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FORM 10-K/A NO. 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 27, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-23400
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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.)
CORPORATE CENTRE, SUITE 2-300
1949 E. SUNSHINE 65804
SPRINGFIELD, MO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (417) 890-0102
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
Series A Preferred Stock, par value $.01 per share
Preferred Stock Purchase Rights
(Title of each class)
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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.
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K X .
---
As of September 17, 1999, the aggregate market value of the voting
stock held by non-affiliates of the registrant was $67,156,320 (based on the
closing sales price, on such date, of $6.875 per share).
As of September 17, 1999, there were 10,107,274 shares of common stock,
$0.01 par value outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
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DT INDUSTRIES, INC.
INDEX TO FORM 10-K/A
THE UNDERSIGNED REGISTRANT HEREBY AMENDS, AS AND TO THE EXTENT SET FORTH BELOW,
THE FOLLOWING ITEMS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES,
EXHIBITS OR OTHER PORTIONS OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JUNE 27, 1999, FILED PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934:
<TABLE>
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Page
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PART I
<S> <C> <C>
Item 1. Business................................................... 2
Item 3. Legal Proceedings.......................................... 13
PART II
Item 6. Selected Financial Data, as restated....................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................... 15
Item 8. Financial Statements and Supplementary Data, as restated... 15
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K................................................... 15
</TABLE>
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Certain information contained in this report, particularly the information
appearing in Items 1, 3 and 7, includes forward-looking statements. These
statements comprising all statements herein which are not historical are based
upon the Company's interpretation of what it believes are significant factors
affecting its businesses, including many assumptions regarding future events,
and are made pursuant to the safe harbor provisions of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. References to "opportunities", growth potential",
"objectives" and "goals", the words "anticipate", "believe", "estimate",
"expect", and similar expressions used herein indicate such forward-looking
statements. Actual results could differ materially from those anticipated in any
forward-looking statements as a result of various factors, including economic
downturns in industries 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, collectibility of past due
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 management systems, availability
of credit 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 certain important factors that could cause actual results of
operations or outcomes of other events to differ materially from any such
forward-looking statement appears elsewhere herein, including in the text of
Items 1, 3 and 7, and in particular under the headings "Recent Developments",
"Backlog", "Results of Operations", "Liquidity and Capital Resources", "Market
Risk", "Seasonality and Fluctuations in Quarterly Results", "Year 2000
Compliance" and "Cautionary Statements Regarding Forward-Looking Statements"
under Item 7.
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ITEM 1. BUSINESS
GENERAL
DT Industries, Inc. (together with its subsidiaries, the "Company" or "DTI") is
an engineering-driven designer, manufacturer and integrator of automated
production equipment and systems used to manufacture, test or package a variety
of industrial and consumer products. The Company is one of the largest
manufacturers of integrated assembly and test systems for discrete parts, as
well as integrated tablet processing and packaging systems in North America.
Although the Company has experienced declines in revenues and operating profits
from the historical highs achieved in fiscal 1998, growth opportunities are
believed to be provided by certain trends among its customers, including
increased emphasis on manufacturing productivity and flexibility, concurrent
engineering of products and assembly systems, globalization of manufacturing and
markets, vendor rationalization and outsourcing. To capitalize on these trends,
DTI has implemented a business strategy to provide, develop and market
complementary technologies and capabilities to supply customers with integrated
processing, assembly, testing and packaging systems for their products. As part
of this strategy, the Company seeks to sell the products produced by previously
acquired companies through its company-wide sales force providing for greater
geographic and customer coverage.
RECENT DEVELOPMENTS
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. The restated consolidated financial statements as of and for the
fiscal year ended June 27, 1999 and June 28, 1998 and the consolidated statement
of operations, changes in stockholders' equity and cash flows as of and for the
fiscal year ended June 29, 1997 have been included in the consolidated financial
statements included herein. Comparisons of previously reported and restated
financial statements for these periods, including annual financial statements
and unaudited quarterly financial data, are set forth in Notes 17 and 18 to the
consolidated financial statements included herein.
For the fiscal year ended June 27, 1999, the previously reported financial
statements included an understatement of cost of sales by $4.0 million. After
restating cost of sales, the Company's income tax benefit increased by $0.7
million. The impact of the accounting irregularities on reported operating
results for the fiscal year ended June 27, 1999 was to overstate gross profit
and operating income by $4.0 million, understate net loss by $3.4 million and
understate diluted net loss per share by $0.34.
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For the fiscal year ended June 28, 1998, the previously reported financial
statements included an understatement of cost of sales by $7.4 million. After
restating cost of sales, the Company's income tax expense decreased by $3.4
million. The impact of the accounting irregularities on reported operating
results for the fiscal year ended June 28, 1998 was to overstate gross profit
and operating income by $7.4 million, net income by $4.0 million and diluted
earnings per share by $0.30.
For the fiscal year ended June 29, 1997, the previously reported financial
statements included an understatement of cost of sales by $2.1 million. After
restating cost of sales, the Company's income tax expense decreased by $0.5
million. The impact of the accounting irregularities on reported operating
results for the fiscal year ended June 29, 1997 was to overstate gross profit
and operating income by $2.1 million, net income by $1.6 million and diluted
earnings per share by $0.15.
TIGHTER INTERNAL CONTROLS
The Committee received a report from special counsel, Bryan Cave LLP, after a
thorough investigation of the accounting irregularities with assistance from an
independent accounting firm engaged by special counsel. After consideration of
this report, the Committee submitted its findings and recommendations to the
full Board of Directors. In addition to the personnel actions described in
"Management Changes" below, the Board directed management to take action in the
following four areas to tighten internal controls to ensure that similar
problems do not occur again: (i) enforcement of the consistent and effective use
of cost accounting and financial control systems, (ii) implementation of
additional financial control systems, (iii) reinforcement of financial
management's responsibility for, and accountability of, the Company's financial
statements as well as the accuracy and integrity of the financial reporting
systems and controls (including provision of sufficient resources to discharge
those responsibilities), and (iv) reinforcement of the responsibility ad
accountability of operating and senior management for the actual performance of
the Company. The Board has directed management and counsel to expeditiously
develop specific action items to address these concerns and solicit
recommendations of the Company's independent accountants and the Chief Financial
Officer to supplement actions taken to date. Management has commenced various
actions to date to begin to address each of the four areas noted above.
MANAGEMENT CHANGES
On September 12, 2000, James J. Kerley, the Company's Chairman of the Board, was
appointed as the Company's Interim Chief Executive Officer. The Company's
President and Chief Executive Officer, Stephen J. Gore, was reappointed
President and Chief Operating Officer. Subsequently, on November 3, 2000, the
Company announced the appointment of Stephen J. Perkins as President and Chief
Executive Officer and the resignation of Mr. Gore as President and Chief
Operating Officer. As of August 23, 2000, the Board of Directors appointed Wayne
W. Schultz, formerly the Company's Vice President of Administration for the
Automation Group, as Interim Senior Vice President, Finance following the
resignation of Bruce P. Erdel. As a result of the investigation into accounting
irregularities, Graham L. Lewis, President of the Company's Packaging Machinery
Group; Louis Pallay, Jr., President of the Company's Kalish subsidiary; Kalish's
senior financial officer; the senior financial officer of the Company's Sencorp
subsidiary; and Sencorp's general ledger accountant were terminated by the
Company. The Company is aggressively conducting searches for highly qualified
candidates to fill the positions formerly held by Messrs. Lewis and Pallay.
Replacements have been hired for the other terminated individuals.
BANK AMENDMENT
As a result of the Company's financial results for fiscal 2000, the Company was
in default of a number of provisions of its credit agreement. After working
closely with the Company throughout the investigation, the Company's lenders
have (i) waived defaults of certain covenants and breaches of representations
and warranties, (ii) amended the financial covenants for fiscal 2001 to levels
the Company believes it can achieve, (iii) increased the interest rate on
borrowings made pursuant to the revolving credit facility, and (iv) provided
that a change of control (as defined) or the failure to maintain additional
management resources will constitute an event of default. The amount available
for borrowing under the Company's credit facility remains at $140 million,
subject to reductions in connection with certain asset sales and other
transactions, and the maturity date of this credit facility is still July 2,
2001.
REDUCING LEVERAGE/ENHANCING STOCKHOLDER VALUE
As previously announced, the Company has engaged Brown, Gibbons, Lang & Company,
L.P. to explore various strategies for reducing debt and enhancing stockholder
value. The Company is actively seeking to divest one or more business units as
part of this strategy.
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LEGAL PROCEEDINGS
Following the Company 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 November 23, 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.
BUSINESS SEGMENTS
The Company operates in two significant business segments:
AUTOMATION SEGMENT. The Automation segment, which accounted for approximately
68% of the Company's consolidated fiscal 1999 net sales, designs and builds a
complete line of integrated automated assembly and testing systems. Integrated
systems combine a variety of manufacturing technologies into a complete
automated manufacturing system. Core capabilities of the Company's Automation
segment include systems integration, medium/high speed indexing,
synchronous/non-synchronous assembly, flexible/reconfigurable, high speed
precision assembly, build-to-print, material handling, cell control/data
collection, lean manufacturing, precision tools and dies, micron assembly and
automated welding systems. The Automation segment's products are used in the
electronics, automotive, consumer products, tire, electrical components,
appliance, medical devices, hardware and many other industries. The Company is
one of the largest manufacturers of integrated assembly and test systems for
discrete parts in North America.
PACKAGING SEGMENT. The Packaging segment, which accounted for approximately 25%
of the Company's consolidated fiscal 1999 net sales, designs and builds
proprietary machines and integrated systems used to perform processing and
packaging tasks. Core capabilities of the Company's Packaging segment include
the design and manufacture of thermoforming, blister packaging and foam
extrusion systems, liquid filling systems and a complete line of tablet
processing and packaging systems. The Packaging segment's products are primarily
used in the pharmaceutical, nutritional, cosmetics, consumer products and food
industries. Sales of these products also produce a stream of recurring revenues
from replacement parts and service as the Company's substantial installed base
of equipment is maintained and upgraded over time. The Company is the largest
manufacturer of integrated tablet processing and packaging systems in North
America.
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The following table summarizes the companies comprising each business segment:
<TABLE>
<CAPTION>
ACQUISITION
COMPANY DATE BUSINESS
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<S> <C> <C>
AUTOMATION SEGMENT:
Peer Division ("Peer") July 1992 Designer and manufacturer of resistance and
arc welding systems and related parts
Detroit Tool and Engineering Company August 1992 Designer and manufacturer of integrated
("DTE") manufacturing systems and custom
equipment, including tools and dies
Advanced Assembly Automation, Inc. August 1994 Designer, manufacturer and integrator
("AAA") of automated production and testing systems
Assembly Machines, Inc. ("AMI") January 1996 Manufacturer of high-speed assembly
systems
Mid-West Automation Enterprises, Inc. July 1996 Designer and manufacturer of integrated
("Mid-West") precision assembly systems
Hansford Manufacturing Corporation September 1996 Designer and manufacturer of integrated
("Hansford") precision assembly systems
Assembly Technology & Test, Inc. July 1997 Designer, manufacturer and integrator of
("ATT"), previously Lucas Assembly & automated production and testing systems
Test Systems
PACKAGING SEGMENT:
Sencorp Systems, Inc. ("Sencorp") August 1993 Designer and manufacturer of plastics
processing and packaging equipment,
systems and related parts
Stokes-Merrill Division ("Stokes- December 1993 Designer and manufacturer of rotary presses,
Merrill") tablet counting equipment and related parts
Lakso Division ("Lakso") February 1995 Designer and manufacturer of automated
packaging machinery, systems and related
parts
Armac Industries, Co. ("Armac") February 1995 Designer and manufacturer of plastics
processing and packaging equipment
Kalish Division ("Kalish") August 1995 Designer, manufacturer and integrator of liquid
filling and tablet packaging systems
Swiftpack Automation Limited November 1995 Designer and manufacturer of packaging
("Swiftpack") equipment, primarily electronic counters
Scheu & Kniss Division ("S&K") August 1998 Manufacturer of tablet press replacement
parts and rebuild services
C.E. King Division July 1999 Designer and manufacturer of tablet
packaging, liquid filling and capping
equipment
</TABLE>
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 approximately $2.1
million was financed by borrowings under the Company's revolving credit
facility. Annualized sales of C. E. King are expected to approximate $5.7
million.
The Company formed Vanguard Technical Solutions, Inc. (VTS) in July 1999 as a
start-up business. VTS is a designer, manufacturer and integrator of vision
guarded robotic assembly and test systems located in Tucson, Arizona.
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The Company is a Delaware corporation organized in January 1993 and the
successor to Peer Corporation, Detroit Tool Group, Inc. ("DTG") and Detroit Tool
and Engineering Company. Peer Corporation was organized in June 1992 to acquire
the Peer Division of Teledyne, Inc. and the stock of DTG, the sole stockholder
of DTE and DTMP.
The Company's principal executive offices are located at 1949 E. Sunshine, Suite
2-300, Springfield, Missouri 65804 and its telephone number is (417) 890-0102.
BUSINESS STRATEGY
The long-term business strategy of DTI is to provide, develop and acquire
complementary technologies and capabilities to supply customers with integrated
assembly, testing and packaging systems for their products. DTI's goal is to
become the premier provider of engineered solutions. The Company expects to
achieve this goal by designing and delivering on-time, innovative solutions
which meet or exceed our customers' expectations while continuously improving
quality, service and cost. Key elements of the Company's strategy include the
following:
Operational Improvements. The Company is focused on improving operational
performance through greater use of risk assessment techniques on custom build
opportunities, higher quality and more detailed project proposals, a
strengthening of the skill set in applications engineering and project
management as well as an increased focus on working capital management. A "Best
of Practices Methodology" has been initiated to address most of the performance
objectives. Management and employees are being evaluated on the basis of the
improvement of identified financial and operational benchmarks, both internally
and against industry competitors.
Restructuring and Cost Reductions. The Company took a restructuring charge of
$2.5 million in fiscal 1999 as part of a program to reduce costs and streamline
operations. The charge includes the closure of one packaging and automation
facility and severance costs associated with headcount reductions and management
changes. The Company will continue to pursue cost cutting measures throughout
its businesses with a goal of lowering or maintaining the current level of
selling, general and administrative expenses, lowering indirect manufacturing
expenses and increasing profitability.
Cross-Selling. Substantial cross-selling opportunities exist across the product
lines of the Automation and Packaging segments. As the Company integrates
acquired operations and develops new product lines, it is able to expand its
product offerings and customer base. The Company expects renewed growth as a
result of new opportunities created through the awareness and expansion of its
customer base.
Product Line Expansion. Through acquisitions, product license arrangements and
strategic alliances, the Company has increased and plans to continue to develop
its engineering capabilities and product offerings. DTI's Packaging segment has
the capability to provide customers with fully integrated tablet processing and
packaging systems. DTI's Automation segment has increased its assembly systems
capabilities as more fully described in "Markets and Products" below. The
Company's objective is to provide customers with integrated automation solutions
and systems integration expertise, rather than single use equipment. The Company
also uses its engineering expertise and manufacturing capability to develop new
products and technology for markets the Company currently serves and to provide
entree into new markets.
Leverage Engineering and Manufacturing Capabilities. The Company's engineering
strategy is to satisfy the growing demand for small, medium and large complex,
integrated automation solutions by utilizing the versatile engineering expertise
of its Automation businesses. The Company intends to utilize its manufacturing
capacity and engineering capabilities fully by directing work to facilities with
specific capabilities and manufacturing strengths to best meet the customer's
needs.
International Expansion. The Company seeks to increase its international sales
through strategic alliances, international agents, foreign offices and agents.
The Company acquired certain assets of U.K.-based C.E. King in July 1999
including a network of international agents to complement the current
international operations consisting of the United Kingdom-based Swiftpack and
Canada-based Kalish. In fiscal 1997, DTI's Automation segment expanded its
international presence by forming an alliance with a subsidiary of Claas KGaA
and opening a sales and service office in Beelen, Germany. This alliance also
allows the Company to market Claas KGaA's highly regarded automation systems to
the Company's existing customer base. The July 1997 acquisition of ATT provided
DTI's Automation segment a stronger international presence with manufacturing
facilities in the United Kingdom and Germany, as well as the United States.
