 $(30,778) $167,396
======== ======= ==== ======== ======== ========
</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
<TABLE>
<CAPTION>
Six Months Ended
December 26, December 27,
1999 1998
As Restated As Restated
(Notes 1 and 12) (Notes 1 and 12)
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (3,024) $ 3,768
Adjustments to reconcile net income (loss) to net cash used by operating
activities:
Depreciation 5,528 5,040
Amortization 2,973 2,687
(Increase) decrease in current assets, excluding the effect of acquisitions:
Accounts receivable (12,072) 5,554
Costs and earnings in excess of amounts billed 3,225 (7,089)
Inventories (1,541) (5,104)
Prepaid expenses and other 4,191 (261)
Increase (decrease) in current liabilities, excluding the effect of
acquisitions:
Accounts payable (8,330) (5,113)
Customer advances 4,268 1,611
Accrued liabilities (1,945) (1,683)
Other 75 106
-------- --------
Net cash used by operating activities (6,652) (484)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,419) (8,543)
Acquisition of C.E. King net assets (2,116) --
Acquisition of Scheu & Kniss net assets -- (10,352)
Other (528) (1,429)
-------- --------
Net cash used by investing activities (6,063) (20,324)
-------- --------
</TABLE>
(continued)
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 7
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(CONTINUED)
PAGE 6
<TABLE>
<CAPTION>
Six Months Ended
December 26, December 27,
1999 1998
As Restated As Restated
(Notes 1 and 12) (Notes 1 and 12)
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from revolving loans $ 21,385 $ 27,342
Proceeds from issuance of debt -- 5,175
Payments on borrowings (396) (98)
Financing costs (993) --
Exercise of stock options -- 119
Payments for repurchase of stock -- (9,985)
Dividends -- (410)
-------- --------
Net cash provided by financing activities 19,996 22,143
-------- --------
Effect of exchange rate changes 30 168
-------- --------
Net increase in cash 7,311 1,503
Cash and cash equivalents at beginning of period 10,487 6,915
-------- --------
Cash and cash equivalents at end of period $ 17,798 $ 8,418
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 8
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 7
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 U.S. generally accepted
accounting principles 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 Amended Annual Report on Form 10-K for the fiscal year
ended June 27, 1999 (to be filed as soon as practicable) and with the
Company's Annual Report on Form 10-K for the fiscal year ended June 25,
2000 filed on October 13, 2000.
RESTATEMENT OF FINANCIAL RESULTS
As publicly announced on August 23, 2000 (prior to the issuance of the
Company's consolidated financial statements as of and for the fiscal
year ended June 25, 2000), it was determined that the consolidated
results reported in the Company's Form 10-K as of and for the fiscal
years ended June 27, 1999, June 28, 1998 and June 29, 1997, as well as
the unaudited consolidated quarterly results reported in the Company's
Reports on Form 10-Q for the fiscal years ended June 25, 2000, June 27,
1999, June 28, 1998 and June 29, 1997, would need to be restated for
certain accounting irregularities at its Kalish subsidiary. The Board
of Directors authorized the Audit and Finance Committee (the
"Committee") to conduct an independent investigation, with the
assistance of special counsel retained by the Committee, to identify
the causes of these discrepancies and to make recommendations to ensure
similar issues do not recur in the future. The Committee retained Bryan
Cave LLP as special counsel, and Bryan Cave LLP engaged an independent
accounting firm to assist in the investigation. In addition, the
Company investigated whether similar issues existed at any other
subsidiaries. As a result of the investigation it was determined that
certain assets (primarily accounts receivable, inventories and related
accounts and prepaid expenses and other) were overstated at the
Company's Kalish and Sencorp subsidiaries due to accounting
irregularities. At Kalish, consolidated results as of and for the
fiscal years ended June 25, 2000, June 27, 1999, June 28, 1998 and June
29, 1997, were impacted. At Sencorp, only consolidated results as of
and for the fiscal year ended June 25, 2000 were impacted.
As a result, the consolidated financial statements as of and for the
fiscal years ended June 27, 1999, June 28, 1998 and June 29, 1997 as
well as the unaudited consolidated quarterly financial data as of and
for the fiscal years ended June 25, 2000, June 27, 1999, June 28, 1998
and June 29, 1997 have been restated and provided in the Company's
Annual Report on Form 10-K for the fiscal year ended June 25, 2000.
The restated consolidated financial statements as of December 26, 1999
and June 27, 1999 and for the three and six months ended December 26,
1999 and December 27, 1998 have been included in the consolidated
financial statements included herein.
For the three months ended December 26, 1999, the previously reported
financial statements included an understatement of cost of sales by
$2,753. After restating cost of sales, the Company's income tax expense
decreased by $993. The impact of the accounting irregularities on
reported operating results for the three months was to overstate gross
profit and operating income by $2,753, net income by $1,760 and diluted
earnings per share by $0.18 per share.
<PAGE> 9
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 8
For the six months ended December 26, 1999, the previously
reported financial statements primarily included an understatement of
cost of sales by $5,745. After restating cost of sales, the Company's
income tax expense decreased by $2,026. The impact of the accounting
irregularities on reported operating results for the six months was to
overstate gross profit and operating income by $5,585, net income by
$3,559 and diluted earnings per share by $0.35 per share.
For the three months ended December 27, 1998, the previously reported
financial statements included an understatement of cost of sales by
$716. After restating cost of sales, the Company's income tax expense
decreased by $271. The impact of the accounting irregularities on
reported operating results for the three months was to overstate gross
profit and operating income by $716, net income by $445 and diluted
earnings per share by $0.05 per share.
