<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 March 26, 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 April 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
MARCH 26, 2000 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 March 26, 2000
and June 27, 1999 (Audited), as restated 2
Consolidated Statement of Operations for the three
and nine months ended March 26, 2000 and March 28,
1999, as restated 3
Consolidated Statement of Changes in Stockholders'
Equity for the nine months ended March 26, 2000,
as restated 4
Consolidated Statement of Cash Flows for the nine
months ended March 26, 2000 and March 28, 1999,
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>
March 26,
2000 June 27,
As Restated 1999
(Notes 1 and 11) As Restated
(Unaudited) (Notes 1 and 11)
------------------ -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,181 $ 10,487
Accounts receivable, net 70,208 50,006
Costs and estimated earnings in excess of amounts
billed on uncompleted contracts 67,770 65,806
Inventories, net 50,257 49,377
Prepaid expenses and other 9,956 16,070
------------------- ------------------
Total current assets 205,372 191,746
Property, plant and equipment, net 73,703 77,402
Goodwill, net 177,188 180,066
Other assets, net 4,226 4,051
------------------ -----------------
$ 460,489 $ 453,265
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 684 $ 384
Accounts payable 31,402 37,507
Customer advances 20,251 21,924
Accrued liabilities 34,844 35,123
------------------ ------------------
Total current liabilities 87,181 94,938
------------------ ------------------
Long-term debt 121,673 104,209
Deferred income taxes 10,442 10,442
Other long-term liabilities 3,425 3,400
------------------ ------------------
Total long-term obligations 135,540 118,051
------------------ ------------------
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 67,047 68,968
Cumulative translation adjustment (1,962) (1,375)
Less -
Treasury stock (1,268,488 shares) at cost (30,778) (30,778)
------------------ ------------------
Total stockholders' equity 167,768 170,276
------------------ ------------------
$ 460,489 $ 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 Nine months ended
March 26, March 28, March 26, March 28,
2000 1999 2000 1999
As Restated As Restated As Restated As Restated
(Notes 1 and 11) (Notes 1 and 11) (Notes 1 and 11) (Notes 1 and 11)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 121,995 $ 104,097 $ 331,105 $ 328,631
Cost of sales 95,958 80,166 262,624 252,688
----------- ------------ ------------ --------------
Gross profit 26,037 23,931 68,481 75,943
Selling, general and
administrative expenses 19,688 20,716 58,906 60,021
----------- ------------ ------------ --------------
Operating income 6,349 3,215 9,575 15,922
Interest expense 2,834 1,724 7,274 5,783
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 1,298 1,253 3,826 3,759
----------- ------------ ------------ --------------
Income (loss) before provision for
income taxes 2,217 238 (1,525) 6,380
Provision for income taxes 1,114 95 396 2,469
----------- ------------ ------------ --------------
Net income (loss) $ 1,103 $ 143 $ (1,921) $ 3,911
=========== ============ ============ ==============
Net earnings (loss) per common share:
Basic $ 0.11 $ 0.01 $ (0.19) $ 0.38
Diluted $ 0.11 $ 0.01 $ (0.19) $ 0.38
=========== ============ ============ ==============
Weighted average common shares
outstanding:
Basic 10,107,274 10,107,274 10,107,274 10,163,246
Diluted 10,216,318 10,111,242 10,107,274 10,254,900
=========== ============ ============ ==============
</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 NINE MONTHS ENDED MARCH 26, 2000
(DOLLARS IN THOUSANDS)
PAGE 4
<TABLE>
<CAPTION>
Accumulated
other Additional
Retained comprehensive Common paid-in Treasury
earnings loss stock capital stock Total
---------- --------------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 27, 1999 - As Restated
(Notes 1 and 11) $ 68,968 $ (1,375) $ 113 $ 133,348 $ (30,778) $ 170,276
Comprehensive loss:
Net loss (unaudited) (1,921)
Foreign currency translation (unaudited) (587)
Total comprehensive loss (unaudited)
(2,508)
--------- ----------- ------- --------- ---------- ---------
Balance, March 26, 2000 - As Restated
(Notes 1 and 11) (unaudited) $ 67,047 $ (1,962) $ 113 $ 133,348 $ (30,778) $ 167,768
========= =========== ======= ========= ========== =========
</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>
Nine Months Ended
March 26, March 28,
2000 1999
As Restated As Restated
(Notes 1 and 11) (Notes 1 and 11)
----------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,921) $ 3,911
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation 8,252 7,723