International sales accounted for approximately 25% of consolidated net sales in
fiscal 1999.
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MARKETS AND PRODUCTS
AUTOMATION SEGMENT. The Automation segment designs and builds a complete line of
automated assembly and test systems, special machines and large complex dies for
a range of industries, including automotive, tire, recreational products,
appliance, electronics, medical device, electrical components, hardware and many
others. The Company also manufactures custom production equipment for specific
customer applications, proprietary machines for specific industrial applications
and integrated systems which may combine features of custom and proprietary
equipment. Sales from the Company's Automation segment accounted for
approximately 68%, 68% and 63% of consolidated net sales for fiscal 1999, 1998
and 1997, respectively.
Integrated Systems. Integrated systems combine a wide variety of manufacturing
technologies into a complete automated manufacturing system. Utilizing advanced
computers, robotics, vision systems and other technologies, the Company provides
a variety of capabilities including systems integration, medium/high speed
indexing, synchronous/non-synchronous assembly, flexible/reconfigurable
assembly, high speed precision assembly, build-to-print, material handling, cell
control/data collection, lean manufacturing, precision tools and dies, micron
assembly and automated welding systems for the electronics, automotive,
appliance, electrical components, medical device and hardware industries. The
Company offers this variety of integrated systems for small or large, custom or
standard automation applications. The standardized automation applications
utilize various machine platforms and proprietary modular building blocks in
carousel, in-line, rotary and robotic assembly systems, all of which facilitate
time-sensitive, concurrent engineering projects where changes in tooling and
processes can occur in an advanced stage of system design.
Custom Machines. The Company's custom machine building capabilities include:
engineering, project management, machining and fabrication of components,
installation of electrical controls, final assembly and testing. A customer will
usually approach the Company with a manufacturing objective, and DTI will work
with the customer to design, engineer, assemble, test and install a machine to
meet the objective. The customer often retains rights to the design after
delivery of the machine since the purchase contract typically includes the
design of the machine; however, the engineering and manufacturing expertise
gained in designing and building the machine is often reapplied by the Company
in projects for other customers.
Material Handling. The Company builds an automated electrified monorail product
offered in various capacity ranges from lightweight systems to systems
transporting products weighing up to 8,800 pounds. This product can be applied
to a variety of material handling applications ranging from delivery systems for
the food industry to manufacturing processes involving manual and automation
interfaces for engine assembly and testing. The benefits of this product include
providing a clean, quiet, controlled transport with the flexibility to operate
in a variety of processes and production rates.
Automated Resistance and Arc Welding Systems. The Company manufactures and sells
a line of standard resistance welding equipment as well as special automated
welding systems designed and built for specific applications. Marketed under the
brand name Peer(TM), the Company's products are used in the automotive,
appliance and electrical industries to fabricate and assemble components and
subassemblies. The Company's resistance welding equipment is also used in the
manufacture of file cabinets, school and athletic lockers, store display
shelves, metal furniture and material storage products.
Tooling and Dies. The Company possesses considerable expertise in the design,
engineering and production of precision tools and dies. In addition, personnel
trained as tool and die makers often apply their skills to the manufacture of
the Company's production machines.
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PACKAGING SEGMENT. The Packaging segment designs and builds proprietary machines
and integrated systems which are marketed under individual brand names and
manufactured for specific industrial applications using designs owned or
licensed by the Company. Although these machines are generally cataloged as
specific models, they are usually modified for specific customer requirements
and often combined with other machines into integrated systems. Many customers
also request additional accessories and features which typically generate higher
revenues and enhanced profit opportunities. The Packaging segment's products
include thermoformers, blister packaging systems, extrusion systems, rotary
presses and complete integrated packaging systems. Packaging systems include:
bottle unscrambling, electronic and slat tablet counting/filling, cottoning,
sealing and capping, labeling, collating, cartoning, and liquid and tube
filling. The Company believes this equipment maintains a strong reputation among
its customers for quality, reliability and ease of operation and maintenance.
The Company also sells replacement parts and accessories for its substantial
installed base of machines. Sales from DTI's Packaging segment accounted for
approximately 25%, 23% and 25% of consolidated net sales for fiscal 1999, 1998
and 1997, respectively.
Thermoformers. A thermoformer heats plastic material and uses pressure and/or a
vacuum to mold it into a product. Marketed under the brand names Sencorp(R) and
Armac(TM), the Company's thermoformers are used by customers in North America,
Europe and Asia to form a variety of products including: specialized cups,
plates and food containers, trays for food and medical products and other
plastics applications.
The Company's thermoformers are sold primarily to custom formers who use the
machines to create thermoformed items which are sold to a variety of end users.
The Company also sells thermoformers directly to end users, including large
producers of electrical and healthcare products, cosmetics, hardware, and other
consumer products.
The Company produces a line of thermoformers of different sizes, heating ovens,
maximum draw depths and press capacities. Certain thermoformers produced by the
Company feature a fully integrated process control system to regulate the
thermoformer's functions. Depending upon the customer's requirements, the
control system is capable of networking with, or downloading to, the customer's
computers or other equipment and the Company's service center. This on-line
diagnostic capability allows the Company to provide real-time service and
support to its customers.
Blister Packaging Systems. Blister packaging is a common method of displaying
consumer products for sale in hardware stores, convenience stores, warehouse
stores, drug stores and similar retail outlets. Batteries, cosmetics, hardware
items, electrical components, razor blades and toys are among the large variety
of products sold in a clear plastic blister or two-sided package. The Company
designs and manufactures machinery, marketed under the brand names Sencorp(R)
and Armac(TM), which performs blister packaging by heat-sealing a clear plastic
bubble, or blister, onto coated paperboard, or by sealing two-sided packages
using heat or microwave technology.
The Company's blister packaging systems are primarily sold to manufacturers of
the end products. These customers, with higher volume production requirements,
may use a thermoformer in-line with a blister sealer to form blisters, insert
their product and seal the package in one continuous process, referred to as a
form/fill/seal configuration. Customers having relatively low volume production
often use a stand-alone blister sealing machine to seal products in a package
using blisters purchased from a custom former.
Extruders. An extrusion process is used to convert plastic resin and additives
into a continuous melt and to force such melt through a die to produce a desired
shape that is then cooled. Marketed under the brand name Sencorp(R), the
Company's foam extruders are used to produce products such as building
insulation, display board, meat trays, bottle wrap protection labels and egg
cartons. The Company's foam extruders are primarily sold to large plastics
companies that use the machines to create end products and sheet products. The
Company also manufactures reclaim extruders which process a variety of plastic
materials from ground form to finished pellet form.
Rotary Presses. The Company is the largest U.S. designer and manufacturer of
rotary tablet presses. The Company designs and manufactures rotary presses used
by customers in the airbag, candy, food supplement, ceramic, ordnance, specialty
chemical, and pharmaceutical industries to produce tablets. Marketed under the
brand name Stokes(TM), the Company's line of rotary presses includes machines
capable of producing 17,000 tablets per minute and other machines capable of
applying up to 40 tons of pressure. Products produced on the Company's rotary
presses include Lifesavers(R), and Breathsavers(R) brand mints, Centrum(R) brand
vitamins and inflation pellets for automotive airbags.
8
<PAGE> 10
The Company has an agreement with Horn & Noack Pharmatechnick GmbH, for the
purpose of licensing German rotary press technology designed primarily for the
pharmaceutical and nutritional markets. The agreement gives the Company the
exclusive right to manufacture and market this press technology under the
Stokes(TM) brand name in North and Central America and non-exclusively in the
rest of the world, excluding Europe. The Company is marketing the pharmaceutical
press through its Packaging segment.
Packaging Systems. The Company designs, manufactures and distributes a complete
line of products utilized for packaging, liquid filling or tube filling
applications. The equipment manufactured by the Company, which includes bottle
unscramblers, slat counters, electronic counters, liquid fillers, cottoners,
cappers and labelers, collators and cartoners, can be sold as an integrated
system or individual units. These machines are marketed under the brand names of
Kalish(TM), Lakso(R), Merrill(R) and Swiftpack(TM) and are primarily delivered
to customers in the pharmaceutical, nutritional, food, cosmetic, toy and
chemical industries.
The Company benefits from a substantial installed base of Lakso(R) and
Merrill(R) slat counters in the aftermarket sale of slats. Slat counting
machines use a set of slats to meter the number of tablets or capsules to be
inserted into bottles. Each size or shape of tablet or capsule requires a
different set of slats. In addition, the practice in the pharmaceutical industry
is to use a different set of slats for each product, even if the tablets are the
same size.
Laboratory Machines, Tooling, Parts and Accessories. The Company produces a line
of small scale blister sealers and a line of tablet pressing equipment used to
test new materials and techniques, for quality control, laboratory or other
small run uses. The Company also sells parts and accessories for its proprietary
machines. In addition, the Company designs and builds special tools and dies
used in custom applications of its thermoforming systems, rotary presses and
slat counters.
OTHER BUSINESSES. The Company's other businesses produce precision-stamped steel
and aluminum components through its stamping and fabrication operations for the
heavy trucking, agricultural equipment, appliance, and electrical industries.
The Company's stamping presses range in size from 32 tons to 1,500 tons, giving
the Company the flexibility to stamp flat rolled metal ranging in thickness from
.015 inches to .750 inches. Certain of the Company's presses can accommodate
dies up to 190 inches in length to perform several stamping functions in a
single press.
MARKETING AND DISTRIBUTION
The Company's automation and packaging machines and systems are sold primarily
through the Company's approximately 75 person direct sales force and to a lesser
extent through manufacturers' representatives and agents. Sales of automation
and packaging machines and integrated systems require the Company's sales
personnel to have a high degree of technical expertise and extensive knowledge
of the industry served. The Company's sales force consists of specialists in
each primary market in which the Company's automation and packaging machines and
systems are sold. Each operating unit has a sales force experienced in the
marketing of the equipment and systems historically produced by each respective
business. The Company believes that cross-selling among the members of the
Automation and Packaging segments and integration of proprietary technology and
custom equipment into total production automation systems for selected
industries provide the Company with expanded sales opportunities.
The Company's automation and packaging machines and systems are sold throughout
the world by more than 80 manufacturers' representatives and sales agents in
nearly 50 countries. The Company has sales and service offices in China, Canada,
England and Germany. International sales were approximately 25% of consolidated
net sales for fiscal 1999 compared to 31% and 30% of consolidated net sales in
fiscal 1998 and fiscal 1997, respectively.
9
<PAGE> 11
MANUFACTURING AND RAW MATERIALS
The principal raw materials and components used in the manufacturing of the
Company's automation and packaging machines and systems include carbon steel,
stainless steel, aluminum, electronic components, pumps and compressors,
programmable logic controls, hydraulic components, conveyor systems, visual and
mechanical sensors, precision bearings and lasers. The Company is not dependent
upon any one supplier for raw materials or components used in the manufacture of
automation and packaging machines and systems. Certain customers specify sole
source suppliers for components of custom machines or systems. The Company
believes there are adequate alternative sources of raw materials and components
of sufficient quantity and quality.
AUTOMATION SEGMENT. Integrated systems to assemble and test various products are
designed and manufactured at the Company's facilities in Illinois, Michigan, New
York, Ohio, Pennsylvania, the United Kingdom and Germany where manufacturing
activity primarily consists of fabrication and assembly and, to a lesser extent,
machining. The facilities in Missouri house the machining and assembly
operations primarily used in the manufacture of tools and dies, custom special
machines and certain other integrated systems. A facility in Michigan and the
United Kingdom manufacture the material handling systems. Another facility in
Michigan houses the machining, assembly and test operations used in the
manufacture of welding equipment and systems. A number of manufacturing
technologies are employed at these facilities including: fabrication of
stainless steel, direct numerically controlled machinery, computer generated
surface modeling of contoured components and fully networked CAD/CAM
capabilities.
PACKAGING SEGMENT. Special machines, integrated systems and related parts for
the Company's tablet packaging and liquid-filling equipment are designed and
assembled at the Company's facilities in Massachusetts, Illinois, Canada and two
locations in the United Kingdom from components made to the Company's
specifications by unaffiliated vendors. Rotary presses and related replacement
parts are manufactured and are assembled at the Company's facilities in
Pennsylvania and Kentucky. Special machines and integrated systems for the
plastics packaging industry are primarily manufactured at the Company's
manufacturing facility in Massachusetts which include machining, fabrication and
assembly.
FINANCIAL INFORMATION RELATING TO BUSINESS SEGMENTS, FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES
The Company operates predominantly in the business segments classified as
Automation and Packaging. The Company's principal foreign operations consist of
manufacturing, sales and service operations in Canada, the United Kingdom and
Germany. For certain other financial information concerning the Company's
business segments, foreign and domestic operations and export sales, see Item 8.
Financial Statements and Supplementary Data.
CUSTOMERS
The majority of the Company's sales is attributable to repeat customers, some of
which have been customers of the Company or its acquired businesses for over
twenty years. The Company believes such repeat business is indicative of the
Company's engineering capabilities, the quality of its products and overall
customer satisfaction.
The Company's five largest customers during fiscal 1999 accounted for
approximately 26% of the Company's consolidated net sales.
Certain purchasers of the Company's automation and packaging machines and
systems make advance and progress payments to the Company in connection with the
manufacture of machinery and systems.
BACKLOG
The Company's backlog is based upon customer purchase orders the Company
believes are firm. As of June 27, 1999, the Company had $180.0 million of orders
in backlog, which compares to a backlog of approximately $224.8 million as of
June 28, 1998.
10
<PAGE> 12
The Automation segment's backlog was $138.4 million as of June 27, 1999, a
decrease of $46.0 million from the prior year. The reduced backlog reflects the
continued delays and deferrals of orders of automation systems from customers in
various industries, primarily automotive, and lower orders from a significant
customer in the electronics industry. Backlog for the Packaging segment
increased $3.4 million, or 9.6%, to $38.1 million due primarily to an increase
in the backlog of plastics processing equipment.
The level of backlog at any particular time is not necessarily indicative of the
future operating performance of the Company. Additionally, certain purchase
orders are subject to cancellation by the customer upon notification. Certain
orders are also subject to delays in completion and shipment at the request of
the customer. The Company believes most of the orders in the backlog will be
recognized as sales during fiscal 2000.
COMPETITION
The market for the Company's automation and packaging machines and systems is
highly competitive, with a large number of companies advertising the sale of
production machines. However, the market for automation and packaging machinery
and systems is fragmented and characterized by a number of industry niches in
which few manufacturers compete. The Company's competitors vary in size and
resources; most are smaller privately held companies or subsidiaries of larger
companies, some of which are larger than the Company; and none competes with the
Company in all product lines. In addition, the Company may encounter competition
from new market entrants. The Company believes that the principal competitive
factors in the sale of the Company's automation and packaging equipment and
systems are quality, technology, on-time delivery, price and service. The
Company believes that it competes favorably with respect to each of these
factors.
ENGINEERING; RESEARCH AND DEVELOPMENT
The Company maintains engineering departments at all of its manufacturing
locations. The Company employs more than 325 people with experience in the
design of production equipment. In addition to design work relating to specific
customer projects, the Company's engineers develop new products and product
improvements designed to address the needs of the Company's target market niches
and to enhance the reliability, efficiency, ease of operation and safety of its
proprietary machines.
TRADEMARKS AND PATENTS
The Company and its subsidiaries own and maintain the registered trademarks
AssemblyFlex(R), Fillit(R), Force-Flo(R), Force-Flo Feeder(R), Lakso(R),
Merrill(R), Mid-West(R), Mid-West Automation(R), Pacer(R), Pharmaveyor(R),
Reformer(R), S&K(R), Sencorp(R), Slat-Scan(R), Vali-Tab(R) and Versa Press(R).
Registrations for Company trademarks are also owned and maintained in countries
where such products are sold and such registrations are considered necessary to
preserve the Company's proprietary rights therein.
The Company also has the rights to use the unregistered trademarks Armac(TM),
F.A.S.T.(TM), Hartridge(TM), Kalish(TM), Peer(TM), Stokes(TM) and Swiftpack(TM).
All of the trademarks listed above are used in connection with the machines and
systems marketed by the Automation and Packaging segments.