For the six months ended December 27, 1998, the previously reported
financial statements included an understatement of cost of sales by
$1,788. After restating cost of sales, the Company's income tax expense
decreased by $679. The impact of the accounting irregularities on
reported operating results for the six months was to overstate gross
profit and operating income by $1,788, net income by $1,109 and diluted
earnings per share by $0.11 per share.
A comparison of previously reported and restated unaudited,
interim financial statements as of December 26, 1999 and June 27, 1999
and for the three and six months ended December 26, 1999 and December
27, 1998 are set forth in Note 12 to the consolidated financial
statements included herein.
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 U.S. generally accepted accounting
principles.
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
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 King from the date of
acquisition.
In August 1998, the Company completed the acquisition of certain net
assets of Scheu & Kniss, Inc. (S&K). See the consolidated financial
statements and notes thereto included in the Company's Amended Annual
Report on Form 10-K for the fiscal year ended June 27, 1999 for
additional information relating to this acquisition.
The pro forma effects of the above acquisitions are not material to the
Company's financial results for the three and six months ended December
26, 1999 and December 27, 1998.
<PAGE> 10
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 9
4. FINANCING
As of December 26, 1999 and June 27, 1999, long-term debt consisted of
the following:
<TABLE>
<CAPTION> December 26,
1999 June 27,
As Restated 1999
(Notes 1 and 12) As Restated
(Unaudited) (Notes 1 and 12)
---------------- ---------------
<S> <C> <C>
Term loan $ 10,000 $ 10,000
Revolving loans 108,315 86,315
Other long-term debt 7,761 8,278
-------- --------
126,076 104,593
Less-current portion of long-term debt 686 384
-------- --------
$125,390 $104,209
======== ========
</TABLE>
In September 1999, the Company completed an amendment to its
$175,000 credit facility. The credit facility, as amended, was reduced
to $135,000, including a $125,000 revolving credit facility and a
$10,000 term credit facility. In accordance with the amended credit
agreement, the revolving credit facility increased in December 1999 to
$130,000 as the Company met certain operating cash flow targets.
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). The credit facility, as amended, matures July 2, 2001.
Borrowings under the amended credit facility are secured by
substantially all of the assets of DTI and its domestic subsidiaries.
Total borrowing availability under the amended credit facility as of
December 26, 1999 was $18,863.
As a result of the restatements of financial results described in
Notes 1 and 12, the Company was in default of certain financial and
other covenants provided within the senior credit agreement and
another credit agreement. In October 2000, the Company amended the
relevant credit agreements wherein the Company's lenders waived any
and all events of default arising from the restatements and
increased the interest rate on borrowings pursuant to the agreement.
The overall line of credit and maturity were not amended.
<PAGE> 11
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 10
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. A registration statement relating to resales of
the Convertible Preferred Securities was declared effective by the
Securities and Exchange Commission on September 2, 1997. In conjunction
with the amendment of the credit facility as discussed in Note 4, 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 $2,528 have been
deferred and accrued as of December 26, 1999.
6. RESTRUCTURING RESERVE
In the fourth quarter of fiscal 1999, the Company recorded a
restructuring charge of $2,500 associated with management changes and
workforce reductions, idle facility costs and non-cash asset
writedowns. The costs included the shut-down of one packaging
manufacturing facility in July 1999. The breakdown of the
restructuring reserve was as follows:
<TABLE>
<CAPTION>
Charges to
June 27, 1999 Reserve December 26, 1999
------------- ---------- -----------------
<S> <C> <C> <C>
Severance costs $ 1,493 $ (1,223) $ 270
Idle facility costs 264 (203) 61
Asset writedowns and other 361 (291) 70
------------- ---------- -----------------
$ 2,118 $ (1,717) $ 401
============= ========== =================
</TABLE>
The Company has completed the restructuring plans as developed in
fiscal 1999. The remaining restructuring reserve relates primarily to
several management changes for which payments under severance programs
extend beyond December 26, 1999. The remaining balance of the
restructuring reserve is expected to be fully utilized during fiscal
2000.
<PAGE> 12
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 11
7. BUSINESS SEGMENTS
The Company adopted Statement of Financial Accounting Standards No. 131
(SFAS 131), "Disclosures about Segments of an Enterprise and Related
Information", effective June 27, 1999. SFAS 131 requires disclosure of
segment information on the basis that it is used internally for
evaluating segment performance and deciding how to allocate resources
to segments. Accordingly, segment information for the three and six
months ended December 27, 1998 has been restated to conform with the
requirements of SFAS 131.