Amortization 4,573 4,044
(Increase) decrease in current assets, excluding
the effect of acquisitions:
Accounts receivable (20,161) 2,404
Costs and earnings in excess of amounts billed (1,966) (8,148)
Inventories 964 (3,992)
Prepaid expenses and other 7,069 615
Increase (decrease) in current liabilities, excluding the
effect of acquisitions:
Accounts payable (6,131) (6,902)
Customer advances (1,856) (2,210)
Accrued liabilities (704) (190)
Other 119 74
----------------- ---------------
Net cash used by operating activities (11,762) (2,671)
----------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,539) (11,185)
Acquisition of C.E. King net assets (2,116) --
Acquisition of Scheu & Kniss net assets -- (10,352)
Other (621) (1,429)
----------------- ---------------
Net cash used by investing activities (7,276) (22,966)
----------------- ---------------
</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>
Nine Months Ended
March 26, March 28,
2000 1999
As Restated As Restated
(Notes 1 and 11) (Notes 1 and 11)
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from revolving loans $ 18,686 $ 34,503
Proceeds from issuance of debt -- 5,275
Payments on borrowings (443) (128)
Financing costs (1,143) --
Exercise of stock options -- 119
Payments for repurchase of stock -- (9,985)
Dividends -- (612)
----------------- -----------------
Net cash provided by financing activities 17,100 29,172
----------------- -----------------
Effect of exchange rate changes (1,368) (44)
----------------- -----------------
Net increase (decrease) in cash (3,306) 3,491
Cash and cash equivalents at beginning of period 10,487 6,915
----------------- -----------------
Cash and cash equivalents at end of period $ 7,181 $ 10,406
================= =================
</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 March 26, 2000 and
June 27, 1999 and for the three and nine months ended March 26, 2000
and March 28, 1999 have been included in the consolidated financial
statements included herein.
For the three months ended March 26, 2000, the previously reported
financial statements primarily included an understatement of cost of
sales by $2,695. After restating cost of sales, the Company's income
tax expense decreased by $965. The impact of the accounting
irregularities on reported operating results for the three months was
to overstate gross profit and operating income by $2,595, net income
by $1,630 and diluted earnings per share by $0.16 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 nine months ended March 26, 2000, the previously reported
financial statements primarily included an understatement of cost of
sales by $8,440. After restating cost of sales, the Company's income
tax expense decreased by $2,992. The impact of the accounting
irregularities on reported operating results for the nine months was
to overstate gross profit and operating income by $8,181, net income by
$5,189 and diluted earnings per share by $0.51 per share.
For the three months ended March 28, 1999, the previously reported
financial statements included an understatement of cost of sales by
$562. After restating cost of sales, the Company's income tax expense
decreased by $213. The impact of the accounting irregularities on
reported operating results for the three months was to overstate gross
profit and operating income by $562, net income by $349 and diluted
earnings per share by $0.04 per share.
For the nine months ended March 28, 1999, the previously reported
financial statements included an understatement of cost of sales by
$2,350. After restating cost of sales, the Company's income tax expense
decreased by $892. The impact of the accounting irregularities on
reported operating results for the nine months was to overstate gross
profit and operating income by $2,350, net income by $1,458 and diluted
earnings per share by $0.14 per share.
A comparison of previously reported and restated unaudited, interim
financial statements as of March 26, 2000 and June 27, 1999 and for the
three and nine months ended March 26, 2000 and March 28, 1999 are set
forth in Note 11 to the consolidated financial statements included
herein.
2. PRINCIPLES OF CONSOLIDATION AND FOREIGN CURRENCY TRANSLATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.
The accounts of the Company's foreign subsidiaries are maintained in
their respective local currencies. The accompanying consolidated
financial statements have been translated and adjusted to reflect U.S.
dollars in accordance with 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
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 nine months ended March
26, 2000 and March 28, 1999.