The Company applies for and maintains patents where the Company believes such
patents are necessary to maintain the Company's interest in its inventions. The
Company does not believe that any single patent or group of patents is material
to either its Packaging business or its Automation business, nor does it believe
that the expiration of any one or a group of its patents would have a material
adverse effect upon its business or ability to compete in either line of
business. The Company believes that its existing patent and trademark
protection, however, provides it with a modest competitive advantage in the
marketing and sale of its proprietary products.
11
<PAGE> 13
ENVIRONMENTAL AND SAFETY REGULATION
The Company is subject to environmental laws and regulations that impose
limitations on the discharge of pollutants into the environment and establish
standards for the treatment, storage and disposal of toxic and hazardous wastes.
The Company is also subject to the federal Occupational Safety and Health Act
and other state statutes. Costs of compliance with environmental, health and
safety requirements have not been material to the Company.
The Company believes it is in material compliance with all applicable
environmental and safety laws and regulations.
EMPLOYEES
At the end of August 1999, the Company had approximately 2,800 employees. None
of the Company's employees are covered under collective bargaining agreements.
The Company has not experienced any work stoppages in the last five years and
considers its relations with employees to be good.
12
<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS
Following the Company's announcement regarding the restatements of previously
reported financial statements, the Company, its Kalish subsidiary and certain of
their officers have been named as defendants in at least five complaints in
purported class action lawsuits as of November 23, 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.
Product liability claims are asserted against the Company from time to time for
various injuries alleged to have resulted from defects in the manufacture and/or
design of the Company's products. At June 27, 1999, there were 18 such claims
either pending or which may be asserted against the Company. The Company does
not believe that the resolution of such suits, either individually or in the
aggregate, will have a material adverse effect on the Company's financial
condition, results of operations or cash flow. Product liability claims are
covered by the Company's comprehensive general liability insurance policies,
subject to certain deductible amounts. The Company has established reserves for
such deductible amounts, which it believes to be adequate based on its previous
claims experience. However, there can be no assurance that resolution of product
liability claims in the future will not have a material adverse effect on the
Company's financial condition, results of operations or cash flow.
In addition to product liability claims, from time to time, the Company is the
subject of legal proceedings, including claims involving employee matters,
commercial matters and similar claims. There are no material claims currently
pending. The Company maintains comprehensive general liability insurance which
it believes to be adequate for the continued operation of its business.
13
<PAGE> 15
PART II
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal year ended
------------------------------------------------------------------------
June 27, June 28, June 29,
1999 1998 1997
As As As June 30, June 25,
Restated(1) Restated(1) Restated(1) 1996 1995
----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales $ 442,084 $ 519,342 $ 396,110 $ 235,946 $ 147,369
Cost of sales 352,526 387,515 287,150 172,568 109,678
--------- --------- --------- --------- ---------
Gross profit 89,558 131,827 108,960 63,378 37,691
Selling, general and administrative expenses 80,740 75,246 54,367 35,445 21,428
Restructuring charge (Note 14) 2,500 -- -- -- --
Loss on sale of assets of Knitting Elements
division (Note 3) -- 1,383 -- -- --
--------- --------- --------- --------- ---------
Operating income 6,318 55,198 54,593 27,933 16,263
Interest expense 7,742 6,509 11,088 4,799 1,849
Dividends on Company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary DT
Capital Trust holding solely convertible
junior subordinated debentures of the
Company 5,012 5,012 251 -- --
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary loss (6,436) 43,677 43,254 23,134 14,414
Provision (benefit)for income taxes (1,301) 16,792 18,518 9,643 5,964
--------- --------- --------- --------- ---------
Income (loss) before extraordinary loss (5,135) 26,885 24,736 13,491 8,450
Extraordinary loss, net(2) -- 1,200 324 -- --
--------- --------- --------- --------- ---------
Net income (loss) $ (5,135) $ 25,685 $ 24,412 $ 13,491 $ 8,450
--------- --------- --------- --------- ---------
Diluted earnings (loss) per common share
before extraordinary loss $ (0.51) $ 2.19 $ 2.26 $ 1.50 $ 0.94
--------- --------- --------- --------- ---------
Diluted earnings (loss) per common share $ (0.51) $ 2.10 $ 2.23 $ 1.50 $ 0.94
--------- --------- --------- --------- ---------
Diluted weighted average common shares
outstanding 10,149 13,621 11,022 9,001 9,000
--------- --------- --------- --------- ---------
BALANCE SHEET DATA
Working capital $ 96,808 $ 103,023 $ 89,336 $ 26,161 $ 16,791
Total assets 453,265 451,700 393,426 233,843 159,263
Total debt 104,593 90,011 48,505 79,327 37,353
Company-obligated, mandatorily
redeemable convertible preferred
securities of subsidiary DT Capital
Trust holding solely convertible junior
junior subordinated debentures of
the Company 70,000 70,000 70,000 -- --
Stockholders' equity 170,276 184,642 183,622 87,884 75,020
</TABLE>
(1)As restated. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Restatement of Financial Results" and
Notes 1 and 17 to the consolidated financial statements for a comparison of
previously reported and restated financial statements.
(2)Reflects costs incurred of $2,000, less applicable income tax benefits of
$800 in the fiscal year ended June 28, 1998, as restated, and costs incurred
of $540, less applicable income tax benefits of $216 in the fiscal year ended
June 29, 1997, as restated, related to the extinguishment and refinancing of
debt by the Company.
14
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See the information under the caption "Management's Discussion and Analysis" on
pages 16 through 28.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the information under the caption "Market Risk" on page 26.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the consolidated financial statements and notes thereto on pages 29 through
53.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
1. FINANCIAL STATEMENTS PAGE
<S> <C>
Consolidated Balance Sheets as of June 27, 1999 and June 28, 1998, as restated 30
Consolidated Statement of Operations for the Fiscal Years Ended
June 27, 1999, June 28, 1998 and June 29, 1997, as restated 31
Consolidated Statement of Changes in Stockholders' Equity for the Fiscal Years
Ended June 27, 1999, June 28, 1998 and June 29, 1997, as restated 32
Consolidated Statement of Cash Flows for the Fiscal Years Ended
June 27, 1999, June 28, 1998 and June 29, 1997, as restated 33
Notes to Consolidated Financial Statements 35
2. FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants on Financial Statement Schedule S-1
Schedule VIII Valuation and Qualifying Accounts and Reserves for the Fiscal
Years Ended June 27, 1999, June 28, 1998, June 29, 1997, as restated S-2
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. EXHIBITS
The exhibits listed on the accompanying Index to Exhibits are filed as part of
this Report.
4. REPORTS ON FORM 8-K
On May 6, 1999, a Current Report on Form 8-K was filed to report, pursuant to
Item 5 thereof, the release of the Company's earnings for the three and nine
months ended March 28, 1999.
On July 23, 1999, a Current Report on Form 8-K was filed to report, pursuant to
Item 5 thereof, the release by the Company of its expectation of earnings for
the three and twelve months ended June 27, 1999.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
DT Industries, Inc. (DTI or the Company) was formed through a series of
acquisitions beginning with the initial acquisitions of Detroit Tool Group, Inc.
and the Peer Division of Teledyne, Inc. in 1992. Subsequent to those
transactions, the Company or its subsidiaries completed a number of
acquisitions. The acquisitions were elements of a strategic plan to acquire
companies with proprietary products and manufacturing capabilities which had
strong market and technological positions in the niche markets they served and
furthered the Company's goal of providing customers a full range of integrated
automated systems. The Company believes that emphasis on complementary
acquisitions of companies serving target markets has allowed it to broaden its
product offerings and to provide customers a single source for complete
integrated automation systems. The acquisitions expanded the Company's base of
customers and markets, creating greater opportunities for cross-selling among
the various divisions of the Company.
The terms of the amendment to the credit facility in September 1999 included
certain restrictions on acquisitions. As such, the Company's focus is now
centered on operational improvements to increase profitability through
cost-containment measures, right-sizing of operations, the implementation of
performance metrics and overall continuous improvement programs.
The Company has made the following acquisitions in the past three years which
affected the results of operations:
July 1996 Mid-West Automation Enterprises, Inc. (Mid-West)
September 1996 Hansford Manufacturing Corporation (Hansford)
July 1997 Lucas Assembly and Test Systems (LATS), renamed
Assembly Technology & Test (ATT)
August 1998 Scheu & Kniss
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.
As the transaction occurred subsequent to the end of fiscal 1999, the balance
sheet and results of operations of C. E. King are excluded from the fiscal 1999
consolidated balance sheet and results of operations of DTI. The pro forma
effects of the acquisition of C. E. King assets on the Company's fiscal 1999
financial position are not material.
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 the 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.
16
<PAGE> 18
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 27, 1999, June 28, 1998 and June 29, 1997 have been restated. The
restated consolidated financial statements as of and for the fiscal years ended
June 27, 1999 and June 28, 1998 and the consolidated statement of operations,
changes in stockholders equity and cash flows as of and for the fiscal year
ended June 29, 1997 have been included in the consolidated financial statements
included herein. Comparisons of previously reported and restated financial
statements for these periods, including annual financial statements and
unaudited quarterly financial data, are set forth in Notes 17 and 18 to the
consolidated financial statements included herein.
For the fiscal year ended June 27, 1999, the previously reported financial
statements included an understatement of cost of sales by $4.0 million. After
restating cost of sales, the Company's income tax benefit increased by $0.7
million. The impact of the accounting irregularities on reported operating
results for the fiscal year ended June 27, 1999 was to overstate gross profit
and operating income by $4.0 million, understate net loss by $3.4 million and
understate diluted net loss per share by $0.34.
For the fiscal year ended June 28, 1998, the previously reported financial
statements included an understatement of cost of sales by $7.4 million. After
restating cost of sales, the Company's income tax expense decreased by $3.4
million. The impact of the accounting irregularities on reported operating
results for the fiscal year ended June 28, 1998 was to overstate gross profit
and operating income by $7.4 million, net income by $4.0 million and diluted
earnings per share by $0.30.
For the fiscal year ended June 29, 1997, the previously reported financial
statements included an understatement of cost of sales by $2.1 million. After
restating cost of sales, the Company's income tax expense decreased by $0.5
million. The impact of the accounting irregularities on reported operating
results for the fiscal year ended June 29, 1997 was to overstate gross profit
and operating income by $2.1 million, net income by $1.6 million and diluted
earnings per share by $0.15.
REVIEW OF FISCAL 1999 FINANCIAL RESULTS
Fiscal 1999 financial results were significantly below prior year and planned
results. Fiscal 1999 was expected to be a transition year as a result of a
significant reduction in business with our largest customer as it was reducing
its capital spending due to adequate capacity. The Company had planned to
replace a significant portion of this revenue decrease with orders from new
customers. However, fiscal 1999 orders were $396.7 million, or 21% below the
prior year. Order activity reflected not only the lower activity of our largest
customer but the softness in capital spending in many of our other key markets,
including automotive, heavy equipment, agricultural equipment and appliance. The
Company's financial results were below the prior year's results throughout the
year due primarily to the lower sales levels and the resulting unfavorable
manufacturing efficiencies. Selling, general and administrative expenses
increased as the Company continued its pursuit of new business and development
of new products and technologies.
In the fourth quarter of fiscal 1999, the Company incurred a restated net loss
of $9.0 million on sales of $113.5 million. The fourth quarter results of
operations included special charges of $13.0 million. The special charges
included a charge of $9.8 million to cost of sales related to cost and
performance issues on three automation projects, a $2.5 million restructuring
charge and a $0.7 million bad debt reserve established for a receivable
currently being pursued in a legal action.
The Company has taken various actions to contain costs and improve profitability
reflected in the restructuring charge in the fourth quarter. These actions
include management changes at under-performing units, reductions in work force
throughout the company and the closing of underutilized facilities. Project
issues which lowered earnings in fiscal 1999 have been reviewed and changes
implemented in methods and controls in an effort to mitigate these risks in the
future.
For a better understanding of the significant factors that influenced the
Company's performance during the past three years, the following discussion
should be read in conjunction with the consolidated financial statements and
notes thereto appearing elsewhere in this Annual Report on Form 10-K/A.
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.
17
<PAGE> 19
Set forth below is certain financial data relating to each business segment.
Prior years' data has been restated to reflect segment presentation in
accordance with Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information". In
addition, the financial data provided for fiscal 1999, fiscal 1998 and fiscal
1997 has been restated as a result of the accounting irregularities at Kalish.
See "Restatement of Financial Results" above and Notes 1 and 17 to the
consolidated financial statements appearing elsewhere in this Annual Report on
Form 10-K/A.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
AS RESTATED AS RESTATED AS RESTATED
------------------- --------------------- --------------
(in thousands)
<S> <C> <C> <C>
NET SALES
Automation $ 299,787 $ 355,052 $ 248,213
Packaging 109,487 116,803 100,435
Other 32,810 47,487 47,462
--------- --------- ---------
Total $ 442,084 $ 519,342 $ 396,110
========= ========= =========
GROSS PROFIT
Automation $ 53,385 $ 90,275 $ 64,720
Gross margin 17.8% 25.4% 26.1%
Packaging $ 32,524 $ 33,050 $ 33,389
Gross margin 29.7% 28.3% 33.2%
Other $ 3,649 $ 8,502 $ 10,851
Gross margin 11.1% 17.9% 22.9%
--------- --------- ---------
Total gross profit $ 89,558 $ 131,827 $ 108,960
Total gross margin 20.3% 25.4% 27.5%
========= ========= =========
OPERATING INCOME
Automation $ 5,573 $ 47,436 $ 39,629
Operating margin 1.9% 13.4% 16.0%
Packaging $ 8,400 $ 13,412 $ 15,052
Operating margin 7.7% 11.5% 15.0%
Other $ 1,765 $ 3,391 $ 6,966
Operating margin 5.4% 7.1% 14.7%
Corporate $ (9,420) $ (9,041) $ (7,054)
--------- --------- ---------
Total operating income $ 6,318 $ 55,198 $ 54,593
Total operating margin 1.4% 10.6% 13.8%
========= ========= =========
DEPRECIATION AND AMORTIZATION EXPENSE
Automation $ 9,426 $ 8,714 $ 6,327
Packaging 3,595 2,793 2,564
Other 1,496 1,491 1,258
Corporate 947 752 904
--------- --------- ---------
Total $ 15,464 $ 13,750 $ 11,053
========= ========= =========
CAPITAL EXPENDITURES
Automation $ 3,889 $ 9,441 $ 6,654
Packaging 9,327 3,313 770
Other 1,624 3,459 3,806
Corporate 1,063 1,101 620
--------- --------- ---------
Total $ 15,903 $ 17,314 $ 11,850
========= ========= =========
IDENTIFIABLE ASSETS
Automation $ 272,816 $ 299,423 $ 240,396
Packaging 142,828 118,414 114,675
Other 21,325 25,170 34,812
Corporate 16,296 8,693 3,543
--------- --------- ---------
Total $ 453,265 $ 451,700 $ 393,426
========= ========= =========
</TABLE>
18
<PAGE> 20
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 those contracts not accounted for under the percentage of completion method,
revenue is recognized upon shipment (defined primarily as FOB shipping point) 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 margin may vary from year to year as a result of the variations in
profitability of contracts for large orders of automated production systems,
packaging systems or special machines. In addition, changes in the product mix
in a given period affect gross margin.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of net
sales represented by certain items reflected in the Company's consolidated
statement of operations:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
AS RESTATED(1) AS RESTATED(1) AS RESTATED(1)
--------------- --------------- ----------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 79.7 74.6 72.5
----- ----- -----
Gross profit 20.3 25.4 27.5
Selling, general and administrative expenses 18.3 14.5 13.7
Restructuring charge 0.6 - -
Loss on sale of assets of Knitting Elements
division - 0.3 -
----- ----- -----
Operating income 1.4 10.6 13.8
Interest expense 1.8 1.2 2.8
Dividends on Company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary DT Capital
Trust holding solely convertible junior
subordinated debentures of the Company 1.1 1.0 0.1
----- ----- -----
Income (loss) before provision for income taxes
and extraordinary loss (1.5) 8.4 10.9
Provision (benefit) for income taxes (0.3) 3.2 4.7
----- ----- -----
Income (loss) before extraordinary loss (1.2) 5.2 6.2
Extraordinary loss on debt refinancing - 0.2 0.1
----- ----- -----
Net income (loss) (1.2)% 5.0% 6.1%
----- ----- -----
</TABLE>
(1)As restated. See "Restatement of Financial Results" and Notes 1 and 17 to the
consolidated financial statements.