Financial information for the Company's reportable segments consisted
of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 26,
1999
December 26, Dece,ber 27, As Restated December 27,
1999 1998 (Notes 1 and 12) 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales
Automation $ 66,975 $ 73,920 $127,768 $156,816
Packaging 32,109 29,122 63,977 50,228
Other 8,898 8,585 17,366 17,490
-------- -------- -------- --------
Consolidated total $107,982 $111,627 $209,111 $224,534
======== ======== ======== ========
</TABLE>
The reconciliation of segment operating income to consolidated income
(loss) before income taxes consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 26, December 27, December 26, December 27,
1999 1998 1999 1998
As Restated As Restated As Restated As Restated
(Notes 1 and 12) (Notes 1 and 12) (Notes 1 and 12) (Notes 1 and 12)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Automation $ 2,124 $ 4,414 $ 2,247 $ 13,741
Packaging 2,300 1,506 4,383 2,378
------------ ------------ ------------ ------------
Operating income for
reportable segments 4,424 5,920 6,630 16,119
Operating income for
immaterial businesses 599 767 823 1,167
Corporate (2,001) (2,352) (4,226) (4,579)
Interest expense (2,642) (2,023) (4,440) (4,059)
Dividends on Company-
obligated, mandatorily
redeemable convertible
preferred securities (1,275) (1,253) (2,528) (2,506)
------------ ------------ ------------ ------------
Consolidated income (loss)
before income taxes $ (895) $ 1,059 $ (3,741) $ 6,142
============ ============ ============ ============
</TABLE>
<PAGE> 13
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 12
8. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
December 26, 1999
As Restated June 27, 1999
(Notes 1 and 12) As Restated
(Unaudited) (Notes 1 and 12)
----------------- -----------------
<S> <C> <C>
Inventories, net:
Raw materials $ 23,411 $ 21,835
Work in process 21,281 17,919
Finished goods 7,936 9,623
------------ ----------
$ 52,628 $ 49,377
============ ==========
Accrued liabilities:
Accrued employee compensation and benefits $ 12,891 $ 12,291
Accrued warranty 3,991 4,409
Dividends on convertible preferred securities 2,528 --
Other 14,289 18,423
------------ ----------
$ 33,699 $ 35,123
============ ==========
</TABLE>
The Company has 1,268,488 shares of treasury stock at a total cost of
$30,778, as reflected in the stockholders' equity section of the
consolidated balance sheet. The repurchased shares are being used
primarily for employee stock option programs. In conjunction with the
negotiation of the amendment to the credit facility as discussed in
Note 4, the Company has agreed that it will make no further repurchases
of its common stock.
9. 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>
AVERAGE SHARES SUBJECT
PRICE TO OPTION
------- --------------
<S> <C> <C>
Options outstanding at June 27, 1999 $ 17.43 1,011,938
Options granted $ 6.25 246,000
Options exercised --- ---
Options forfeited $ 14.88 (29,000)
--------------
Options outstanding at December 26, 1999 $ 15.24 1,228,938
==============
Exercisable at December 26, 1999 $ 16.19 564,483
==============
</TABLE>
10. COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income", establishes standards for the
reporting and display of comprehensive income and its components in a
full set of general-purpose financial statements. Comprehensive income
represents net income plus certain items that are charged directly to
stockholders' equity. The only component of other comprehensive income
for the Company relates to foreign currency translation adjustments.
<PAGE> 14
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 13
11. COMMITMENTS AND CONTINGENCIES
Following the Company's announcements 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
October 25, 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.
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.
12. RESTATEMENT
As described in Note 1, the December 26, 1999 and June 27, 1999 balance
sheets as well as the unaudited interim results for the three and six
months ended December 26, 1999 and December 27, 1998 have been
restated. A comparison of previously reported and restated financial
statements follows:
<PAGE> 15
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 14
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 26,
1999 December 26, June 27,
As Previously 1999 1999 June 27,
Reported As Restated As Previously 1999
(Unaudited) (Unaudited) Reported As Restated
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 17,798 $ 17,798 $ 10,487 $ 10,487
Accounts receivable, net 61,674 62,077 50,691 50,006
Costs and estimated earnings in excess of
amounts billed on uncompleted contracts 66,182 62,582 64,894 65,806
Inventories, net 63,682 52,628 56,876 49,377
Prepaid expenses and other 11,349 12,762 12,320 16,070
--------- --------- --------- ---------
Total current assets 220,685 207,847 195,268 191,746
Property, plant and equipment, net 75,455 75,455 77,402 77,402
Goodwill, net 178,804 178,804 180,066 180,066
Other assets, net 4,341 4,341 4,051 4,051
--------- --------- --------- ---------
$ 479,285 $ 466,447 $ 456,787 $ 453,265
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 686 $ 686 $ 384 $ 384
Accounts payable 28,941 29,178 37,507 37,507
Customer advances 26,159 26,326 21,903 21,924
Accrued liabilities 35,434 33,699 32,418 35,123
--------- --------- --------- ---------
Total current liabilities 91,220 89,889 92,212 94,938
--------- --------- --------- ---------
Long-term debt 124,822 125,390 103,659 104,209
Deferred income taxes 10,088 10,442 8,376 10,442
Other long-term liabilities 3,330 3,330 3,400 3,400
--------- --------- --------- ---------
Total long-term obligations 138,240 139,162 115,435 118,051
--------- --------- --------- ---------
Commitments and contingencies
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 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 outstanding 113 113 113 113
Additional paid-in capital 133,348 133,348 133,348 133,348
Retained earnings 78,519 65,944 77,984 68,968
Cumulative translation adjustment (1,377) (1,231) (1,527) (1,375)
Less - Treasury stock (1,268,488 shares),
at cost (30,778) (30,778) (30,778) (30,778)
--------- --------- --------- ---------
Total stockholders' equity 179,825 167,396 179,140 170,276
--------- --------- --------- ---------
$ 479,285 $ 466,447 $ 456,787 $ 453,265
========= ========= ========= =========
</TABLE>
<PAGE> 16
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 15
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
December 26, December 27,
1999 December 26, 1998 December 27,