<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 March 26, 2000 and June 27, 1999, long-term debt consisted of
the following:
<TABLE>
<CAPTION>
March 26,
2000 June 27,
As Restated 1999
(Notes 1 and 11) As Restated
(Unaudited) (Notes 1 and 11)
------------------ ------------------
<S> <C> <C>
Term loan $ 10,000 $ 10,000
Revolving loans 104,643 86,315
Other long-term debt 7,714 8,278
------------------ ----------------
122,357 104,593
Less-current portion of long-term debt 684 384
------------------ ----------------
$ 121,673 $ 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 March 26, 2000 was $22,325.
As a result of the restatements of financial results described in Notes
1 and 11, 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 agreements. 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 $3,826 have been deferred and
accrued as of March 26, 2000.
6. 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 nine
months ended March 28, 1999 has been restated to conform with the
requirements of SFAS 131.
<PAGE> 12
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 11
Financial information for the Company's reportable segments consisted of
the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 26, March 26,
2000 2000
As Restated As Restated
(Notes 1 March 28, (Notes 1 March 28,
and 11) 1999 and 11) 1999
--------------- ----------------- ---------------- -------------
<S> <C> <C> <C> <C>
Net sales
Automation $ 81,633 $ 68,563 $ 209,401 $ 225,378
Packaging 30,004 27,560 93,981 77,787
Other 10,358 7,974 27,723 25,466
---------------- ------------------- ---------------- ------------------
Consolidated total $ 121,995 $ 104,097 $ 331,105 $ 328,631
----------------- ------------------- ---------------- ------------------
</TABLE>
The reconciliation of segment operating income to consolidated income (loss)
before income taxes consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 26, March 28, March 26, March 28,
2000 1999 2000 1999
As Restated As Restated As Restated As Restated
(Notes 1 (Notes 1 (Notes 1 (Notes 1
and 11) and 11) and 11) and 11)
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Automation $ 5,288 $ 2,556 $ 7,535 $ 16,185
Packaging 1,881 2,820 6,263 5,309
----------------- ---------------- ---------------- --------------
Operating income for
reportable segments 7,169 5,376 13,798 21,494
Operating income for
immaterial businesses 1,129 432 1,951 1,599
Corporate (1,949) (2,593) (6,174) (7,171)
Interest expense (2,834) (1,724) (7,274) (5,783)
Dividends on Company-
obligated, mandatorily
redeemable convertible
preferred securities (1,298) (1,253) (3,826) (3,759)
----------------- ----------------- ---------------- ---------------
Consolidated income (loss)
before income taxes $ 2,217 $ 238 $ (1,525) $ 6,380
----------------- ----------------- ---------------- --------------
</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
7. 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
write-downs. The costs included the shutdown of one packaging
manufacturing facility in July 1999. The restructuring reserve at June
27, 1999 was fully utilized during the nine months ended March 26,
2000. The breakdown of the restructuring reserve was as follows:
<TABLE>
<CAPTION>
Charges to
June 27, 1999 Reserve March 26, 2000
----------------------- ------------------ -------------------
<S> <C> <C> <C>
Severance costs $ 1,493 $ (1,493) $ --
Idle facility costs 264 (264) --
Asset write-downs and other 361 (361) --
----------------------- ------------------ ------------------
$ 2,118 $ (2,118) $ --
======================= ================== ==================
</TABLE>
8. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
March 26, 2000
As Restated June 27, 1999
(Notes 1 and 11) As Restated
(Unaudited) (Notes 1 and 11)
----------------- -----------------
<S> <C> <C>
Inventories, net:
Raw materials $ 24,672 $ 21,835
Work in process 16,378 17,919
Finished goods 9,207 9,623
----------------- -----------------
$ 50,257 $ 49,377
================= =================
Accrued liabilities
Accrued employee compensation and benefits $ 13,380 $ 12,291
Accrued warranty 3,504 4,409
Dividends on convertible preferred securities 3,826 --
Other 14,134 18,423
------------------ -----------------
$ 34,844 $ 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 benefit 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.
<PAGE> 14
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 13
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 6.40 261,000
Options exercised --- ---
Options forfeited 17.16 (92,775)
---------------------
Options outstanding at March 26, 2000 15.01 1,180,163
=====================
Exercisable at March 26, 2000
560,884
=====================
</TABLE>
10. 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.