19
<PAGE> 21
FISCAL 1999 (RESTATED) COMPARED TO FISCAL 1998 (RESTATED)
Consolidated net sales decreased $77.2 million, or 14.9%, to $442.1 million for
the year ended June 27, 1999 from $519.3 million for the year ended June 28,
1998. Net sales by segment were as follows (in millions):
<TABLE>
<CAPTION>
Twelve Months Ended Twelve Months Ended
June 27, 1999 June 28, 1998 (Decrease)
-------------------------- ------------------------ ---------------------
<S> <C> <C> <C>
Automation $299.8 $355.0 $(55.2)
Packaging 109.5 116.8 (7.3)
Other 32.8 47.5 (14.7)
-------------------------- ------------------------ ---------------------
$442.1 $519.3 $(77.2)
-------------------------- ------------------------ ---------------------
</TABLE>
Excluding the incremental sales of $9.5 million from the acquisition of ATT in
July 1997, Automation segment sales decreased $64.7 million, or 18.2%, from the
year ended June 28, 1998. Decreased Automation segment revenues resulted
primarily from lower sales to the electronics industry. Specifically, sales to a
significant electronics customer were down substantially in the year ended June
27, 1999 as compared to the year ended June 28, 1998. Soft order activity
throughout the Automation segment during fiscal 1999 due to continued delays on
certain projects also contributed to the decreased sales revenues compared to
the prior year to customers in the automotive, heavy equipment and appliance
industries.
Excluding the incremental sales of $5.5 million from the acquisition of S&K in
August 1998, Packaging segment sales decreased $12.8 million, or 11.0%, from the
year ended June 28, 1998 primarily from lower sales of plastics processing
equipment, particularly foam extrusion systems to international markets. Sales
of tablet counting and packaging systems to the pharmaceutical and nutritional
industries, which had been strong throughout the first three quarters of fiscal
1999, decreased during the fourth quarter resulting in sales slightly below the
prior year level.
The decreased revenues from the Company's other businesses reflect the sale of
the Knitting Elements business in May 1998 combined with significantly lower
sales of parts to agricultural equipment customers. An economic downturn in the
agricultural equipment industry resulted in the decreased revenues from sales of
precision metal stampings and fabrications to several customers serving this
market. Also, certain other customers of the precision metal stamping and
fabricating business have been eliminated through planned attrition and product
changes. These decreases were partially offset by strong sales to customers in
the transportation industry.
Gross profit decreased $42.2 million, or 32.1%, to $89.6 million for the year
ended June 27, 1999 from $131.8 million for the year ended June 28, 1998. The
gross margin decreased to 20.3% in 1999 from 25.4% in fiscal 1998 primarily
reflecting the decrease in margins in the Automation segment and the stamping
and fabrication businesses.
Automation segment gross margins decreased in fiscal 1999 to 17.8% from 25.4% in
fiscal 1998 due primarily to substantial losses on certain assembly systems and
welding systems projects reflecting cost overruns and production difficulties,
manufacturing inefficiencies resulting from the lower volume of manufacturing
activity and unfavorable product mix changes in the Company's customer base as
compared to the prior year. As previously discussed, based on facts and
circumstances occurring or culminating in the fourth quarter of fiscal 1999, the
Company recorded a charge of $9.8 million to cost of sales in the fourth quarter
related to three Automation projects to revise cost estimates to reflect
additional costs anticipated to bring the projects up to contract
specifications, to reflect anticipated final billings to recoup costs of
modifications incurred during the production process, and on one of the
projects, to reflect warranty costs expected to support the manufacturing
systems through the initial year of production.
Margins of the Company's metal stamping and fabrication business declined due to
lower manufacturing efficiencies resulting from the lower level of manufacturing
activity and unfavorable product mix issues compared to the prior year.
Increased margins in the Packaging segment reflect improved margins on sales of
tablet counting and packaging machinery partially offset by cost overruns and
production inefficiencies on plastics processing equipment.
20
<PAGE> 22
SG&A expenses increased $5.5 million, or 7.3%, to $80.7 million for the year
ended June 27, 1999 from $75.2 million for the year ended June 28, 1998. As the
Company continued to focus on sales and marketing efforts in order to extend its
customer base, the sales force was expanded contributing to increased
expenditures for travel and quoting costs. The Company has also increased its
participation in trade shows and other industry events. Research and development
activities were also increased during fiscal 1999 as compared to the prior year
in order to bolster the Company's technological position and create new products
and services. The Company also took a charge of $0.7 million to SG&A expense in
the fourth quarter of fiscal 1999 related to a receivable that is currently
being pursued in a legal action. As a percentage of consolidated net sales, SG&A
expenses increased to 18.3% from 14.5% in fiscal 1998.
During the fourth quarter of fiscal 1999, the Company recorded a restructuring
charge of $2.5 million for severance costs associated with management changes
and workforce reductions, idle facility costs resulting from the lower level of
order activity and non-cash asset writedowns. The charge includes severance
costs of $1.7 million, idle facility costs of $0.4 million and $0.4 million of
asset writedowns and other charges.
Operating income decreased $48.9 million, or 88.6%, to $6.3 million for the year
ended June 27, 1999 from $55.2 million for the year ended June 28, 1998, as a
result of the factors noted above. The operating margin decreased to 2.0% in
fiscal 1999 from 10.9% in fiscal 1998, excluding the effects of the $2.5 million
restructuring charge in fiscal 1999 and the $1.4 million non-recurring, non-cash
charge related to the sale of the Company's non-core Knitting Elements division
in fiscal 1998.
Interest expense increased to $7.7 million for the year ended June 27, 1999 from
$6.5 million for the year ended June 28, 1998. The increase in interest expense
primarily reflects the increased level of debt associated with the stock
repurchase program and the August 1998 acquisition of S&K. The stock repurchase
program was terminated in September 1999.
The Company paid $5.0 million of dividends on the Company-obligated, mandatorily
redeemable convertible preferred securities of subsidiary DT Capital Trust
holding solely convertible junior subordinated debentures of the Company
(Convertible Preferred Securities) for the years ended June 27, 1999 and June
28, 1998. Effective September 1999, the Company elected to defer interest
payments on the convertible junior subordinated debentures. As a result,
quarterly distributions on the Convertible Preferred Securities have also been
deferred.
Income before extraordinary loss decreased $32.0 million for the year ended June
27, 1999 from $26.9 million of income for the year ended June 28, 1998 to a $5.1
million loss. An extraordinary loss was recognized in fiscal 1998 for costs
incurred of $2.0 million, less applicable income tax benefits of $0.8 million,
related to the refinancing of debt in July 1997. Basic and diluted loss per
share before the extraordinary loss were $0.51 for the year ended June 27, 1999
versus basic and diluted earnings per share of $2.38 and $2.19, respectively,
for the year ended June 28, 1998. Basic weighted average shares outstanding for
the year ended June 27, 1999 were 10.1 million versus 11.3 million for the year
ended June 28, 1998. The decrease reflects the repurchase of 1.4 million shares
of the Company's stock since May 1998. Diluted weighted average shares
outstanding for the year ended June 27, 1999 were 10.1 million versus 13.6
million for the year ended June 28, 1998. The decrease primarily reflects the
exclusion of antidilutive convertible securities and the repurchase of the
Company's stock.
21
<PAGE> 23
FISCAL 1998 (RESTATED) COMPARED TO FISCAL 1997 (RESTATED)
Consolidated net sales increased $123.2 million, or 31.1%, to $519.3 million for
the year ended June 28, 1998, from $396.1 million for the year ended June 29,
1997. Net sales by segment were as follows (in millions):
<TABLE>
<CAPTION>
Twelve Months Ended Twelve Months Ended
June 28, 1998 June 29, 1997 Increase
-------------------------- ------------------------ ---------------------
<S> <C> <C> <C>
Automation $355.0 $248.2 $106.8
Packaging 116.8 100.4 16.4
Other 47.5 47.5
---
-------------------------- ------------------------ ---------------------
$519.3 $396.1 $123.2
-------------------------- ------------------------ ---------------------
</TABLE>
Of the $123.2 million increase in sales, $107.4 million was due to the
incremental sales of recently acquired businesses offset by the reduction in
sales from the disposition of the Knitting Elements division, with the remaining
$15.8 million, or 4.0%, relating to increased sales from existing businesses.
Recently acquired businesses included Hansford in September 1996 and ATT in July
1997. The increase in sales by the Automation segment was due to $108.9 million
in incremental sales from recently acquired businesses offset by a slight
decrease in sales from existing businesses. The decrease was the result of lower
sales of automated assembly and test systems reflecting decreased revenues from
certain customers in the electronics industry partially offset by the growth in
sales of welding systems, custom build-to-print machines and sales of systems to
customers in the automotive industry. Packaging segment sales increased due to
the growth in sales of packaging systems, including thermoforming and extrusion
systems and liquid and tablet packaging lines.
Gross profit increased $22.8 million, or 21.0%, to $131.8 million for the year
ended June 28, 1998, from $109.0 million for the year ended June 29, 1997, as a
result of the sales increases discussed above. The gross margin decreased to
25.4% from 27.5% reflecting lower gross margins across all business segments.
Automation segment gross margin decreased to 25.4% in the current year from
26.1% in the prior year primarily from the effects of the acquisition of ATT in
July 1997. Packaging segment gross margin decreased to 28.3% in the current year
from 33.2% in the prior year primarily reflecting the substantially lower
profitability of the Kalish business in fiscal 1998. The investigation into the
accounting irregularities at Kalish revealed lower than expected profitability
on the higher mix of large, custom integrated packaging lines.
SG&A expenses increased $20.8 million, or 38.4%, to $75.2 million for the year
ended June 28, 1998 from $54.4 million for the year ended June 29, 1997. The
increase was primarily due to recently acquired businesses, with the remaining
increase the result of personnel additions, increased costs related to
compensation and incentive programs, professional fees, commissions and travel
costs, most of which related to the overall growth of the Company. The
additional professional fees pertained to the selection of the core business
system and various tax and human resource consulting projects. As a percentage
of consolidated net sales, SG&A expenses increased to 14.5% from 13.7%.
On May 1, 1998, the Company sold substantially all of the assets of its non-core
Knitting Elements division for $9.4 million. DTI incurred a non-recurring,
non-cash operating charge of $1.4 million related to the sale. The loss, net of
the estimated tax benefit, lowered diluted earnings per share by $0.06.
Operating income increased $0.6 million, or 1.1%, to $55.2 million for the year
ended June 28, 1998 from $54.6 million for the year ended June 29, 1997, as a
result of the factors noted above. The operating margin decreased to 10.6% from
13.8% in the prior year as a result of the factors discussed above.
Interest expense decreased to $6.5 million for the year ended June 28, 1998 from
$11.1 million for the year ended June 29, 1997. The decrease in interest expense
is the result of the public offering of common stock in November 1996, the
Convertible Preferred Securities offering in June 1997 and operating cash flow
in fiscal 1998 which allowed the Company to retire debt.
Income before extraordinary loss increased to $26.9 million for the year ended
June 28, 1998 from $24.7 million for the year ended June 29, 1997 as a result of
the factors noted above. The Company recognized extraordinary losses of $2.0
million and $0.5 million, less applicable income tax benefits of $0.8 million
and $0.2 million, respectively, relating to the refinancing of debt in July 1997
and July 1996, respectively.
22
<PAGE> 24
Basic and diluted earnings per share before the extraordinary loss were $2.38
and $2.19, respectively, for the year ended June 28, 1998 versus $2.40 and
$2.26, respectively, for the year ended June 29, 1997. Basic weighted average
shares outstanding for the year ended June 28, 1998 were 11.3 million versus
10.3 million for the year ended June 29, 1997. The increase is primarily the
result of the 2.25 million shares of common stock issued in a public offering in
November 1996. Diluted weighted average shares outstanding for the year ended
June 28, 1998 were 13.6 million versus 11.0 million for the year ended June 29,
1997. The increase reflects the 2.25 million shares of common stock issued in a
public offering in November 1996 and the assumed conversion of the Convertible
Preferred Securities.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was approximately $27.8 million and
$43.8 million during fiscal 1999 and 1998, respectively. During fiscal 1997, net
cash used by operating activities was approximately $0.7 million. Net income
(loss) plus non-cash operating charges provided $11.4 million, $47.4 million and
$38.9 million of operating cash flow in fiscal 1999, 1998 and 1997,
respectively.
Working capital balances decreased $16.4 million during fiscal 1999 due
primarily to a significant decrease in accounts receivable from June 28, 1998
partially offset by an increase in inventory primarily in the Packaging segment.
The decrease in accounts receivable, which relates primarily to the Automation
segment, reflects the lower level of manufacturing activity in the fourth
quarter of fiscal 1999 versus the comparable period in 1998 and the Company's
increased efforts throughout fiscal 1999 to collect outstanding receivables.
Inventories of plastics processing equipment have risen to a more constant level
after strong shipments late in fiscal 1998 had decreased inventories to below
normal levels. The Company also began stocking some standard packaging machinery
during fiscal 1999 to reduce lead times and maintain manufacturing efficiencies.
For the fiscal year ended June 28, 1998, net increases in working capital
balances used operating cash of $3.6 million. The increase in working capital
from June 29, 1997 primarily reflects the timing of project activity and the
resulting impact on accounts payable and customer advances. These increases were
partially offset by the lower level of manufacturing activity related to certain
electronics customers, contributing to the overall decrease in accounts
receivable.
In fiscal 1997, working capital balances increased $39.6 million primarily due
to a $26.5 million increase in accounts receivable and a $5.4 million increase
in inventory. These increases were driven by the increased level of
manufacturing activity and a trend toward larger dollar value and longer lead
time projects as well as the strong level of shipments in the final months of
the year.
Working capital balances can fluctuate significantly between periods as a result
of the significant costs incurred on individual contracts and the relatively
large amounts invoiced and collected by the Company for a number of large
contracts, and the amounts and timing of customer advances or progress payments
associated with certain contracts.
During the year ended June 27, 1999, the Company borrowed $8.2 million on its
revolving credit facility and raised another $6.5 million primarily through the
issuance of Bonds, as discussed below. These funds were combined with the $27.8
million of cash generated from operations and used to finance the acquisition of
Scheu & Kniss for $10.4 million, repurchase $10.0 million of the Company's
stock, pay dividends of $0.8 million and finance capital expenditures of $15.9
million. The Company purchased 1.4 million shares of its stock at a total cost
of $34.4 million under the stock repurchase program since May 1998. The stock
repurchase program was terminated in September 1999.
In November 1998, DTI made an additional payment to the sellers of Kalish as
determined by formulae based on the earnings of the acquired business for each
of the three years after the closing of the acquisition, prior to the
restatement described above. The additional purchase price specified within the
Kalish agreement, based on earnings from the acquisition date to June 28, 1998,
amounted to $3.0 million and was paid through a combination of stock and cash.
This additional purchase price was recorded as goodwill. Mr. Lewis, a former
director of the Company, was the controlling shareholder of Kalish prior to its
acquisition by the Company. Because of the overstatement of certain asset
accounts of
23
<PAGE> 25
the acquired business and the resulting restatement of the Company's financial
statements for fiscal years 1997 and 1998, the additional purchase price was
recalculated to be zero. In connection with the termination of Mr. Lewis'
employment with the Company as of October 5, 2000, the Board of Directors
requested Mr. Lewis' immediate resignation from the Board and the Company
demanded the return of the additional purchase price and any bonuses deemed
unearned as a result of the restatements. No amounts with respect thereto have
been reflected in the June 27, 1999 consolidated financial statements.
On July 27, 1998, the Company's wholly-owned subsidiary, Sencorp Systems, Inc.,
participated in the issuance of $7.0 million of Massachusetts Industrial Finance
Agency Multi-Mode Industrial Development Revenue Bonds 1998 Series A (Bonds) to
fund the planned expansion of the Company's facility in Hyannis, Massachusetts.