As Previously 1999 As Previously 1998
Reported As Restated Reported As Restated
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales $ 107,982 $ 107,982 $ 111,627 $ 111,627
Cost of sales 82,835 85,588 86,052 86,768
----------- ------------ ----------- -----------
Gross profit 25,147 22,394 25,575 24,859
Selling, general and administrative expenses 19,372 19,372 20,524 20,524
----------- ------------ ----------- -----------
Operating income 5,775 3,022 5,051 4,335
Interest expense 2,642 2,642 2,023 2,023
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 1,275 1,275 1,253 1,253
----------- ------------ ----------- -----------
Income (loss) before provision for income taxes 1,858 (895) 1,775 1,059
Provision (benefit) for income taxes 985 (8) 683 412
----------- ------------ ----------- -----------
Net income (loss) $ 873 $ (887) $ 1,092 $ 647
=========== ============ =========== ===========
Net earnings (loss) per common share:
Basic $ 0.09 $ (0.09) $ 0.11 $ 0.06
Diluted $ 0.09 $ (0.09) $ 0.11 $ 0.06
=========== ============ =========== ===========
Weighted average common shares outstanding:
Basic 10,107,274 10,107,274 10,066,888 10,066,888
Diluted 10,119,824 10,107,274 10,190,146 10,190,146
=========== ============ =========== ===========
</TABLE>
<PAGE> 17
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 16
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
Six months ended Six months ended
December 26, December 27,
1999 December 26, 1998 December 27,
As Previously 1999 As Previously 1998
Reported As Restated Reported As Restated
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 208,951 $ 209,111 $ 224,534 $ 224,534
Cost of sales 160,921 166,666 170,734 172,522
--------------- -------------- --------------- --------------
Gross profit 48,030 42,445 53,800 52,012
Selling, general and administrative expenses 39,218 39,218 39,305 39,305
--------------- -------------- --------------- --------------
Operating income 8,812 3,227 14,495 12,707
Interest expense 4,440 4,440 4,059 4,059
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 2,528 2,528 2,506 2,506
--------------- -------------- --------------- --------------
Income (loss) before provision for income 1,844 (3,741) 7,930 6,142
taxes
Provision (benefit) for income taxes 1,309 (717) 3,053 2,374
--------------- -------------- --------------- --------------
Net income (loss) $ 535 $ (3,024) $ 4,877 $ 3,768
=============== ============== =============== ==============
Net earnings (loss) per common share:
Basic $ 0.05 $ (0.30) $ 0.48 $ 0.37
Diluted $ 0.05 $ (0.30) $ 0.47 $ 0.36
=============== ============== =============== ==============
Weighted average common shares outstanding:
Basic 10,107,274 10,107,274 10,191,387 10,191,387
Diluted 10,134,038 10,107,274 10,354,495 10,354,495
=============== ============== =============== ==============
</TABLE>
<PAGE> 18
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 17
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 six months ended December 26, 1999
compared to the three and six months ended December 27, 1998. This discussion
should be read in conjunction with the consolidated financial statements and
notes to the consolidated financial statements included in the Company's Amended
Annual Report on Form 10-K for the fiscal year ended June 27, 1999 (to be filed
as soon as practicable) and the Company's Annual Report on Form 10-K for the
fiscal year ended June 25, 2000 filed on October 13, 2000.
RESTATEMENT OF FINANCIAL RESULTS
As publicly announced on August 23, 2000 (prior to the issuance of the Company's
consolidated financial statements as of and for the fiscal year ended June 25,
2000), it was determined that the consolidated results reported in the Company's
Form 10-K as of and for the fiscal years ended June 27, 1999, June 28, 1998 and
June 29, 1997, as well as the unaudited consolidated quarterly results reported
in the Company's Reports on Form 10-Q for the fiscal years ended June 25, 2000,
June 27, 1999, June 28, 1998 and June 29, 1997, would need to be restated for
certain accounting irregularities at its Kalish subsidiary. The Board of
Directors authorized the Audit and Finance Committee (the "Committee") to
conduct an independent investigation, with the assistance of special counsel
retained by the Committee, to identify the causes of these discrepancies and to
make recommendations to ensure similar issues do not recur in the future. The
Committee retained Bryan Cave LLP as special counsel, and Bryan Cave LLP engaged
an independent accounting firm to assist in the investigation. In addition, the
Company investigated whether similar issues existed at any other subsidiaries.
As a result of the investigation, it was determined that certain assets
(primarily accounts receivable, inventories and related accounts and prepaid
expenses and other) were overstated at the Company's Kalish and Sencorp
subsidiaries due to accounting irregularities. At Kalish, consolidated results
as of and for the fiscal years ended June 25, 2000, June 27, 1999, June 28, 1998
and June 29, 1997, were impacted. At Sencorp, only consolidated results as of
and for the fiscal year ended June 25, 2000 were impacted.
On October 4, 2000, special counsel to the Committee submitted its report to the
Committee, which in turn reported to the Board of Directors on its investigation
into the accounting irregularities and its findings and recommendations
regarding such matters.
As a result, the consolidated financial statements as of and for the fiscal
years ended June 27, 1999, June 28, 1998 and June 29, 1997 as well as the
unaudited consolidated quarterly financial data as of and for the fiscal years
ended June 25, 2000, June 27, 1999, June 28, 1998 and June 29, 1997 have been
restated and provided in the Company's Annual Report on Form 10-K for the
fiscal year ended June 25, 2000. The restated consolidated financial
statements as of December 26, 1999 and June 27, 1999 and for the three and six
months ended December 26, 1999 and December 27, 1998 have been included in the
consolidated financial statements included herein.
For the three months ended December 26, 1998, the previously reported financial
statements included an understatement of cost of sales by $2.8 million. After
restating cost of sales, the Company's income tax expense decreased by $1.0
million. The impact of the accounting irregularities on reported operating
results for the three months was to overstate gross profit and operating income
by $2.8 million, net income by $1.8 million and diluted earnings per share by
$0.18 per share.