11. RESTATEMENT
As described in Note 1, the March 26, 2000 and June 27, 1999 balance
sheets and unaudited, interim results for the three and nine months
ended March 26, 2000 and March 28, 1999 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>
March 26,
2000 March 26, June 27,
As Previously 2000 1999 June 27,
Reported As Restated As Previously 1999
(Unaudited) (Unaudited) Reported As Restated
--------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 7,181 $ 7,181 $ 10,487 $ 10,487
Accounts receivable, net 69,705 70,208 50,691 50,006
Costs and estimated earnings in excess of
amounts billed on uncompleted contracts 68,239 67,770 64,894 65,806
Inventories, net 65,330 50,257 56,876 49,377
Prepaid expenses and other 10,590 9,956 12,320 16,070
----------- ----------- ----------- -----------
Total current assets 221,045 205,372 195,268 191,746
Property, plant and equipment, net 73,703 73,703 77,402 77,402
Goodwill, net 177,188 177,188 180,066 180,066
Other assets, net 4,226 4,226 4,051 4,051
----------- ----------- ----------- -----------
$ 476,162 $ 460,489 $ 456,787 $ 453,265
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 684 $ 684 $ 384 $ 384
Accounts payable 31,097 31,402 37,507 37,507
Customer advances 19,436 20,251 21,903 21,924
Accrued liabilities 38,150 34,844 32,418 35,123
----------- ----------- ----------- -----------
Total current liabilities 89,367 87,181 92,212 94,938
----------- ----------- ----------- -----------
Long-term debt 121,089 121,673 103,659 104,209
Deferred income taxes 10,429 10,442 8,376 10,442
Other long-term liabilities 3,425 3,425 3,400 3,400
----------- ----------- ----------- -----------
Total long-term obligations 134,943 135,540 115,435 118,051
----------- ----------- ----------- -----------
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
----------- ----------- ----------- -----------
Stockholder's equity
Preferred stock, $0.01 par value; 1,500,000
shares authorized; no shares issued and
outstanding 113 113 113 113
Additional paid-in capital 133,348 133,348 133,348 133,348
Retained earnings 81,252 67,047 77,984 68,968
Cumulative translation adjustment (2,083) (1,962) (1,527) (1,375)
Less - Treasury stock (1,268,488 shares),
at cost (30,778) (30,778) (30,778) (30,778)
----------- ----------- ----------- -----------
Total stockholders' equity 181,852 167,768 179,140 170,276
----------- ----------- ----------- -----------
$ 476,162 $ 460,489 $ 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
March 26, March 28,
2000 March 26, 1999 March 28,
As Previously 2000 As Previously 1999
Reported As Restated Reported As Restated
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 121,895 $ 121,995 $ 104,097 $ 104,097
Cost of sales 93,263 95,958 79,604 80,166
----------- ----------- ----------- -----------
Gross profit 28,632 26,037 24,493 23,931
Selling, general and administrative expenses 19,688 19,688 20,716 20,716
----------- ----------- ----------- -----------
Operating income 8,944 6,349 3,777 3,215
Interest expense 2,834 2,834 1,724 1,724
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 1,298 1,298 1,253 1,253
----------- ----------- ----------- -----------
Income before provision for income taxes 4,812 2,217 800 238
Provision for income taxes 2,079 1,114 308 95
----------- ----------- ----------- -----------
Net income $ 2,733 $ 1,103 $ 492 $ 143
=========== =========== =========== ===========
Net earnings per common share:
Basic $ 0.27 $ 0.11 $ 0.05 $ 0.01
Diluted $ 0.27 $ 0.11 $ 0.05 $ 0.01
=========== =========== =========== ===========
Weighted average common shares outstanding:
Basic 10,107,274 10,107,274 10,107,274 10,107,274
Diluted 10,216,318 10,216,318 10,111,242 10,111,242
=========== =========== =========== ===========
</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
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended Nine months ended
March 26, March 28,
2000 March 26, 1999 March 28,
As Previously 2000 As Previously 1999
Reported As Restated Reported As Restated
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 330,846 $ 331,105 $ 328,631 $ 328,631
Cost of sales 254,184 262,624 250,338 252,688
----------- ------------ ----------- -----------
Gross profit 76,662 68,481 78,293 75,943
Selling, general and administrative expenses 58,906 58,906 60,021 60,021
----------- ------------ ----------- -----------
Operating income 17,756 9,575 18,272 15,922
Interest expense 7,274 7,274 5,783 5,783
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 3,826 3,826 3,759 3,759
----------- ------------ ----------- -----------
Income (loss) before provision for income taxes 6,656 (1,525) 8,730 6,380
Provision for income taxes 3,388 396 3,361 2,469
----------- ------------ ----------- -----------
Net income (loss) $ 3,268 $ (1,921) $ 5,369 $ 3,911
=========== ============ =========== ===========
Net earnings (loss) per common share:
Basic $ 0.32 $ (0.19) $ 0.53 $ 0.38
Diluted $ 0.32 $ (0.19) $ 0.52 $ 0.38
=========== ============ =========== ===========
Weighted average common shares outstanding:
Basic 10,107,274 10,107,274 10,163,246 10,163,246
Diluted 10,169,335 10,107,274 10,254,900 10,254,900
=========== ============ =========== ===========
</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 nine months ended March 26, 2000 compared
to the three and nine months ended March 28, 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 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.