The Bonds mature July 1, 2023 and bear interest at a floating rate determined
weekly by Bank Boston, the bond remarketing agent. The weekly rate is the lowest
per annum rate which would allow the bonds to be sold at a price equal to 100%
of the outstanding principal plus accrued interest. The interest rate, which is
not permitted to rise above 12%, was 3.65% as of June 27, 1999. The proceeds
from the Bonds are held in trust until needed for the expansion. Approximately
$5.2 million has been received from the Bonds as of June 27, 1999. The Company
was not in compliance with certain financial covenants in one of the bond
documents as of June 27, 1999. In September 1999, the Company completed an
amendment to the relevant bond document, providing, among other things, for the
permanent waiver of the covenant defaults as of June 27, 1999, the establishment
of revised financial covenants and other requirements, including the furnishing
of additional collateral.
In May 1998, the Company's Board of Directors authorized purchases of up to 2
million shares of the Company's common stock. Through June 27, 1999, the Company
had repurchased approximately 1.4 million shares of its common stock at a total
cost of $34.4 million. The repurchased shares are being used for employee stock
option programs. In conjunction with the negotiations of the amended credit
facility discussed below, the Company agreed that it will make no further
repurchases of common stock. As a result, the stock repurchase program was
terminated in September 1999. No purchases of the Company's common stock were
made under the repurchase plan after June 27, 1999.
On July 21, 1997, the Company replaced the Second Amended and Restated Credit
Facilities Agreement and the foreign currency denominated term facility then
outstanding with a $175 million multi-currency revolving and term credit
facility. The multi-currency credit facility provided a $10 million Canadian
term loan and a $165 million revolving credit facility, which included an
approximate $80 million sub-limit for multi-currency borrowings in Pounds
Sterling and Deutsche Marks. Borrowings under the multi-currency facility bore
interest at floating rates based on the agent bank's base rate or LIBOR (at the
option of DTI) plus a specified percentage based on the ratio of funded debt to
operating cash flow and the ratings of DTI's corporate debt. At June 27, 1999,
interest rates on the multi-currency credit facility ranged from 3.21% to 7.75%.
The agreement was secured by the capital stock of each of the significant
domestic subsidiaries and 65% of the capital stock of each significant foreign
subsidiary of DTI. In conjunction with entering into the credit facility, the
Company recognized an extraordinary loss in July 1997 of $1.2 million
attributable to the write-off of $2.0 million of unamortized deferred financing
fees, net of related $0.8 million tax benefit.
The Company was not in compliance with certain financial covenants within the
credit agreement as of June 27, 1999. In September 1999 the Company completed an
amendment to the credit facility. The total line of credit as amended is $135
million, including a $125 million revolving credit facility and a $10 million
term credit facility. The amendment included a provision to increase the
facility to $140 million if the Company met certain operating cash flow targets
during the first six months of fiscal 2000. 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 then amended, was
scheduled to mature on April 2, 2001. Borrowings under the amended credit
facility are secured by substantially all of the assets of DTI and its domestic
subsidiaries. The amendment to the credit facility provided a permanent waiver
of the events of default as of June 27, 1999 and established a revised set of
financial and other covenants and restrictions, including prohibitions of
acquisitions and payment of dividends without the consent of the lenders.
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 $72.2 million
aggregate principal amount of the 7.16% Convertible Junior Subordinated
Deferrable Interest Debentures Due 2012 which were acquired with the proceeds
from the offering as well as the sale of Common Securities to the Company. The
Company's obligations under the Convertible Junior Subordinated Debentures, the
Indenture pursuant to which they were issued, the
24
<PAGE> 26
Amended and Restated Declaration of Trust of the Trust and the Guarantee of DTI,
taken together, constitute a full and unconditional guarantee by DTI of amounts
due on the Convertible Preferred Securities. The Convertible Preferred
Securities are convertible at the option of the holders at any time into the
common stock of DTI at an effective conversion price of $38.75 per share and are
redeemable at DTI's option after June 1, 2000 and mandatorily redeemable in
2012. The net proceeds of the offering of approximately $67.8 million were used
by DTI to retire indebtedness. A registration statement relating to resales of
such Convertible Preferred Securities was declared effective by the Securities
and Exchange Commission on September 2, 1997.
In conjunction with the negotiation of 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 were
also deferred and DTI is not declaring or paying dividends on its common stock.
During fiscal 1997, the Company also completed the public offering of 2.25
million shares of its common stock at a price to the public of $34.50 per share,
raising $73.5 million after deducting issuance costs. The proceeds received by
the Company from the offering were used to reduce indebtedness.
In July 1999, the Company completed the acquisition of certain of the 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. As the transaction occurred subsequent to the end of fiscal
1999, the balance sheet and results of operations of the C. E. King assets are
excluded from the fiscal 1999 consolidated balance sheet and results of
operations of DTI. The pro forma effects of the acquisition of C. E. King assets
on the Company's fiscal 1999 financial position are not material.
Capital expenditures were $15.9 million in fiscal 1999. Management anticipates
that capital expenditures for fiscal 2000 will range from 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.
The Company paid quarterly cash dividends of $0.02 per share on September 15,
1998, December 15, 1998, March 15, 1999 and June 15, 1999 to stockholders of
record on August 31, 1998, November 30, 1998, March 5, 1999, and May 31, 1999,
respectively. The future payment of quarterly dividends has been suspended.
Based on its ability to generate funds from operations and the availability of
funds under its current credit facilities, the Company believes it will have
sufficient funds available to meet its currently anticipated operating, debt
service and capital expenditure requirements.
BACKLOG
The Company's backlog is based upon customer purchase orders the Company
believes are firm. As of June 27, 1999, the Company had $180.0 million of orders
in backlog, which compares to a backlog of approximately $224.8 million as of
June 28, 1998.
Automation segment backlog was $138.4 million as of June 27, 1999, a decrease of
$46.0 million from the prior year. The reduced backlog reflects the continued
delays and deferrals of orders of automation systems from customers in various
industries, primarily automotive, and lower orders from a significant customer
in the electronics industry. Backlog for the Packaging segment increased $3.4
million, or 9.6%, to $38.1 million due primarily to an increase in the backlog
of plastics processing equipment.
The level of backlog at any particular time is not necessarily indicative of the
future operating performance of the Company. Additionally, certain purchase
orders are subject to cancellation by the customer upon notification. Certain
orders are also subject to delays in completion and shipment at the request of
the customer. The Company believes most of the orders in the backlog will be
recognized as sales during fiscal 2000.
25
<PAGE> 27
FOREIGN OPERATIONS
The Company's primary foreign operations are conducted through its subsidiaries
in Canada, the United Kingdom and Germany. The functional currencies of these
subsidiaries are the currencies native to the specific country in which the
subsidiary is located. Foreign operations accounted for approximately $89.1
million, $91.9 million and $28.0 million of the Company's net sales in fiscal
1999, 1998 and 1997, respectively. Earnings from operations for the Company's
foreign operations were $8.7 million, $5.5 million and $3.3 million in fiscal
1999, 1998 and 1997, respectively.
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 (see Liquidity and Capital
Resources). 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 June 27, 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.
If interest rates increase 1% in fiscal 2000, as compared to fiscal 1999, the
Company's interest expense would increase by approximately $0.8 million, and net
income would decrease by approximately $0.5 million. This amount has been
determined using the assumptions that the Company's outstanding floating-rate
debt, as of June 27, 1999, continued to be outstanding through fiscal 2000, and
that the average interest rates for these instruments increased 1% over fiscal
1999. The model does not consider the effects of the reduced level of potential
overall economic activity that would exist in such an environment. In the event
of a significant change in interest rates, management would likely take actions
to further mitigate its exposure to this market risk. However, due to the
uncertainty of the specific actions that would be taken and their possible
effects, the sensitivity analysis assumes no change in the Company's financial
structure.
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.
NEW ACCOUNTING PRONOUNCEMENTS
In 1999, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130) and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 130 requires the components of
comprehensive income to be disclosed in the financial statements. SFAS 131
requires that the Company report certain information if specific requirements
are met about operating segments of the Company including information about
services, geographic areas of operation and major customers. Required
disclosures have been made and prior years' information has been restated for
the impact of SFAS Statements 130 and 131.
26
<PAGE> 28
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 measured 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 the Company in fiscal 2001. The Company is continuing to evaluate
the provisions of SFAS 133 to determine its impact on financial position and
results of operations.
YEAR 2000 COMPLIANCE
The costs of the planned year 2000 modifications and the dates by which the
Company expects to complete its plans are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third-party modification plans
and other factors. Specific factors that may cause differences between these
estimates and actual results include, without limitation, the availability and
cost of personnel trained in these areas, the ability to locate and correct all
relevant computer codes, changes in consulting fees and costs to remediate or
replace hardware and software, non-incremental costs resulting from redeployment
of internal resources, timely responses to and corrections by third parties such
as significant customers and suppliers, and similar uncertainties.
The Company utilizes software and related computer technologies essential to its
operations and to certain products that use two digits rather than four to
specify the year, which could result in a date recognition problem with the
transition to the year 2000. The Company has established and is implementing a
plan, primarily utilizing internal resources, to assess the potential impact of
the year 2000 on the Company's systems and operations and to implement solutions
to address this issue. The Company has completed the assessment and remediation
phases of its year 2000 plan, including a combination of repair and replacement
of affected systems. The Company is presently developing contingency plans for
various aspects of operations.
For substantially all of the Company's internal systems, this remediation was an
incidental consequence of the ongoing implementation of a new integrated core
business system. The testing phase is in process and should be completed by
October 1, 1999. Critical systems have been tested to be compliant.
The total incremental cost of this project, comprised primarily of the costs of
the implementation of a new integrated core business system includes costs of
approximately $3.5 million incurred in fiscal year 1998 and expenditures in
fiscal year 1999 of approximately $4.0 million which were included in the
Company's capital expenditures plan.
The Company's most likely worst case year 2000 scenario would be an interruption
in work or cash flow resulting from unanticipated problems encountered with the
information systems of the Company or of any of the significant third parties
with whom the Company does business. The Company believes that the risk of
significant business interruption due to unanticipated problems with its own
systems is low based on the progress of the Company's year 2000 plan to date.
The Company is developing contingency plans, which are anticipated to be
completed by November 30, 1999, in the event unforeseen internal disruptions
occur.
The Company believes its highest risk relates to significant suppliers or
customers failing to remediate their year 2000 issues in a timely manner.
Relating to its suppliers, the Company has identified and will continue to
identify alternative sources of supply of necessary materials. The risk relating
to the Company's customers includes delays in receipt of payment due to a
customer's unresolved year 2000 issues and to customer product migration due to
the Company's unresolved year 2000 issues. The Company's year 2000 plan and
contingency plans will help to mitigate the impact of customer product
migration. However, there can be no assurance that the Company will not
experience unanticipated costs and/or business interruptions due to year 2000
problems in its internal systems, its supply chain or from customer payment and
product migration issues, or that such costs and/or interruptions will not have
a material adverse effect on the Company's consolidated financial condition or
results of operation.
27
<PAGE> 29
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
Certain information contained herein, particularly the information appearing in
this section under the headings "Results of Operations", "Liquidity and Capital
Resources", "Backlog", "Market Risk", "Seasonality and Fluctuations in Quarterly
Results" and "Year 2000 Compliance", includes forward-looking statements. These
statements, comprising all statements herein which are not historical, are based
upon the Company's interpretation of what it believes are significant factors
affecting its businesses, including many assumptions regarding future events,
and are made pursuant to the safe harbor provisions of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. References to "opportunities", "growth potential",
"objectives" and "goals", the words "anticipate", "believe", "estimate",
"expect", and similar expressions used herein indicate such forward-looking
statements. Actual results could differ materially from those anticipated in any
forward-looking statements as a result of various factors, including economic
downturns in industries served, delays or cancellations of customer orders,
delays in shipping dates of products, significant cost overruns on certain
projects, 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 certain important
factors that could cause actual results of operations or outcomes of other
events to differ materially from any such forward-looking statement appears
elsewhere herein, including under the headings "Results of Operations",
"Liquidity and Capital Resources", "Backlog", "Market Risk", "Seasonality and
Fluctuations in Quarterly Results" and "Year 2000 Compliance".
28
<PAGE> 30
STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of DT Industries, Inc., have
been prepared by management, which is responsible for their integrity and
objectivity. The statements have been prepared in conformity with accounting
principles generally accepted in the United States and include amounts based on
management's best estimates and judgements.
Management has established and maintains a system of internal control designed
to provide reasonable assurance that assets are safeguarded and that the
financial records reflect the authorized transactions of the Company. The system
of internal control includes widely communicated statements of policies and
business practices that are designed to require all employees to maintain high
ethical standards in the conduct of Company affairs. The internal controls are
augmented by organizational arrangements that provide for appropriate delegation
of authority and division of responsibility.
The consolidated financial statements have been audited by
PricewaterhouseCoopers LLP, independent accountants, in accordance with auditing
standards generally accepted in the United States. As part of their audit of the
Company's fiscal 1999 consolidated financial statements, PricewaterhouseCoopers
LLP considered the Company's system of internal control to the extent they
deemed necessary to determine the nature, timing and extent of their audit
tests.
The Board of Directors pursues its responsibility for the Company's financial
reporting through its Audit and Finance Committee, which is composed entirely of
outside directors. The Audit and Finance Committee meets periodically with the
independent accountants and management. The independent accountants have direct
access to the Audit and Finance Committee, with and without the presence of
management representatives, to discuss the results of their audit work and their
comments on the adequacy of internal accounting controls and the quality of
financial reporting.