For the six months ended December 26, 1999, the previously reported financial
statements primarily included an understatement of cost of sales by $5.7
million. After restating cost of sales, the Company's income tax expense
decreased by $2.0 million. The impact of the accounting irregularities on
reported operating results for the six months was to overstate gross profit
and operating income by $5.6 million, net income by $3.6 million and diluted
earnings per share by $0.35 per share.
<PAGE> 19
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 18
For the three months ended December 27, 1998, the previously reported financial
statements included an understatement of cost of sales by $0.7 million. After
restating cost of sales, the Company's income tax expense decreased by $0.3
million. The impact of the accounting irregularities on reported operating
results for the three months was to overstate gross profit and operating income
by $0.7 million, net income by $0.4 million and diluted earnings per share by
$0.05 per share.
For the six months ended December 27, 1998, the previously reported financial
statements included an understatement of cost of sales by $1.8 million. After
restating cost of sales, the Company's income tax expense decreased by $0.7
million. The impact of the accounting irregularities on reported operating
results for the six months was to overstate gross profit and operating income by
$1.8 million, net income by $1.1 million and diluted earnings per share by $0.11
per share.
A comparison of previously reported and restated unaudited, interim financial
statements as of December 26, 1999 and June 27, 1999 and for the three and six
months ended December 26, 1999 and December 27, 1998 are set forth in Note 12
to the consolidated financial statements included herein.
BUSINESS SEGMENTS
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.
In the fourth quarter of fiscal 1999, the Company recorded $10.5 million of
special charges related to cost and performance issues on four automation
projects. The Company continues to attempt resolution of outstanding issues
with these customers, including collections of outstanding accounts receivable,
billings of final project costs and estimated warranty costs expected in the
initial period of production. The Company believes the remaining reserves
related to these projects at December 26, 1999 are adequate.
<PAGE> 20
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 19
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",
"Market Risk" and "Year 2000 Compliance", 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", and 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 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", "Market Risk" and "Year 2000 Compliance".
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 Six Months Ended
December 26, December 27, December 26, December 27,
1999 1998 1999 1998
As Restated(1) As Restated(1) As Restated(1) As Restated(1)
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 79.3 77.7 79.7 76.8
---------------- --------------- --------------- ----------------
Gross profit 20.7 22.3 20.3 23.2
Selling, general and administrative
expenses 17.9 18.4 18.8 17.5
---------------- --------------- --------------- ----------------
Operating income 2.8 3.9 1.5 5.7
Interest expense 2.4 1.8 2.1 1.8
Dividends on Company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary DT
Capital Trust 1.2 1.1 1.2 1.1
---------------- --------------- --------------- ----------------
Income (loss) before provision for
income taxes (0.8) 1.0 (1.8) 2.8
Provision (benefit) for income taxes --- 0.4 (0.3) 1.1
---------------- --------------- --------------- ----------------
Net income (loss) (0.8)% 0.6% (1.5)% 1.7%
---------------- --------------- --------------- ----------------
</TABLE>
(1) As restated. See "Restatement of Financial Results" and Notes 1 and 12 to
the unaudited consolidated financial statements.
<PAGE> 21
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 20
THREE MONTHS ENDED DECEMBER 26, 1999 (RESTATED)
COMPARED TO THREE MONTHS ENDED DECEMBER 27, 1998 (RESTATED)
Consolidated net sales for the three months ended December 26, 1999 were $108.0
million, a decrease of $3.6 million, or 3.3%, from $111.6 million for the three
months ended December 27, 1998. Net sales by segment were as follows (in
millions):
<TABLE>
Three Months Ended Three Months Ended December Increase
December 26, 1999 27, 1998 (Decrease)
-------------------------- ----------------------------- -------------------
<S> <C> <C> <C>
Automation $ 67.0 $ 73.9 $ (6.9)
Packaging 32.1 29.1 3.0
Other 8.9 8.6 0.3
-------------------------- ----------------------------- -------------------
$ 108.0 $ 111.6 $ (3.6)
-------------------------- ----------------------------- -------------------
</TABLE>
Automation segment sales decreased primarily as a result of lower sales to the
automotive industry. Soft order activity during the second half of fiscal 1999
due to the deferral of capital spending programs by automotive customers
resulted in revenues from the automotive industry that were significantly below
those recorded during the second quarter of fiscal 1999. These decreases were
partially offset by an increase in revenues for build-to-print machinery for the
tire industry and material handling systems for the heavy equipment market.
Increased Packaging segment sales reflect a combination of significantly higher
sales of plastics processing equipment and the incremental increase in sales as
a result of the acquisition of C.E. King in July 1999, partially offset by the
lower sales of other packaging equipment to the pharmaceutical market. The
increased sales of plastics processing equipment resulted primarily from
increased sales of extrusion and thermoforming systems.
Gross profit decreased $2.5 million, or 9.9%, to $22.4 million for the three
months ended December 26, 1999 from $24.9 million for the three months ended
December 27, 1998. The gross margin decreased to 20.7% from 22.3%. The decrease
reflects lower gross margins across all business groups. Packaging gross margins
were down slightly although a significantly lower Kalish gross margin was
substantially offset by the higher Sencorp gross margin in the second quarter.
Margins for the Kalish subsidiary were significantly lower in the fiscal 2000
period primarily because of the higher mix of integrated packaging lines for
which the investigation into accounting irregularities revealed lower than
expected profitability. The margins on plastics processing equipment for the
three months ended December 26, 1999 improved substantially from fiscal 1999 due
to the early part of fiscal 1999 being adversely affected by cost overruns and
inefficiencies associated with management changes and the implementation of a
new core business system. Gross margins of the Company's other businesses in the
Packaging segment were lower than the prior year from a combination of factors,
including the significantly lower volume of engineering and manufacturing of
tablet presses and resulting unfavorable overhead variances, the acquisition of
C. E. King which produces lower priced, lower margin counters and a less
favorable product mix. The margins in the Automation segment were down slightly
from the prior year primarily reflecting inefficiencies related to the lower
utilization of manufacturing resources due to the decrease in sales noted above.