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
March 26, 2000 and June 27, 1999 and for the three and nine months ended March
26, 2000 and March 28, 1999 have been included in the consolidated financial
statements included herein.
For the three months ended March 26, 2000, the previously reported financial
statements primarily included an understatement of cost of sales by $2.7
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 $2.6 million, net income by $1.6 million and diluted
earnings per share by $0.16 per share.
For the nine months ended March 26, 2000, the previously reported financial
statements primarily included an understatement of cost of sales by $8.4
million. After restating cost of sales, the Company's income tax expense
decreased by $3.0 million. The impact of the accounting irregularities on
reported operating results for the nine months was to overstate gross profit
and operating income by $8.2 million, net income by $5.2 million and diluted
earnings per share by $0.51 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 March 28, 1999, the previously reported financial
statements included an understatement of cost of sales by $0.6 million. After
restating cost of sales, the Company's income tax expense decreased by $0.2
million. The impact of the accounting irregularities on reported operating
results for the three months was to overstate gross profit and operating income
by $0.6 million, net income by $0.4 million and diluted earnings per share by
$0.04 per share.
For the nine months ended March 28, 1999, the previously reported financial
statements included an understatement of cost of sales by $2.4 million. After
restating cost of sales, the Company's income tax expense decreased by $0.9
million. The impact of the accounting irregularities on reported operating
results for the nine months was to overstate gross profit and operating
income by $2.4 million, net income by $1.5 million and diluted earnings per
share by $0.14 per share.
A comparison of previously reported and restated unaudited, interim financial
statements as of March 26, 2000 and June 27, 1999 and for the three and nine
months ended March 26, 2000 and March 28, 1999 are set forth in Note 11 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 has substantially resolved the outstanding issues with the
customers related to two of the projects. Another project is in litigation
regarding collection of an outstanding account receivable and resolution is not
probable over the next twelve months. Warranty work continues on the final
project as the Company continues to attempt resolution with the customer. Final
resolution is expected in the first half of FY2001. Overall, the Company
continues to believe the remaining reserves related to these projects at March
26, 2000 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" and
"Market Risk", includes forward-looking statements. These statements, comprising
all statements herein which are not historical, are based upon the Company's
interpretation of what it believes are significant factors affecting its
businesses, including many assumptions regarding future events, and are made
pursuant to the safe harbor provisions of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. References to "opportunities", "growth potential", "objectives" and
"goals", 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 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".