James J. Kerley
Chairman of the Board
Wayne W. Schultz
Interim Senior Vice President, Finance
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of DT Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows, after the restatement described in Note 1, present fairly, in all
material respects, the financial position of DT Industries, Inc. and its
subsidiaries at June 27, 1999 and June 28, 1998, and the results of their
operations and their cash flows for each of the three fiscal years in the period
ended June 27, 1999, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
St. Louis, Missouri
August 6, 1999, except for
Note 16 which is as of
September 27, 1999 and
Notes 1 and 17 which
are as of October 4, 2000
29
<PAGE> 31
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
JUNE 27, JUNE 28,
1999 1998
AS RESTATED AS RESTATED
(NOTES 1 AND 17) (NOTES 1 AND 17)
--------------------- ----------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 10,487 $ 6,915
Accounts receivable, net 50,006 74,984
Costs and estimated earnings in excess of amounts billed
($219,645 and $187,221, respectively) on uncompleted
contracts 65,806 67,469
Inventories, net 49,377 41,193
Prepaid expenses and other 16,070 8,282
--------- ---------
Total current assets 191,746 198,843
Property, plant and equipment, net 77,402 69,183
Goodwill, net 180,066 177,578
Other assets, net 4,051 6,096
--------- ---------
$ 453,265 $ 451,700
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 384 55
Accounts payable 37,507 33,627
Customer advances 15,087 12,529
Billings in excess of costs and estimated earnings ($52,828 and
$87,703 respectively) on uncompleted contracts 6,837 8,218
Accrued liabilities 35,123 41,391
--------- ---------
Total current liabilities 94,938 95,820
--------- ---------
Long-term debt 104,209 89,956
Deferred income taxes 10,442 7,827
Other long-term liabilities 3,400 3,455
--------- ---------
118,051 101,238
========= =========
Commitments and contingencies (Notes 1 and 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 and 10,502,762 shares outstanding, respectively 113 113
Additional paid-in capital
133,348 134,608
Retained earnings
68,968 74,917
Cumulative translation adjustment (1,375) (551)
Less -
Treasury stock (1,268,488 and 873,000 shares, respectively),
at cost (30,778) (24,445)
--------- ---------
Total stockholders' equity
170,276 184,642
--------- ---------
$ 453,265 $ 451,700
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
30
<PAGE> 32
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
AS RESTATED AS RESTATED AS RESTATED
(NOTES 1 AND 17) (NOTES 1 AND 17) (NOTES 1 AND 17)
------------------- ------------------ -------------------
<S> <C> <C> <C>
Net sales $ 442,084 $ 519,342 $ 396,110
Cost of sales 352,526 387,515 287,150
------------ ------------ ------------
Gross profit 89,558 131,827 108,960
Selling, general and administrative expenses 80,740 75,246 54,367
Restructuring charge (Note 14) 2,500 -- --
Loss on sale of assets of Knitting Elements
division (Note 3) -- 1,383 --
------------ ------------ ------------
Operating income 6,318 55,198 54,593
Interest expense 7,742 6,509 11,088
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 5,012 5,012 251
------------ ------------ ------------
Income (loss) before provision for income
taxes and extraordinary loss (6,436) 43,677 43,254
Provision (benefit) for income taxes (1,301) 16,792 18,518
------------ ------------ ------------
Income (loss) before extraordinary loss (5,135) 26,885 24,736
Extraordinary loss on debt refinancing, net of income
tax benefits of $800 and $216, respectively -- 1,200 324
------------ ------------ ------------
Net income (loss) $ (5,135) $ 25,685 $ 24,412
============ ============ ============
Basic earnings (loss) per common share:
Income (loss) before extraordinary loss $ (0.51) $ 2.38 $ 2.40
Extraordinary loss -- 0.11 0.03
------------ ------------ ------------
Net income (loss) $ (0.51) $ 2.27 $ 2.37
============ ============ ============
Diluted earnings (loss) per common share:
Income (loss) before extraordinary loss $ (0.51) $ 2.19 $ 2.26
Extraordinary loss -- 0.09 0.03
------------ ------------ ------------
Net income (loss) $ (0.51) $ 2.10 $ 2.23
============ ============ ============
Weighted average common shares outstanding:
Basic 10,149,215 11,297,409 10,349,444
Diluted 10,149,215 13,621,481 11,022,080
============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
31
<PAGE> 33
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE TREASURY STOCKHOLDER'S
STOCK CAPITAL EARNINGS INCOME STOCK EQUITY
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1996 $ 90 $ 61,255 $ 26,539 $ --- $ --- $ 87,884
Comprehensive income:
Net income; total comprehensive
income 24,412 24,412
Issuance of common stock 23 73,474 73,497
Exercise of stock options 678 678
Payments on stock subscriptions
receivable 213 213
Issuance costs of Company-obligated
mandatorily redeemable convertible
preferred securities of subsidiary
DT Capital Trust holding solely
convertible junior subordinated
debentures of the Company (2,250) (2,250)
Dividends declared and paid
(812) (812)
--------------------------------------------------------------------------------
BALANCE, JUNE 29, 1997 -
AS RESTATED (NOTES 1 AND 17) 113 133,370 50,139 --- --- 183,622
================================================================================
Comprehensive income:
Net income 25,685
Foreign currency translation (551)
Total comprehensive income 25,134
Exercise of stock options 1,119 1,119
Payments on stock subscriptions 119 119
Dividends declared and paid (907) (907)
Stock repurchase (24,445) (24,445)
--------------------------------------------------------------------------------
BALANCE, JUNE 28, 1998 -
AS RESTATED (NOTES 1 AND 17) 113 134,608 74,917 (551) (24,445) 184,642
================================================================================
Comprehensive loss:
Net loss (5,135)
Foreign currency translation (824)
Total comprehensive loss (5,959)
Dividends declared and paid (814) (814)
Reissuance of treasury stock (1,260) 3,652 2,392
Stock repurchase (9,985) (9,985)
--------------------------------------------------------------------------------
BALANCE, JUNE 27, 1999 -
AS RESTATED (NOTES 1 AND 17) $ 113 $ 133,348 $ 68,968 $ (1,375) $ (30,778) $ 170,276
================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
32
<PAGE> 34
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
AS RESTATED AS RESTATED AS RESTATED
(NOTES 1 AND 17) (NOTES 1 AND 17) (NOTES 1 AND 17)
------------------ ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (5,135) $ 25,685 $ 24,412
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation
10,075 8,279 5,955
Amortization
5,389 5,471 5,098
Deferred income tax provision 1,095 4,613 2,912
Loss on debt refinancing
-- 2,000 540
Loss on sale of assets of Knitting Elements division -- 1,383
(Increase) decrease in current assets, excluding
the effect of acquisitions:
Accounts receivable 20,928 4,778 (26,482)
Costs and earnings in excess of amounts billed 1,663 (1,538) (2,935)
Inventories (6,177) 2,710 (5,443)
Prepaid expenses and other (4,512) 2,252 3,171
Increase (decrease) in current liabilities, excluding
the effect of acquisitions:
Accounts payable 7,549 (3,884) (3,015)
Customer advances 2,425 (3,505) (4,300)
Billings in excess of costs and earnings on
uncompleted contracts (1,345) 1,047 2,115
Accrued liabilities (3,170) (728) (824)
Other (1,017) (4,766) (1,911)
--------- --------- ---------
Net cash provided (used) by operating activities 27,768 43,797 (707)
========= ========= =========
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (15,903) (17,314) (11,850)
Acquisition of Scheu & Kniss net assets (10,352) -- --
Acquisition of Lucas Assembly and Test Systems
net assets, net of cash acquired of $91 -- (46,721) --
Proceeds from the sale of assets of Knitting Elements
division -- 9,375 --
Acquisition of Mid-West stock and Hansford stock,
net of cash acquired of $21,573 -- -- (92,756)
Other (1,778) -- --
--------- --------- ---------
Net cash used in investing activities (28,033) (54,660) (104,606)
========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
(continued)
33
<PAGE> 35
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(In thousands)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
AS RESTATED AS RESTATED AS RESTATED
(NOTES 1 AND 17) (NOTES 1 AND 17) (NOTES 1 AND 17)
----------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from revolving loans $ 8,219 $ 89,986 $ 918
Proceeds from issuance of term debt 6,544 -- 96,708
Payments on borrowings (277) (49,220) (129,518)
Debt issuance costs -- (947) (2,510)
Net proceeds from issuance of common stock 119 1,119 74,175
Net proceeds from issuance of Company-obligated,
mandatorily redeemable convertible preferred securities of
subsidiary DT Capital Trust holding solely convertible junior
subordinated debentures of the Company -- -- 67,750
Payments for repurchase of stock (9,985) (24,445) --
Payments on stock subscriptions receivable -- 119 213
Dividends paid on common stock (814) (907) (812)
--------- --------- ---------
Net cash provided by financing activities 3,806 15,705 106,924
--------- --------- ---------
Effect of exchange rate changes 31 (748) --
--------- --------- ---------
Net increase in cash 3,572 4,094 1,611
Cash and cash equivalents at beginning of period 6,915 2,821 1,210
--------- --------- ---------
Cash and cash equivalents at end of period $ 10,487 $ 6,915 $ 2,821
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest $ 7,161 $ 6,233 $ 10,630
Income taxes $ (1,674) $ 11,447 $ 16,497
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company purchased Scheu & Kniss in fiscal 1999; Lucas Assembly and Test
Systems, which has been renamed Assembly Technology & Test (ATT) in fiscal 1998;
and Mid-West Automation Enterprises, Inc. (Mid-West) and Hansford Manufacturing
Corporation (Hansford) in fiscal 1997.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Fair value of assets acquired $ 5,843 $ 56,283 $ 55,185
Fair value assigned to goodwill 5,351 14,248 68,226
Cash paid (10,352) (46,721) (92,756)
-------- -------- --------
Liabilities assumed $ 842 $ 23,810 $ 30,655
========= ======== ========
</TABLE>
In November 1998, in connection with the additional payment to the sellers of
Kalish as described in Note 3, the Company reissued 123,700 shares of treasury
stock with a market value of $2,273 on the date of issuance.
See accompanying Notes to consolidated Financial Statements.
34
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
NOTE 1 - BUSINESS
DT Industries, Inc. (DTI or the Company) is a leading designer, manufacturer and
integrator of automated production systems used to assemble, test or package
industrial and consumer products. The Company also produces precision metal
components, tools and dies for a broad range of applications. The Company
markets its products through two primary segments: Automation and Packaging. The
Company's operations are located in North America and Europe, but its products
are sold throughout the world.
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 the 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 27, 1999, June 28, 1998 and June 29, 1997 have been restated. The
restated consolidated financial statements as of and for the fiscal years ended
June 27, 1999 and June 28, 1998 and the consolidated statement of operations,
changes in stockholders' equity and cash flows as of and for the fiscal year
ended June 29, 1997 has been included in the consolidated financial statements
included herein. Comparisons of previously reported and restated financial
statements for these periods, including annual financial statements and
unaudited quarterly financial data, are set forth in Notes 17 and 18 to the
consolidated financial statements included herein.
For the fiscal year ended June 27, 1999, the previously reported financial
statements included an understatement of cost of sales by $4,039. After
restating cost of sales, the Company's income tax benefit increased by $667. The
impact of the accounting irregularities on reported operating results for the
fiscal year ended June 27, 1999 was to overstate gross profit and operating
income by $4,039, understate net loss by $3,372 and understate diluted net loss
per share by $0.34.
For the fiscal year ended June 28, 1998, the previously reported financial
statements included an understatement of cost of sales by $7,389. After
restating cost of sales, the Company's income tax expense decreased by $3,390.
The impact of the accounting irregularities on reported operating results for
the fiscal year ended June 28, 1998 was to overstate gross profit and operating
income by $7,389, net income by $3,999 and diluted earnings per share by $0.30.
For the fiscal year ended June 29, 1997, the previously reported financial
statements included an understatement of cost of sales by $2,106. After
restating cost of sales, the Company's income tax expense decreased by $461. The
impact of the accounting irregularities on reported operating results for the
fiscal year ended June 29, 1997 was to overstate gross profit and operating
income by $2,106, net income by $1,645 and diluted earnings per share by $0.15.
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. 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.
Also, as a result of the restatement, the Company has made a demand for the
return of the additional purchase price relative to Kalish, as described in Note
3, although no amounts with respect thereto have been reflected in the
accompanying June 27, 1999 consolidated balance sheet.
35
<PAGE> 37
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies utilized by the Company in the preparation of the
financial statements conform to accounting principles generally accepted in the
United States, and require that management make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual amounts could differ from these estimates.
The significant accounting policies followed by the Company are described below.
REVENUE RECOGNITION
The percentage of completion method of accounting is used by the Company to
recognize revenues and related costs. Under the percentage of completion method,
revenues are measured based on the ratio of engineering and manufacturing labor
hours incurred to date compared to total estimated engineering and manufacturing
labor hours or, for certain customer contracts, the ratio of total costs
incurred to date to total estimated costs. Any revisions in the estimated total
costs or values of the contracts during the course of the work are reflected
when the facts that require the revisions become known.
For those contracts not accounted for under the percentage of completion method,
revenue is recognized upon shipment (defined primarily as FOB shipping point) 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.
Cash deposits received from customers on contracts in progress are reflected as
customer advances in the consolidated balance sheet until the related revenue is
recognized in accordance with the procedures described above. Costs and
estimated earnings in excess of amounts billed on percentage of completion
contracts represent costs incurred and earnings recognized in excess of customer
advances received. Billings in excess of costs incurred and estimated earnings
on uncompleted contracts represent customer advances received in excess of costs
incurred and earnings recognized.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
FOREIGN CURRENCY TRANSLATION
The accounts of the Company's foreign subsidiaries are maintained in their
respective local currencies. The accompanying consolidated financial statements
have been translated and adjusted to reflect U.S. dollars on the basis presented
below.
Assets and liabilities are translated into U.S. dollars at year-end exchange
rates. Income and expense items are translated at average rates of exchange
prevailing during the year. Adjustments resulting from the process of
translating the consolidated amounts into U.S. dollars are accumulated in a
separate translation adjustment account, included in stockholders' equity.
Common stock and additional paid-in capital are translated at historical U.S.
dollar equivalents in effect at the date of acquisition. Foreign currency
transaction gains and losses are included in earnings currently. Foreign
currency transaction gains and losses were not material for all periods
presented.
CASH AND CASH EQUIVALENTS
All highly liquid debt instruments purchased with original maturities of three
months or less are classified as cash equivalents.
36
<PAGE> 38
CONCENTRATIONS OF CREDIT RISK
The Company sells a majority of its machines to a wide range of manufacturing
companies. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral, although many customers pay deposits to
the Company prior to shipment of its products. The Company maintains reserves
for potential credit losses and historically such losses have been within
management's expectations. At June 27, 1999, the Company had no significant
concentrations of credit risk.
INVENTORIES
Domestic inventories are stated at the lower of cost, which approximates the
first-in, first-out (FIFO) method, or market. Inventories include the cost of
materials, direct labor and manufacturing overhead.
Obsolete or unsalable inventories are reflected at their estimated realizable
values.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost and is depreciated using the
straight-line method over the estimated useful lives of the assets which range
from 3 to 39.5 years.
Expenditures for repairs, maintenance and renewals are charged to income as
incurred. Expenditures which improve an asset or extend its estimated useful
life are capitalized. When properties are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the accounts and any
gain or loss is included in income.
GOODWILL
The excess of the purchase price over the fair value of net assets acquired in
business combinations (goodwill) is capitalized and amortized on a straight-line
basis over periods ranging from 15 to 40 years. Goodwill amortization charged to
income for the years ended June 27, 1999, June 28, 1998 and June 29, 1997 was
approximately $5,031, $4,876 and $4,312, respectively. Accumulated amortization
at June 27, 1999 and June 28, 1998 was approximately $18,275 and $13,914,
respectively.
The carrying value of goodwill is assessed for recoverability by management
based on an analysis of future expected cash flows from the underlying
operations of the Company. Management believes there has been no impairment at
June 27, 1999.
ENVIRONMENTAL LIABILITIES
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and that do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Generally, the timing of these accruals coincides with
completion of a feasibility study or the Company's commitment to a formal plan
of action.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. These costs
approximated $3,982, $1,972 and $339 in fiscal 1999, fiscal 1998 and fiscal
1997, respectively, and are included as selling, general and administrative
expenses in the accompanying consolidated statement of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For purposes of financial reporting, the Company has determined the fair value
of financial instruments approximates book value at June 27, 1999, based on
terms currently available to the Company in financial markets.
37
<PAGE> 39
INCOME TAXES
The Company files a consolidated federal income tax return which includes its
domestic subsidiaries. The Company accounts for income taxes pursuant to
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). Under SFAS 109, the current or deferred tax consequences of a
transaction are measured by applying the provisions of enacted laws to determine
the amount of taxes payable currently or in future years. Deferred income taxes
are provided for temporary differences between the income tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
128), which was adopted by the Company in fiscal 1998, requires the computation
of Basic EPS and Diluted EPS. Basic EPS is based on the weighted average number
of outstanding common shares during the period but does not consider dilution
for potentially dilutive securities. Diluted EPS reflects the effects of
conversion of the Company's Convertible Preferred Securities and elimination of
the related dividends, net of applicable income taxes, plus dilutive potential
common shares consisting of certain shares subject to stock options and
contingent purchase price payable in common stock related to an acquired
business. The dilutive potential common shares arising from the effect of
outstanding stock options were computed using the treasury stock method, if
dilutive. Earnings per share for fiscal 1997 have been restated in accordance
with SFAS 128. See Note 13 for additional information.
EMPLOYEE STOCK-BASED COMPENSATION
The Company accounts for employee stock options in accordance with Accounting
Principles Board No. 25, "Accounting for Stock Issued to Employees" (APB 25).
Under APB 25, the Company applies the intrinsic value method of accounting. For
employee stock options accounted for using the intrinsic value method, no
compensation expense is recognized because the options are granted with an
exercise price equal to the market value of the stock on the date of grant.
During fiscal 1997, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), became effective for the
Company. SFAS 123 prescribes the recognition of compensation expense based on
the fair value of options or stock awards determined on the date of grant.
However, SFAS 123 allows companies to continue to apply the valuation methods
set forth in APB 25. For companies that continue to apply the valuation methods
set forth in APB 25, SFAS 123 mandates certain pro forma disclosures as if the
fair value method had been utilized. See Note 8 for additional information.
COMPREHENSIVE INCOME
In 1999, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 requires the
components of comprehensive income to be disclosed in the financial statements.
Required disclosures for prior years have been restated in accordance with SFAS
130.
FISCAL YEAR
The Company uses a 52-53 week fiscal year that ends on the last Sunday in June.
NEW 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 measured 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 the Company in fiscal 2001. The Company is continuing to evaluate
the provisions of SFAS 133 to determine its impact on financial position and
results of operations.