SG&A expenses decreased $1.1 million, or 5.6%, to $19.4 million for the three
months ended December 26, 1999 from $20.5 million for the three months ended
December 27, 1998. Excluding the incremental costs of approximately $0.7
million associated with newly-acquired and start-up businesses, operating
expenses decreased approximately 9% from the prior year quarter. The decrease
was primarily due to the restructuring and cost containment measures taken in
fiscal 1999 and fiscal 2000 across all business segments and at the Corporate
office. The cost cutting measures included headcount reductions and lower
discretionary spending in the general and administrative and sales and
marketing functions. The incremental costs associated with newly-acquired and
start-up businesses resulted from the acquisition of C.E. King in July 1999,
the July 1999 start-up of an advanced automation engineering group on the West
Coast targeting the high-growth medical and electronics markets and the
additional costs being incurred as a result of an agreement to assume the
marketing and distribution of a standard
<PAGE> 22
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 21
product line manufactured by the Company. Due to the lower expenses as compared
to the prior year, SG&A expenses as a percentage of consolidated net sales
decreased to 17.9% from 18.4%.
Operating income decreased $1.3 million, or 30.3%, to $3.0 million for the three
months ended December 26,1999 from $4.3 million for the three months ended
December 27, 1998, as a result of the factors noted above. The operating margin
decreased to 2.8% from 3.9% in the prior year.
Interest expense increased $0.6 million, or 30.6% to $2.6 million for the three
months ended December 26, 1999 primarily from the increase in interest rates on
outstanding borrowings. Dividends on the convertible preferred securities were
$1.3 million for each of the three months ended December 26, 1999 and December
27, 1998. 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 income decreased $1.5 million to reflect a net loss of $0.9 million for the
three months ended December 26, 1999 from $0.6 million of net income for the
three months ended December 27, 1998. Basic and diluted loss per share were
$0.09 for the three months ended December 26, 1999 compared to basic and
diluted earnings per share of $0.06 for the three months ended December 27,
1998. Basic weighted average shares outstanding for each of the three months
ended December 26, 1999 and December 27, 1998 were 10.1 million. Diluted
weighted average shares outstanding for the three months ended December 26,
1999 were 10.1 million versus 10.2 million for the three months ended December
27, 1998.
SIX MONTHS ENDED DECEMBER 26, 1999 (RESTATED)
COMPARED TO SIX MONTHS ENDED DECEMBER 27, 1998 (RESTATED)
Consolidated net sales for the six months ended December 26, 1999 were $209.1
million, a decrease of $15.4 million, or 6.9%, from $224.5 million for the six
months ended December 27, 1998. Net sales by segment were as follows (in
millions):
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended Increase
December 26, 1999 December 27, 1998 (Decrease)
-------------------------- ----------------------------- -------------------
<S> <C> <C> <C>
Automation $ 127.7 $ 156.8 $ (29.1)
Packaging 64.0 50.2 13.8
Other 17.4 17.5 (0.1)
-------------------------- ----------------------------- -------------------
$ 209.1 $ 224.5 $ (15.4)
-------------------------- ----------------------------- -------------------
</TABLE>
Automation segment sales decreased primarily as a result of lower sales to the
automotive industry. Soft order activity during the second half of fiscal 1999
due to the deferral of capital spending programs by automotive customers
resulted in revenues from the automotive industry that were significantly below
those recorded during the first half of fiscal 1999. Revenues were also down in
the electronics and recreational products markets reflecting some larger
projects in fiscal 1999. These decreases in revenues were partially offset by an
increase in revenues for build-to-print machinery for the tire industry and
material handling systems for the heavy equipment market. The Company did
receive significant bookings in the second quarter from the electronics industry
which are expected to provide favorable revenue comparisons regarding sales to
the electronics market for the second half of the fiscal year.
Increased Packaging segment sales reflect a combination of significantly higher
sales of plastics processing equipment and the incremental increase in sales as
a result of the acquisition of C.E. King in July 1999 and Scheu & Kniss (S&K) in
August 1998. The increased sales of plastics processing equipment resulted
primarily from the increased sales of extrusion and thermoforming systems.
<PAGE> 23
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 22
Gross profit decreased $9.6 million, or 18.4%, to $42.4 million for the six
months ended December 26, 1999 from $52.0 million for the six months ended
December 27, 1998. The gross margin decreased to 20.3% from 23.2%. The decrease
reflects lower gross margins across all business groups. Packaging gross margins
were down slightly although a significantly lower Kalish gross margin was
substantially offset by the higher Sencorp gross margin for the six months.
Margins for the Kalish subsidiary were significantly lower in the fiscal 2000
period primarily because of the higher mix of integrated packaging lines for
which the investigation into accounting irregularities revealed lower than
expected profitability. The margins on plastics processing equipment for the six
months ended December 26, 1999 improved substantially from fiscal 1999 due to
the early part of fiscal 1999 being adversely affected by cost overruns and
inefficiencies associated with management changes and the implementation of a
new core business system. Gross margins of the Company's other businesses in the
Packaging segment were lower than the prior year from a combination of factors,
including the significantly lower volume of engineering and manufacturing of
tablet presses and resulting unfavorable overhead variances, the acquisition of
C. E. King which produces lower priced, lower margin counters and a less
favorable product mix. The margins in the Automation segment were down from the
prior year reflecting inefficiencies related to the lower utilization of
manufacturing resources, lower margins on new business and the incremental
manufacturing overhead costs associated with the start-up of the advanced
engineering group.