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 Nine Months Ended
March 26, 2000 March 28, 1999 March 26, 2000 March 28, 1999
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 78.7 77.0 79.3 76.9
---------------- --------------- --------------- ----------------
Gross profit 21.3 23.0 20.7 23.1
Selling, general and administrative
expenses 16.1 19.9 17.8 18.3
---------------- --------------- --------------- ----------------
Operating income 5.2 3.1 2.9 4.8
Interest expense 2.3 1.7 2.2 1.8
Dividends on Company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary DT
Capital Trust 1.1 1.2 1.2 1.1
---------------- --------------- --------------- ----------------
Income (loss) before provision for
income taxes 1.8 0.2 (0.5) 1.9
Provision for income taxes 0.9 0.1 0.1 0.7
---------------- --------------- --------------- ----------------
Net income (loss) 0.9% 0.1% (0.6)% 1.2%
================ =============== =============== ================
</TABLE>
(1) As restated. See "Restatement of Financial Results" and Notes 1 and 11 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 MARCH 26, 2000 (RESTATED)
COMPARED TO THREE MONTHS ENDED MARCH 28, 1999 (RESTATED)
Consolidated net sales for the three months ended March 26, 2000 were $122.0
million, an increase of $17.9 million, or 17.2%, from $104.1 million for the
three months ended March 28, 1999. Net sales by segment were as follows (in
millions):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 26, 2000 March 28, 1999 Increase
-------------------------- ----------------------------- -------------------
<S> <C> <C> <C>
Automation $ 81.6 $ 68.6 $ 13.0
Packaging 30.0 27.6 2.4
Other 10.4 7.9 2.5
-------------------------- ----------------------------- -------------------
$ 122.0 $ 104.1 $ 17.9
========================== ============================= ===================
</TABLE>
Automation segment sales increased $13.0 million, or 19.1%, primarily as a
result of ongoing capital programs within two of the Company's primary markets,
the electronics industry and the tire industry. The Company also continues to
see increased revenues from material-handling systems for the heavy equipment
industry. These increases were partially offset by decreased sales in the
recreational products, appliance and automotive industries. The Company believes
the capital spending within the electronics and tire markets can be attributed
to the strong demand for end products in the electronics market and to
manufacturing improvements regarding tire production. Deferral of capital
spending programs by automotive customers resulted in revenues from the
automotive industry that were significantly below those recorded in the third
quarter of fiscal 1999.
Packaging segment sales increased $2.4 million, or 8.9%, primarily due to the
incremental increase in sales as a result of the acquisition of C.E. King in
July 1999. Significantly higher sales of plastics processing equipment were
offset by lower sales of tablet presses primarily to the nutritional market.
Sales from the Company's stamping and fabrication businesses were up $2.5
million, or 29.9%, as a result of new customer sales in the light truck market
and the transfer of some stamping and fabrication production previously reported
in the Automation segment.
Gross profit increased $2.1 million, or 8.8%, to $26.0 million for the three
months ended March 26, 2000 from $23.9 million for the three months ended March
28, 1999. The gross margin decreased to 21.3% from 23.0%. Gross margins in the
Automation segment were down slightly primarily as a result of the
under-utilization of certain automotive manufacturing facilities and a change in
mix from higher margin duplicate systems. The Packaging segment's gross margins
decreased to 25.5% from 33.6% primarily due to the significantly lower margins
at the Kalish subsidiary. The previously noted investigation at Kalish revealed
significant margin erosion from expected margins on packaging line integration
projects. Kalish shipped a large integrated line to a large pharmaceutical
company in the third quarter which was minimally profitable. This project was a
significant factor in the unusually low margins in the third quarter of fiscal
2000 versus the third quarter of fiscal 1999. Margins for the Packaging segment
were also lower due to a lesser extent to the acquisition of C.E. King in July
1999, which produces lower priced, lower margin tablet counting equipment, and
the under-utilization at the Company's tablet press manufacturing facility. The
stamping and fabrication businesses' gross margins were up significantly in the
current quarter due primarily to better manufacturing overhead absorption
resulting from higher production levels.
SG&A expenses decreased $1.0 million, or 5.0%, to $19.7 million for the three
months ended March 26, 2000 from $20.7 million for the three months ended March
28, 1999. Excluding the incremental costs of approximately $0.9 million
associated with newly-acquired and start-up businesses, operating expenses
decreased approximately 9.2% 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
<PAGE> 22
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 21
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 product line manufactured by the Company. Due to the
lower expenses and higher sales as compared to the prior year, SG&A expenses as
a percentage of consolidated net sales decreased to 16.1% from 19.9%.
Operating income increased $3.1 million, or 97.5%, to $6.3 million for the three
months ended March 26, 2000 from $3.2 million for the three months ended March
28, 1999, as a result of the factors noted above. The operating margin increased
to 5.2% from 3.1% in the prior year.