38
<PAGE> 40
NOTE 3 - ACQUISITIONS AND DISPOSITION
The following table summarizes certain information regarding the Company's
acquisitions during the past three years:
<TABLE>
<CAPTION>
NET CASH
PURCHASE
DATE BUSINESS PRICE
------------------------------- ----------------------------------------------- -------------------------------
<S> <C> <C>
July 1996 Mid-West Automation Enterprises, Inc. $ 75,179
September 1996 Hansford Manufacturing Corporation 17,577
July 1997 Lucas Assembly and Test Systems 46,721
August 1998 Scheu & Kniss 10,352
</TABLE>
During the past three fiscal years, the Company made four acquisitions which
have significantly expanded its product lines. These acquisitions were each
accounted for under the purchase method of accounting and financed primarily
through bank borrowings, resulting in an increase in the Company's debt. Results
of operations of each acquired company have been included in the Company's
consolidated financial statements from the date of acquisition. The purchase
price of each acquisition was allocated to the assets and liabilities acquired
based on their estimated fair value at the date of acquisition. The excess of
purchase price over the estimated fair value of net assets acquired was, in each
instance, recorded as goodwill.
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, prior to
the restatement described in Note 1. The additional purchase price specified
within the Kalish agreement, based on earnings from the acquisition date to June
28, 1998, amounted to $3,000 and was paid through a combination of stock and
cash. This additional purchase price was recorded as goodwill. One of the former
directors of the Company was a controlling shareholder of Kalish prior to its
acquisition by the Company.
On May 1, 1998, the Company completed the sale of substantially all of the
assets of its non-core Knitting Elements division of Detroit Tool Metal Products
Co., a wholly owned subsidiary of DT Industries, Inc., for $9,375. The pre-tax
loss on the sale was approximately $1,383. The loss, net of the estimated tax
benefit, was recorded in March 1998.
The following table sets forth pro forma information for DTI as if all of the
previously discussed acquisitions had taken place on June 29, 1998 and June 30,
1997, respectively. The effect of the sale of the Knitting Elements division is
immaterial. This information is unaudited and does not purport to represent
actual revenue, net income and earnings per share had the acquisitions actually
occurred on June 29, 1998 and June 30, 1997, respectively.
<TABLE>
<CAPTION>
PRO FORMA INFORMATION
----------------------------------------------
JUNE 27, JUNE 28,
1999 1998
FISCAL YEAR ENDED AS RESTATED AS RESTATED
------------------------------------------------ ---------------------- --------------------
<S> <C> <C>
Net sales $ 443,016 $ 536,852
Income (loss) before extraordinary loss $ (5,059) $ 27,434
Earnings (loss) per common share:
Basic $ (0.50) $ 2.43
Diluted $ (0.50) $ 2.23
</TABLE>
39
<PAGE> 41
NOTE 4 - FINANCING
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JUNE 27,
1999 JUNE 28,
AS RESTATED 1998
--------------------- ----------------------
<S> <C> <C>
Notes payable to bank under a term and revolving loan agreement:
Term loan $ 10,000 $ 10,000
Revolving loan 84,483 78,420
Foreign currency denominated revolving credit facilities 1,832 1,400
Other long-term debt 8,278 191
--------------------- ----------------------
104,593 90,011
Less - current portion 384 55
--------------------- ----------------------
$ 104,209 $ 89,956
--------------------- ----------------------
</TABLE>
On July 21, 1997 the Company replaced its credit facilities with a $175,000
multi-currency revolving and term credit facility. The multi-currency facility
provided a $10,000 Canadian term loan and a $165,000 revolving credit facility,
which included an approximate $80,000 sublimit for multi-currency borrowings in
Pounds Sterling and Deutsche Marks. Borrowings under the multi-currency facility
bore interest at floating rates based on the agent bank's base rate or LIBOR (at
the option of DTI), plus a specified percentage based on the ratio of funded
debt to operating cash flow and the ratings of DTI's corporate debt. At June 27,
1999, interest rates on the multi-currency facility ranged from 3.21% to 7.75%.
The facility required commitment fees of 0.125% to 0.25% per annum (as
determined by the Company's ratio of funded debt to operating cash flow) payable
quarterly on any unused portion of the multi-currency facility. The agreement
was secured by the capital stock of each of the significant domestic
subsidiaries and 65% of the capital stock of each significant foreign subsidiary
of DTI. In conjunction with entering into the new credit facility, the Company
recognized an extraordinary loss in July 1997 of $1,200 attributable to the
write-off of $2,000 of unamortized deferred financing fees, net of related $800
tax benefit.
The Company was not in compliance with certain financial covenants within the
credit agreement as of June 27, 1999. In September 1999, the Company completed
an amendment to the credit facility which provided a permanent waiver of the
events of default as of June 27, 1999 as more fully described in Note 16.
On July 27, 1998, the Company's wholly-owned subsidiary, Sencorp Systems, Inc.,
issued $7,000 of Massachusetts Industrial Finance Agency Multi-Mode Industrial
Development Revenue Bonds 1998 Series A (Bonds) to fund the planned expansion of
the Company's facility in Hyannis, Massachusetts. The Bonds mature July 1, 2023
and bear interest at a floating rate determined weekly by Bank Boston, the bond
remarketing agent. The weekly rate is the lowest per annum rate which would
allow the bonds to be sold at a price equal to 100% of the outstanding principal
plus accrued interest. The interest rate, which is not permitted to rise above
12%, was 3.65% as of June 27, 1999. The proceeds from the Bonds were held in
trust until needed for the expansion. Approximately $5,200 had been received
from the Bonds as of June 27, 1999. The Company was not in compliance with
certain financial covenants in one of the bond documents as of June 27, 1999. In
September 1999, the Company completed an amendment to the relevant bond
document, providing, among other things, for the permanent waiver of the
covenant defaults as of June 27, 1999, the establishment of revised financial
covenants and other requirements, including the furnishing of additional
collateral.
The Company's Board of Directors authorized purchases of up to 2 million shares
of the Company's common stock. Through June 27, 1999, the Company had
repurchased 1,401,100 shares of its common stock at a total cost of $34,430,
including fiscal 1999 purchases of 528,100 shares at a total cost of $9,985. The
repurchased shares are being used for employee stock option programs. In
conjunction with the negotiation of the amended credit facility, the Company
agreed that it will make no further repurchases of common stock.
40
<PAGE> 42
NOTE 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 which were acquired with the proceeds from the
offering as well as the sale of common securities to the Company. The Company's
obligations under the Convertible Junior Subordinated Debentures, the Indenture
pursuant to which they were issued, the Amended and Restated Declaration of
Trust of the Trust and the Guarantee of DTI, taken together, constitute a full
and unconditional guarantee by DTI of amounts due on the Convertible Preferred
Securities. The Convertible Preferred Securities are convertible at the option
of the holders at any time into the common stock of DTI at an effective
conversion price of $38.75 per share and are redeemable at DTI's option after
June 1, 2000 and mandatorily redeemable in 2012. The net proceeds of the
offering of approximately $67,750 were used by DTI to retire indebtedness. A
registration statement relating to resales of such Convertible Preferred
Securities was declared effective by the Securities and Exchange Commission on
September 2, 1997. In conjunction with the amendment of the credit facility, the
Company elected to defer interest payments on the Convertible Junior
Subordinated Debentures. As a result, quarterly distributions on the Convertible
Preferred Securities are also being deferred.
NOTE 6 - INCOME TAXES
Income (loss) before provision for income taxes and extraordinary losses was
taxed under the following jurisdictions:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
AS RESTATED AS RESTATED AS RESTATED
-------------- -------------- --------------
<S> <C> <C> <C>
Domestic $ (11,543) $41,269 $42,214
Foreign 5,107 2,408 1,040
-------------- -------------- --------------
$ (6,436) $43,677 $43,254
============== ============== ==============
</TABLE>
The provision (benefit) for income taxes charged to operations was as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
AS RESTATED AS RESTATED AS RESTATED
-------------- -------------- --------------
<S> <C> <C> <C>
Current
U.S. Federal $ (4,097) $ 9,329 $ 12,406
State 29 477 2,763
Foreign 1,672 2,373 437
-------------- -------------- --------------
Total current (2,396) 12,179 15,606
-------------- -------------- --------------
Deferred
U.S. Federal 730 4,164 2,411
State 227 333 397
Foreign 138 116 104
-------------- -------------- --------------
Total deferred 1,095 4,613 2,912
-------------- -------------- --------------
Total provision (benefit) $ (1,301) $ 16,792 $ 18,518
============== ============== ==============
</TABLE>
The provision for income taxes for the fiscal years ended June 28, 1998 and June
29, 1997 is net of income tax benefits of $800 and $216, respectively, related
to the extraordinary losses as described in Note 4.
41
<PAGE> 43
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
JUNE 27, JUNE 28,
1999 1998
AS RESTATED AS RESTATED
--------------------- ----------------------
<S> <C> <C>
DEFERRED TAX LIABILITIES
Depreciation $ 5,856 $ 5,592
Inventory costing capitalization, net 964 833
Earnings recognized under percentage of completion 1,468 2,432
Goodwill and intangibles amortization 3,852 2,797
Other 1,547 484
--------------------- ----------------------
Total deferred tax liabilities 13,687 12,138
--------------------- ----------------------
DEFERRED TAX ASSETS
Project and inventory reserves (3,616) (3,900)
Product liability reserves (488) (488)
Bad debt reserves (904) (862)
Other accruals (4,678) (3,000)
Other (1,278) (1,270)
--------------------- ----------------------
Total deferred tax assets (10,964) (9,520)
--------------------- ----------------------
Deferred tax assets valuation allowance 998 998
--------------------- ----------------------
Total net deferred tax liability 3,721 3,616
Current portion included in prepaid expenses and other 6,721 4,211
--------------------- ----------------------
Long-term deferred tax liability $ 10,442 $ 7,827
===================== ======================
</TABLE>
The deferred tax assets valuation allowance has been recorded to reflect the
potential non-realization of certain deductible temporary differences.
The effective tax rates differ from the U.S. Federal income tax rate for the
following reasons:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
AS RESTATED AS RESTATED AS RESTATED
-------------- -------------- --------------
<S> <C> <C> <C>
Tax (benefit) at the U.S. statutory rate $ (2,253) $ 15,287 $ 15,139
Non-deductible goodwill amortization 1,144 1,156 998
State taxes 162 526 2,041
Foreign sales corporation (354) (834) (320)
Other --- 657 660
-------------- -------------- --------------
Provision (benefit) for income taxes $ (1,301) $ 16,792 $ 18,518
============== ============== ==============
</TABLE>
NOTE 7 - RETIREMENT PLANS
The Company offers substantially all of its employees a retirement savings plan
under Section 401(k) of the Internal Revenue Code. Each employee may elect to
enter a written salary deferral agreement under which a maximum of 15% of their
salary, subject to aggregate limits required under the Internal Revenue Code,
may be contributed to the plan. The Company will match a percentage of the
employee's contribution up to a specified maximum percentage of their salary. In
addition, the Company is required to make a mandatory contribution and may make
a discretionary contribution from profits. During the fiscal years ended June
27, 1999, June 28, 1998 and June 29, 1997, the Company made contributions of
approximately $3,241, $3,023 and $2,377, respectively.
During fiscal 1999, the Company created a non-qualified deferred compensation
plan for certain executive employees. Each employee may elect to enter a written
salary deferral agreement under which a maximum of 15% of their salary, less any
amounts contributed under the 401(k) plan, may be contributed to the plan. The
Company will match a percentage of the employee's contribution up to a specified
maximum percentage of their salary.
42
<PAGE> 44
During fiscal 1999, the Company created a non-qualified deferred compensation
plan for its non-employee directors. Pursuant to this plan, each such director
is required to defer, until termination of service as a director, receipt of a
specified amount of his annual retainer fee by making a hypothetical investment
in DTI common stock equivalent units and may defer, until termination of service
as a director, receipt of all or a portion of his remaining compensation by
making hypothetical investments in a variety of investment alternatives
including DTI common stock equivalent units.
In connection with the acquisition of ATT in fiscal 1998, the Company recorded
an aggregate net liability of $417 representing the excess of the estimated
projected benefit obligation (PBO) over the fair value of plan assets relative
to the defined benefit plans for its international division. The following sets
forth reconciliations of the PBO and fair value of plan assets:
<TABLE>
<CAPTION>
RECONCILIATION OF PROJECTED RECONCILIATION OF PROJECTED
BENEFIT OBLIGATION FOR BENEFIT OBLIGATION FROM THE
THE YEAR ENDED DATE OF ACQUISITION TO
JUNE 27, 1999 JUNE 28, 1998
-------------------------------- ---------------------------
<S> <C> <C>
Beginning balance $ 17,684 $ 13,874
Service cost 981 863
Interest cost 1,081 1,030
Actuarial loss 3,741 1,664
Other 154 253
Foreign currency translation (938) ---
-------------------------------- ---------------------------
Ending balance $ 22,703 $ 17,684
================================ ===========================
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF THE FAIR RECONCILIATION OF THE FAIR
VALUE OF PLAN ASSETS FOR VALUE OF PLAN ASSETS FROM
THE YEAR ENDED THE DATE OF ACQUISITION TO
JUNE 27, 1999 JUNE 28, 1998
-------------------------------- ---------------------------
<S> <C> <C>
Beginning balance $ 17,166 $ 13,457
Return on plan assets 3,066 2,740
Employer contribution 770 716
Other 154 253
Foreign currency translation 920 ---
-------------------------------- ---------------------------
Ending balance $ 22,076 $ 17,166
================================ ===========================
</TABLE>
The following sets forth the funded status of the defined benefit plans:
<TABLE>
<CAPTION>
JUNE 27, JUNE 28,
1999 1998
------------------------------ ---------------------------
<S> <C> <C>
Projected benefit obligation $ 22,703 $ 17,684
Fair value of plan assets 22,076 17,166
------------------------------ ---------------------------
Excess of projected benefit obligation over plan
assets 627 518
Unrecognized net loss 116 49
------------------------------ ---------------------------
Net pension liability $ 511 $ 469
============================== ===========================
</TABLE>
The following sets forth the defined benefit pension plans' net periodic pension
cost:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD FROM THE DATE OF
JUNE 27, 1999 ACQUISITION TO JUNE 28, 1998
------------------------------ -------------------------------
<S> <C> <C>
Service cost $ 981 $ 863
Interest cost 1,081 1,030
Expected return on plan assets (1,906) (1,841)
------------------------------ -------------------------------
Net periodic pension cost $ 156 $ 52
============================== ===============================
</TABLE>
43
<PAGE> 45
The weighted-average assumptions used to determine the PBO are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD FROM THE DATE OF
JUNE 27, 1999 ACQUISITION TO JUNE 28, 1998
------------------------------ -------------------------------
<S> <C> <C>
Discount rate 6.0% 6.5%
Expected return on plan assets 8.5% 8.5%
Rate of compensation increase 4.0% 4.0%
</TABLE>
NOTE 8 - STOCK OPTION PLANS
The Company has three stock option plans: the 1994 Employee Stock Option Plan
(Employee Plan), the 1994 Directors Non-Qualified Stock Option Plan (Directors
Plan) and the 1996 Long-Term Incentive Plan (LTIP Plan).
The Employee Plan provides for the granting of options to the Company's
executive officers and key employees to purchase shares of common stock at
prices equal to the fair market value of the stock on the date of grant. Options
to purchase up to 900,000 shares of common stock may be granted under the
Employee Plan. Options outstanding at June 27, 1999 entitle the holders to
purchase common stock at prices ranging between $10.25 and $34.50. Options
outstanding become exercisable over five years from the date of grant. The right
to exercise the options expires ten years from the date of grant or earlier if
an option holder ceases to be employed by the Company.
The Directors Plan provides for the granting of options to the Company's
directors, who are not employees of the Company, to purchase shares of common
stock at prices equal to the fair market value of the stock on the date of
grant. Options to purchase up to 100,000 shares of common stock may be granted
under the Directors Plan. Options outstanding at June 27, 1999 entitle the
holders to purchase common stock at prices ranging between $13.50 and $31.625
per share. Options outstanding become exercisable with respect to one-fourth of
the shares covered thereby on each anniversary of the date of grant, commencing
on the second anniversary of such date. All options granted under the Directors
Plan expire ten years from the date of grant or earlier if a director leaves the
board of directors of the Company.