SG&A expenses decreased $0.1 million to $39.2 million for the six months ended
December 26, 1999 from $39.3 million for the six months ended December 27, 1998.
Incremental costs associated with newly-acquired and start-up businesses were
offset by cost cutting across business segments and the Corporate office,
including headcount reductions and lower discretionary spending in the general
and administrative and sales and marketing functions. The incremental costs
associated with newly-acquired and start-up businesses resulted from the
acquisitions of S&K in August 1998 and C.E. King in July 1999, the July 1999
start-up of an advanced automation engineering group on the West Coast targeting
the high-growth medical and electronics markets and the additional costs being
incurred as a result of an agreement to assume the marketing and distribution of
a standard product line manufactured by the Company. Due to the lower revenues,
SG&A expenses as a percentage of consolidated net sales increased to 18.8% from
17.5%.
Operating income decreased $9.5 million, or 74.6%, to $3.2 million for the six
months ended December 26,1999 from $12.7 million for the six months ended
December 27, 1998, as a result of the factors noted above. The operating margin
decreased to 1.5% from 5.7% in the prior year.
Interest expense increased $0.4 million, or 9.4%, to $4.4 million for the six
months ended December 26, 1999 primarily from the increase in interest rates on
outstanding borrowings. Dividends on the convertible preferred securities were
$2.5 million for each of the six months ended December 26, 1999 and December 27,
1998. 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 income decreased $6.8 million to reflect a net loss of $3.0 million for the
six months ended December 26, 1999 from $3.8 million of net income for the six
months ended December 27, 1998. Basic and diluted loss per share was $0.30 for
the six months ended December 26, 1999 compared to basic and diluted earnings
per share of $0.37 and $0.36, respectively, for the six months ended December
27, 1998. Basic weighted average shares outstanding were 10.1 million versus
10.2 million for the six months ended December 26, 1999 and December 27, 1998,
respectively. Diluted weighted average shares outstanding were 10.1 million
versus 10.4 million for the six months ended December 26, 1999 and December 27,
1998, respectively.
<PAGE> 24
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 23
LIQUIDITY AND CAPITAL RESOURCES
Non-cash operating charges less the net loss provided $5.5 million of operating
cash flow for the six months ended December 26, 1999. Net increases in working
capital balances used operating cash of $12.2 million, resulting in net cash
used by operating activities of $6.7 million for the six months ended December
26, 1999. The higher working capital balances primarily reflect an increase in
accounts receivable and a decrease in accounts payable. The increase in accounts
receivable, largely in the Automation segment, was primarily due to the shipment
of a few large projects in the second quarter. The decrease in accounts payable
reflects the unusually large balance at June 27, 1999 from the efforts at that
time to lower debt by extending payables and to a lesser extent due to the
timing of purchases and the lower overall volume of manufacturing activity as
compared to June 1999.
During the six months ended December 26, 1999, the Company borrowed $21.4
million on its revolving credit facility. The funds were used for working
capital requirements, the acquisition of C. E. King for $2.1 million, capital
expenditures of $3.4 million and financing costs of $1.0 million. The Company
did have a large increase in cash at December 26, 1999, the result of some
significant customer payments received during the last few days of the quarter.
During the six months ended December 27, 1998, cash used to fund the net
increases in working capital balances of $12.0 million offset the cash provided
by net income plus non-cash operating charges of $11.5 million. The increase in
working capital resulted from the unfavorable changes in costs and earnings in
excess of amounts billed, inventories and trade payables, partially offset by
the decrease in trade receivables. The increase in current assets was
attributed to generally less favorable payment terms and delayed collections.
Inventories increased primarily in the Packaging segment as the Company was
building and stocking more standard packaging machines to allow for quicker
deliveries. Current liabilities decreased from the June 1998 level due
primarily to the decreased manufacturing activity across the Company and the
timing of significant component purchases.
During the six months ended December 27, 1998, the Company borrowed $27.3
million on its revolving credit facility and raised another $5.2 million through
the issuance of industrial revenue bonds to finance the expansion of a packaging
facility. The funds were used primarily to finance the purchase of S&K for $10.4
million, repurchase $10.0 million of the Company's stock, fund capital
expenditures of $8.5 million and pay dividends of $0.4 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 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 December 26, 1999 consolidated financial statements.
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.
<PAGE> 25
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 24
In September 1999, the Company completed an amendment to its $175 million
credit facility. The total credit facility, as amended, was reduced to $135
million, including a $125 million revolving credit facility and a $10 million
term credit facility. In accordance with the amended credit agreement, the
revolving credit facility increased in December 1999 to $130 million as the
Company met certain operating cash flow targets. 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). The credit facility, as amended,
matures on July 2, 2001. Borrowings under the amended credit facility are
secured by substantially all of the assets of DTI and its domestic
subsidiaries. Total borrowing availability under the amended credit facility as
of December 26, 1999 was $18.9 million.
In conjunction with the negotiation of the amended credit facility, the Company
elected to defer interest payments on the convertible junior subordinated
debentures. The amended credit facility requires that the deferral continue
until the maturity of the credit facility. As a result, quarterly distributions
on the Convertible Preferred Securities will also be deferred and DTI will not
declare or pay any dividends on its common stock. Dividends on the Convertible
Preferred Securities in the amount of $2.5 million have been deferred and
accrued as of December 26, 1999.