Interest expense increased $1.1 million, or 64.4%, to $2.8 million for the three
months ended March 26, 2000 from $1.7 million for the three months ended March
28, 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 March 26, 2000 and March 28, 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 income was $1.1 million for the three months ended March 26, 2000 versus
$0.1 million for the three months ended March 28, 1999. Basic and diluted
earnings per share were $0.11 for the three months ended March 26, 2000 compared
to basic and diluted earnings per share of $0.01 for the three months ended
March 28, 1999. Basic weighted average shares outstanding for each of the three
months ended March 26, 2000 and March 28, 1999 were 10.1 million. Diluted
weighted average shares outstanding for the three months ended March 26, 2000
were 10.2 million versus 10.1 million for the three months ended March 28, 1999.
NINE MONTHS ENDED MARCH 26, 2000 (RESTATED)
COMPARED TO NINE MONTHS ENDED MARCH 28, 1999 (RESTATED)
Consolidated net sales for the nine months ended March 26, 2000 were $331.1
million, an increase of $2.5 million, or 0.8%, from $328.6 million for the nine
months ended March 28, 1999. Net sales by segment were as follows (in millions):
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended Increase
March 26, 2000 March 28, 1999 (Decrease)
-------------------------- ----------------------------- -------------------
<S> <C> <C> <C>
Automation $ 209.4 $ 225.4 $ (16.0)
Packaging 94.0 77.8 16.2
Other 27.7 25.4 2.3
-------------------------- ----------------------------- -------------------
$ 331.1 $ 328.6 $ 2.5
========================== ============================= ===================
</TABLE>
<PAGE> 23
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 22
Automation segment sales decreased $16.0 million, or 7.1%, primarily as a result
of lower sales to the automotive industry. The Company's automotive sales were
strong in fiscal 1999 led by several projects in fuel systems. The lower
automotive sales in fiscal 2000 can be attributed to the decrease in fuel
systems projects in fiscal 2000 and the general deferral of other capital
spending programs by automotive customers over the last 12 months. Revenues were
also down significantly in the recreational products market reflecting a
significant amount of revenues in the prior year from a large, special project.
The recreational business has been replaced by sales in the electronics industry
which are being fueled by a significant capital spending program by a
significant customer in that industry. Additionally, the Company continues to
see increased revenues from the significant capital spending program within its
tire market and material handling systems for the heavy equipment industry.
Packaging segment sales increased $16.2 million, or 20.8%, reflecting a
combination of significantly higher sales of plastics processing equipment,
including sales of extrusion and thermoforming systems, and the incremental
increase in sales as a result of the acquisition of C.E. King in July 1999 and
Scheu & Kniss in August 1998. These increases were partially offset by reduced
sales of tablet presses.
Sales from the Company's stamping and fabrication businesses were up $2.3
million, or 8.9%, as a result of new customer sales in the light truck market
and the transfer of some stamping and fabrication production previously reported
in the Automation segment.
Gross profit decreased $7.4 million, or 9.8%, to $68.5 million for the nine
months ended March 26, 2000 from $75.9 million for the nine months ended March
28, 1999. The gross margin decreased to 20.7% from 23.1%. The decrease in gross
margin reflects the decrease in margins in the Automation and Packaging
segments. 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 an advanced automation
engineering group on the West Coast. Packaging gross margins were 25.0% for the
nine months ended March 26, 2000 versus 29.4% for the nine months ended March
28, 1999. 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 nine months ended March 26, 2000 improved 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 from 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.
SG&A expenses decreased $1.1 million, or 1.9%, to $58.9 million for the nine
months ended March 26, 2000 from $60.0 million for the nine months ended March
28, 1999. Incremental costs associated with newly-acquired and start-up
businesses were offset by cost containment measures taken across business
segments and at 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. SG&A expenses as a percentage of consolidated net sales decreased to
17.8% from 18.3%.
Operating income decreased $6.3 million, or 39.9%, to $9.6 million for the nine
months ended March 26, 2000 from $15.9 million for the nine months ended March
28, 1999, as a result of the factors noted above. The operating margin decreased
to 2.9% from 4.8% in the prior year.
<PAGE> 24
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 23
Interest expense increased $1.5 million, or 25.8%, to $7.3 million for the nine
months ended March 26, 2000 from $5.8 million for the nine months ended March
28, 1999 primarily from the increase in interest rates on outstanding
borrowings. Dividends on the convertible preferred securities were $3.8 million
for each of the nine months ended March 26, 2000 and March 28, 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 income decreased $5.8 million to reflect a net loss of $1.9 million for the
nine months ended March 26, 2000 from net income of $3.9 million for the nine
months ended March 28, 1999. Basic and diluted loss per share were $0.19 for the
nine months ended March 26, 2000 compared to basic and diluted earnings per
share of $0.38 for the nine months ended March 28, 1999. Basic weighted average
shares outstanding were 10.1 million versus 10.2 million for the nine months
ended March 26, 2000 and March 28, 1999, respectively. Diluted weighted average
shares outstanding were 10.1 million versus 10.3 million for the nine months
ended March 26, 2000 and March 28, 1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Non-cash operating charges less the net loss provided $10.9 million of operating
cash flow for the nine months ended March 26, 2000. Net increases in working
capital balances used operating cash of $22.7 million, resulting in net cash
used by operating activities of $11.8 million for the nine months ended March
26, 2000. The increase in working capital primarily reflects unfavorable changes
in accounts receivable and accounts payable. The increase in accounts receivable
is unusually high due to a few large projects for which special payment terms
were extended. 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.
During the nine months ended March 26, 2000, the Company borrowed $18.7 million
on its revolving credit facility. The funds were used for the acquisition of C.
E. King for $2.1 million, capital expenditures of $4.5 million, financing costs
of $1.1 million, with the remaining amount used for working capital
requirements.
During the nine months ended March 28, 1999, net income plus non-cash operating
charges of $15.7 million primarily provided for the increase in working capital
of $18.4 million. The increase in working capital primarily resulted from
unfavorable changes in costs and earnings in excess of amounts billed,
inventories, trade payables and customer advances. Within the Automation Group,
increases in accumulated costs on projects resulted from project delays and cost
overruns on a few large projects. Within the Packaging Group, inventories of
plastics processing and packaging machinery increased due to the Company
stocking some standard machines to facilitate quicker delivery.
During the nine months ended March 28, 1999, the Company borrowed $34.5 million
on its revolving credit facility and raised another $5.3 million primarily
through the issuance of industrial revenue bonds. 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 $11.2 million and pay
dividends of $0.6 million.
<PAGE> 25
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 24
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 March 26, 2000 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.
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 March 26, 2000 was $22.3
million.
In conjunction with the amendment to the credit facility in September 1999, the
Company elected to defer interest payments on the convertible junior
subordinated debentures. The amended credit facility requires that such deferral
continue until the maturity of the credit facility. As a result, quarterly
distributions on the Convertible Preferred Securities are being deferred and DTI
is not declaring or paying dividends on its common stock. Dividends on the
Convertible Preferred Securities in the amount of $3.8 million have been
deferred and accrued as of March 26, 2000.
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 agreements. The overall line of
credit and maturity were not amended.
<PAGE> 26
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 25
Management anticipates that capital expenditures in the current fiscal year will
be approximately $7.0 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.
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 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.
BACKLOG
The Company's backlog is based upon customer purchase orders that the Company
believes are firm. As of March 26, 2000, the Company had $257.5 million of
orders in backlog, which compares to a backlog of approximately $203.8 million
as of March 28, 1999.
The backlog for the Automation segment at March 26, 2000 was $214.7 million,
which increased $54.6 million or 34% from a year ago. The increase is a result
of significant bookings 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 the
Company's automotive markets, particularly fuel systems through March 2000.
Backlog for the Packaging segment was $35.9 million, a decrease of $4.0 million,
or 10.0%, over the comparable period in fiscal 1999. The decrease was partially
due to the lower demand for tablet presses in the nutritional market. The
decrease was partially offset by 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 expects that less than one-half 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.
<PAGE> 27
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 26
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
Hedging 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 March 26, 2000.
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 March 26, 2000. 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.
PAGE 27
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Statement Regarding Computation of Earnings
Per Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
<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
Exhibit 11 Statement Regarding Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