As a result of the restatements of financial results described earlier, the
Company was in default of certain financial and other covenants provided within
the senior credit agreement and another credit agreement. In October 2000, the
Company amended the relevant credit agreements wherein the Company's lenders
waived any and all events of default arising from the restatements and
increased the interest rate on borrowings pursuant to the agreement. The
overall line of credit and maturity were not amended.
Management anticipates that capital expenditures in the current fiscal year will
be approximately $10 million to $12 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.
In July 1999, the Company completed the acquisition of certain net assets of C.
E. King, Ltd., a manufacturer of tablet counting, liquid filling and capping
equipment located in Chertsey, England. The purchase price of $2.1 million was
primarily financed by borrowings under the Company's revolving credit facility.
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 C. E. King from the date of
acquisition.
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.
<PAGE> 26
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 25
BACKLOG
The Company's backlog is based upon customer purchase orders that the Company
believes are firm. As of December 26, 1999, the Company had $253.3 million of
orders in backlog, which compares to a backlog of approximately $190.2 million
as of December 27, 1998.
The backlog for the Automation segment at December 26, 1999 was $206.6 million,
which increased $57.5 or 38.6% million from a year ago. The increase is a result
of significant bookings in the second quarter primarily from the electronics and
tire industries. This increase was partially offset by a lower backlog with
automotive customers, reflecting a continuation of capital spending reduction
and deferral in this industry through December 1999. Backlog for the Packaging
segment was $37.3 million, an increase of $0.5 million over the comparable
period in fiscal 1999. The increase is a result of the incremental backlog of C.
E. King, acquired in July 1999.
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 a majority of the orders in the backlog
will be recognized as sales during the current fiscal year. The Company's
backlog does have a higher level of orders for long-lead time machinery, which
are expected to translate into revenues in the 2001 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.
RECENT ACCOUNTING PRONOUNCEMENTS
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. In
June 1999, the FASB issued SFAS 137, "Accounting for Derivative Instruments and
Heding Activities - Deferral of the Effective Date of FASB Statement No. 133",
which delayed the effective date of SFAS 133. SFAS 133 is effective for all
fiscal quarters beginning after June 15, 2000. The Company is continuing to
evaluate the provisions of SFAS 133 to determine its impact on financial
position and results of operations. The Company holds no material derivative
financial instruments at December 26, 1999.
<PAGE> 27
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 26
YEAR 2000 COMPLIANCE
The Company successfully completed all work to resolve the potential impact of
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems and equipment with embedded chips. The Company
has not experienced any material disruption from the year 2000 issue relating to
the century rollover. The Company will continue to monitor all critical systems
for the appearance of delayed year 2000 related issues, problems relative to the
leap year and problems encountered through suppliers, customers and other third
parties with whom the Company deals.
For substantially all of the Company's internal systems, the remediation phase
of its year 2000 plan was an incidental consequence of the ongoing
implementation of new integrated core business systems at several of the
Company's divisions. The total incremental cost of these projects, comprised
primarily of the costs of the implementation of the new integrated core business
systems, includes costs of approximately $3.5 million incurred in fiscal year
1998, expenditures in fiscal year 1999 of approximately $4.0 million and costs
of approximately $0.6 million in the six months ended December 26, 1999, all of
which was included in the Company's capital expenditures plans.
MARKET RISK
In the ordinary course of business, the Company is exposed to foreign currency
and interest rate risks. These exposures primarily relate to having investments
in assets denominated in foreign currencies and to changes in interest rates.
Fluctuations in currency exchange rates can impact operating results, including
net sales and operating expenses. The Company hedges certain of its foreign
currency exposure by borrowing in the local functional currency in countries
where the Company has significant assets denominated in foreign currencies. Such
borrowings include Pounds Sterling, Canadian dollars and Deutsche Marks in the
United Kingdom, Canada and Germany, respectively. The Company may utilize
derivative financial instruments, including forward exchange contracts and swap
agreements to manage certain of its foreign currency and interest rate risks
that it considers practical to do so. The Company holds no material derivative
financial instruments at December 26, 1999. The Company does not enter into
derivative financial instruments for trading purposes. Market risks that the
Company currently has elected not to hedge primarily relate to its floating-rate
debt.
<PAGE> 28
DT INDUSTRIES, INC.
PART II. OTHER INFORMATION
PAGE 27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>
(a) Exhibits:
Exhibit 3.1 Amendments to By-Laws of the Company (previously filed)
Exhibit 3.2 Amended and Restated By-Laws of the Company (previously filed)
Exhibit 10 Fifth Amendment to Fourth Amended and Restated Credit Facilities Agreement, dated
as of December 1, 1999, among Bank of America, N.A., formerly NationsBank, N.A.,
as Administrative Agent, and Bank of America, N.A. and the other Lenders listed
therein and DT Industries, Inc. and the other Borrowers listed therein (previously filed)
Exhibit 11 - Statement Regarding Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
</TABLE>
<PAGE> 29
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: October 31, 2000 /s/ Wayne W. Schultz
-------------------------------------------
(Signature)
Wayne W. Schultz
Interim Senior Vice President - Finance
(Principal Financial and Accounting
Officer)
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 3.1 Amendments to By-Laws of the Company (previously filed)
Exhibit 3.2 Amended and Restated By-Laws of the Company (previously filed)
Exhibit 10 Fifth Amendment to Fourth Amended and Restated Credit Facilities Agreement, dated as of December
1, 1999, among Bank of America, N.A., formerly NationsBank, N.A., as Administrative Agent, and
Bank of America, N.A. and the other Lenders listed therein and DT Industries, Inc. and the other
Borrowers listed therein (previously filed)
Exhibit 11 Statement Regarding Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
</TABLE>