The LTIP Plan provides for the granting of four types of awards on a stand
alone, combination, or a tandem basis, specifically, nonqualified stock options,
incentive stock options, restricted shares and performance stock awards. The
LTIP Plan provides for the granting of up to 600,000 shares of common stock,
provided that the total number of shares with respect to which awards are
granted in any one year may not exceed 100,000 shares to any individual
employee, and the total number of shares with respect to which grants of
restricted stock and performance stock awards are made in any year shall not
exceed 50,000 shares to any individual employee. Grants to date consist only of
non-qualified stock options entitling the holders to purchase common stock at
prices ranging between $15.875 and $37.50. The exercise price of such
non-qualified stock options is equal to the fair market value of the stock on
the date of the grant. Options outstanding become exercisable over five years
from the date of grant. The right to exercise the options expires ten years from
the date of grant or earlier if an option holder ceases to be employed by the
Company.
A summary of the status of the Company's stock option plans as of June 27, 1999,
June 28, 1998 and June 29, 1997, and changes during the years then ended are
presented below:
<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998 FISCAL 1997
------------------------- ------------------------ ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------------ ------------ ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,013,963 $20.47 939,650 $17.58 662,250 $13.86
Granted 252,250 $15.93 236,500 $29.72 376,950 $23.34
Exercised (8,875) $13.34 (74,887) $14.95 (49,625) $13.66
Forfeited (245,400) $27.75 (87,300) $19.15 (49,925) $15.62
------------ ------------ ----------
Outstanding at end of year 1,011,938 $17.43 1,013,963 $20.47 939,650 $17.58
------------ ------------ ----------
Exercisable at end of year 404,548 206,338 122,625
============ ============ ==========
</TABLE>
44
<PAGE> 46
The following table summarizes certain information for options currently
outstanding and exercisable at June 27, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- --------------------------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
----------------- -------------- ------------------- ----------------- -------------- -----------------------
<S> <C> <C> <C> <C> <C>
$10-14 349,163 5 $13.30 271,887 $13.29
$15-19 523,275 8 $16.65 106,661 $16.85
$20-30 41,500 8 $27.69 7,900 $26.47
$31-38 98,000 7 $31.93 18,100 $32.11
-------------- --------------
1,011,938 404,548
============== ==============
</TABLE>
PRO FORMA DISCLOSURES
The Company applies APB 25 and related interpretations in accounting for its
stock option plans. Accordingly, no compensation cost has been recognized for
the stock options because the options were granted with an exercise price equal
to the stock price on the date of grant. Had compensation costs for the
Company's stock option plans been determined based on the fair value of the
options on the grant dates consistent with the methodology prescribed by SFAS
123, the Company's net income (loss) and earnings (loss) per share would have
been changed to the pro forma amounts indicated below. Due to the adoption of
the methodology prescribed by SFAS 123, the pro forma results shown below only
reflect the impact of stock option awards granted in fiscal 1999 and 1998.
Because future stock option awards may be granted, the pro forma impact for
fiscal 1999 and 1998 is not necessarily indicative of the impact in future
years.
<TABLE>
<CAPTION>
FISCAL FISCAL
1999 1998
AS RESTATED AS RESTATED
------------------------- --------------------------
<S> <C> <C> <C>
Net income (loss) As reported $ (5,135) $25,685
Pro forma $ (6,767) $24,221
Diluted earnings (loss)
per common share As reported $ (0.51) $2.10
Pro forma $ (0.67) $2.00
</TABLE>
The fair value of the options granted (which is amortized over the option
vesting period in determining the pro forma impact), is estimated on the date of
grant using the Black-Scholes multiple option-pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
FISCAL FISCAL
1999 1998
------------------------------ -------------------------------
<S> <C> <C>
Expected life of options 5 years 5 years
Risk-free interest rates 4.54 - 5.27% 5.49 - 6.11%
Expected volatility of stock 44% 39%
Expected dividend yield 0.4% 0.3%
</TABLE>
The weighted average fair value of options granted during the years ended June
27, 1999 and June 28, 1998 was $6.93 and $12.74 per share, respectively.
NOTE 9 - RELATED PARTIES
In years prior to the initial public offering of the Company's common stock, the
Company issued 443,250 shares of the Company's common stock at prices which
approximated estimated fair value ranging from $1.26 to $2.57 per share to
members of management under agreements which allow management to pay for the
stock with cash and/or recourse notes receivable to the Company. The recourse
notes receivable were issued with interest rates ranging from 5.84% to 6.28% and
become due between September 2003 and January 2004. The notes are reflected as a
reduction to additional paid-in capital in the accompanying consolidated
financial statements.
45
<PAGE> 47
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company leases land, buildings, machinery, equipment and furniture under
various noncancelable operating lease agreements. At June 27, 1999, future
minimum lease payments under noncancelable operating leases were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR:
--------------------------------------------------------------------------------
<S> <C>
2000 $ 6,253
2001 5,113
2002 4,803
2003 4,341
2004 2,088
2005 and thereafter 11,399
--------------
$ 33,997
==============
</TABLE>
Total lease expense under noncancelable operating leases was approximately
$5,881, $7,372 and $5,652 for the years ended June 27, 1999, June 28, 1998 and
June 29, 1997, respectively. Commitments under capital leases are not
significant to the consolidated financial statements.
The Company is a party to various claims and lawsuits arising in the normal
course of business. It is the opinion of management, after consultation with
legal counsel, that those claims and lawsuits, when resolved, will not have a
material adverse effect on the financial position, cash flows or results of
operations of the Company.
See Note 1 for discussion of restatement related contingencies.
NOTE 11 - DEPENDENCE ON SIGNIFICANT CUSTOMERS
No customers accounted for 10% or more of their respective total segment's sales
in fiscal 1999. Total net sales to a customer in the electronics industry were
$85,241 in fiscal 1998. Total net sales to a customer in the electronics
industry were $89,062 and total net sales to a customer in the automotive
industry were $43,179 in fiscal 1997. Trade receivables recorded for significant
customers at June 28, 1998 were $11,051.
46
<PAGE> 48
NOTE 12 - SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
JUNE 27, JUNE 28,
1999 1998
AS RESTATED AS RESTATED
------------------------------ -------------------------------
<S> <C> <C>
ACCOUNTS RECEIVABLE
Trade receivables $ 53,030 $ 77,126
Less - allowance for doubtful accounts 3,024 2,142
------------------------------ -------------------------------
$ 50,006 $ 74,984
============================== ===============================
INVENTORIES, NET
Raw materials $ 21,835 $ 18,285
Work in process 17,919 15,187
Finished goods 9,623 7,721
------------------------------ -------------------------------
$ 49,377 $ 41,193
============================== ===============================
PROPERTY, PLANT AND EQUIPMENT
Machinery and equipment $ 70,811 $ 57,148
Buildings and improvements 30,080 26,391
Land and improvements 6,924 5,664
Construction-in-progress 2,950 3,659
------------------------------ -------------------------------
110,765 92,862
Less - accumulated depreciation 33,363 23,679
------------------------------ -------------------------------
$ 77,402 $ 69,183
============================== ===============================
ACCRUED LIABILITIES
Accrued employee compensation and benefits $ 12,291 $ 13,645
Other 22,832 27,746
------------------------------ -------------------------------
$ 35,123 $ 41,391
============================== ===============================
</TABLE>
During fiscal 1999 and 1998, the Company repurchased 1,401,100 shares of its
common stock. The shares remaining in treasury have been reflected in the
stockholders' equity section of the consolidated balance sheet as of June 27,
1999 and June 28, 1998 at cost of $30,778 and $24,445, respectively. The
repurchased shares are being used for employee stock option programs. In
conjunction with the amendment to the credit facility discussed in Note 16, the
Company agreed that it will make no further repurchases of common stock.
NOTE 13 - EARNINGS (LOSS) PER SHARE OF COMMON STOCK
The following table represents reconciliations of income (loss) before
extraordinary loss and weighted average shares outstanding between basic and
diluted earnings per share for the years ended June 27, 1999, June 28, 1998 and
June 29, 1997. The convertible preferred securities were antidilutive for the
year ended June 27, 1999 and have been excluded from the computation of diluted
earnings (loss) per share (share data in thousands).
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
----------------------------------------------------------------------------------
JUNE 27, 1999 JUNE 28, 1998 JUNE 29, 1997
AS RESTATED AS RESTATED AS RESTATED
------------------------- ------------------------- ------------------------
Loss before Income before Income before
extraordinary extraordinary extraordinary
loss Shares loss Shares loss Shares
-------------- ---------- --------------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic $ (5,135) 10,149 $ 26,885 11,297 $ 24,736 10,349
Effect of dilutive securities:
Mandatorily redeemable
convertible preferred
securities 3,008 1,806 151 80
Stock options 394 472
Contingent issuable shares 124 121
-------------- ---------- --------------- --------- -------------- ---------
Diluted $ (5,135) 10,149 $ 29,893 13,621 $ 24,887 11,022
============== ========== =============== ========= ============== =========
</TABLE>
47
<PAGE> 49
NOTE 14 - SPECIAL CHARGES
During the fourth quarter of fiscal 1999, the Company recorded $13,000 of
special charges. The special charges were comprised of a $9,800 charge to cost
of sales reflecting additional costs and provisions for estimated losses on
three large automation systems projects, a $2,500 restructuring charge described
below and a $700 provision for a receivable currently being pursued in a legal
action.
The restructuring charge of $2,500 comprised severance costs associated with
management changes and workforce reductions, idle facility costs resulting from
the lower level of order activity 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 recorded in the fourth quarter was as
follows:
<TABLE>
<CAPTION>
Beginning Charges to As of
Balance Reserve June 27, 1999
--------------------- ------------------ ------------------
<S> <C> <C> <C>
Severance costs $ 1,749 $ (256) $ 1,493
Idle facilities costs 390 (126) 264
Asset writedowns and other 361 --- 361
--------------------- ------------------ ------------------
$ 2,500 $ (382) $ 2,118
===================== ================== ==================
</TABLE>
The balance of the restructuring reserve is expected to be fully utilized in
fiscal 2000.
NOTE 15 - 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 fiscal 1998 and 1997 has been restated to conform with the requirements of
SFAS 131.
The Company has two primary reportable segments: Automation and Packaging. The
operations of the Company's Automation segment design and build 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. The Company's reportable segments are
distinguished based on the nature of products manufactured and sold and types of
customers. The Company's other businesses produce custom and precision-stamped
steel and aluminum components through its stamping and fabrication operations.
The Company evaluates performance and allocates resources to reportable segments
primarily based on operating income. The accounting policies of the reportable
segments are the same as those described in the summary of significant policies.
Intersegment sales are not significant.
48
<PAGE> 50
Financial information for the Company's reportable segments consisted of the
following:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1999 1998 1997
AS RESTATED AS RESTATED AS RESTATED
-------------- -------------- --------------
<S> <C> <C> <C>
NET SALES
Automation $ 299,787 $ 355,052 $ 248,213
Packaging 109,487 116,803 100,435
Other 32,810 47,487 47,462
-------------- -------------- --------------
Consolidated Total $ 442,084 $ 519,342 $ 396,110
============== ============== ==============
OPERATING INCOME (LOSS)
Automation $ 5,573 $ 47,436 $ 39,629
Packaging 8,400 13,412 15,052
Other 1,765 3,391 6,966
Corporate (9,420) (9,041) (7,054)
-------------- -------------- --------------
Consolidated Total $ 6,318 $ 55,198 $ 54,593
============== ============== ==============
ASSETS
Automation $ 272,816 $ 299,423 $ 240,396
Packaging 142,828 118,414 114,675
Other 21,325 25,170 34,812
Corporate 16,296 8,693 3,543
-------------- -------------- --------------
Consolidated Total $ 453,265 $ 451,700 $ 393,426
============== ============== ==============
CAPITAL EXPENDITURES
Automation $ 3,889 $ 9,441 $ 6,654
Packaging 9,327 3,313 770
Other 1,624 3,459 3,806
Corporate 1,063 1,101 620
-------------- -------------- --------------
Consolidated Total $ 15,903 $ 17,314 $ 11,850
============== ============== ==============
DEPRECIATION AND AMORTIZATION
Automation $ 9,426 $ 8,714 6,327
Packaging 3,595 2,793 2,564
Other 1,496 1,491 1,258
Corporate 947 752 904
-------------- -------------- --------------
Consolidated Total $ 15,464 $ 13,750 11,053
============== ============== ==============
</TABLE>
The reconciliation of segment operating income to consolidated income (loss)
before income taxes consisted of the following:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1999 1998 1997
AS RESTATED AS RESTATED AS RESTATED
-------------- -------------- --------------
<S> <C> <C> <C>
Automation $ 5,573 $ 47,436 $ 39,629
Packaging 8,400 13,412 15,052
-------------- -------------- --------------
Operating income for reportable segments 13,973 60,848 54,681
Operating income for immaterial businesses 1,765 3,391 6,966
Corporate (9,420) (9,041) (7,054)
Interest expense (7,742) (6,509) (11,088)
Dividends on Company-obligated, mandatorily redeemable
convertible preferred securities of subsidiary DT Capital
Trust holding solely convertible junior subordinated debentures
of the Company (5,012) (5,012) (251)
-------------- -------------- --------------
Consolidated income (loss) before income taxes $ (6,436) $ 43,677 $ 43,254
============== ============== ==============
</TABLE>
49
<PAGE> 51
Financial information related to the Company's operations by geographic area
consisted of the following:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
NET SALES
United States $ 333,602 $ 357,146 $ 275,863
International 108,482 162,196 120,247
------------- ------------- -------------
Consolidated Total $ 442,084 $ 519,342 $ 396,110
============= ============= =============
LONG-LIVED ASSETS
United States $ 67,784 $ 59,027 $ 49,487
International 9,618 10,156 1,645
------------- ------------- -------------
Consolidated Total $ 77,402 $ 69,183 $ 51,132
============= ============= =============
</TABLE>
Net sales are attributed to countries based on the shipping destination of
products sold. Long-lived assets consist of total property, plant and equipment.
NOTE 16 - SUBSEQUENT EVENTS
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 $2,116 was
primarily financed by borrowings under the Company's revolving credit facility.
As the transaction occurred subsequent to the end of fiscal 1999, the balance
sheet and results of operations of C. E. King are excluded from the fiscal 1999
consolidated balance sheet and results of operations of DTI. The pro forma
effects of the C. E. King acquisition on the Company's fiscal 1999 financial
position are not material.
In September 1999, the Company completed an amendment to its $175,000 credit
facility. The total line of credit as amended is $135,000, including a $125,000
revolving credit facility and a $10,000 term credit facility. The amendment
included a provision to increase the facility to $140,000 if the Company met
certain operating cash flow targets during the first six months of fiscal 2000.
Borrowings under the amendment to the credit facility bore interest at floating
rates based on the prime rate plus 1 7/8% or LIBOR plus 3% (at the option of
DTI). The credit facility, as amended, was scheduled to mature on April 2, 2001.
Borrowings under the credit facility are secured by substantially all of the
assets of DTI and its domestic subsidiaries. The amendment to the credit
facility provided a permanent waiver of the events of default as of June 27,
1999 and established a revised set of financial and other covenants and
restrictions.
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 described in Note 5. As a result, quarterly
distributions on the Convertible Preferred Securities are also being deferred
and DTI will not declare or pay dividends on its common stock.
50
<PAGE> 52
NOTE 17 - RESTATEMENT
As described in Note 1, the June 27, 1999, June 28, 1998 and June 29, 1997
financial statements have been restated. A comparison of previously reported and
restated financial statements follows:
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 27, JUNE 28, JUNE 29,
1999 JUNE 27, 1998 JUNE 28, 1997 JUNE 29,
AS PREVIOUSLY 1999 AS PREVIOUSLY 1998 AS PREVIOUSLY 1997
REPORTED AS RESTATED REPORTED AS RESTATED REPORTED AS RESTATED
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 10,487 $ 10,487 $ 6,915 $ 6,915 $ 2,821 $ 2,821
Accounts receivable, net 50,691 50,006 75,634 74,984 68,538 68,538
Costs and estimated
earnings in excess of
amounts billed on
uncompleted contracts 64,894 65,806 66,910 67,469 51,643 51,643
Inventories, net 56,876 49,377 48,755 41,193 42,198 40,428
Prepaid expenses and
other 12,320 16,070 8,931 8,282 7,051 7,051
----------- ----------- ------------ ----------- ------------ -----------
Total current assets 195,268 191,746 207,145 198,843 172,251 170,481
Property, plant and
equipment, net 77,402 77,402 69,183 69,183 51,132 51,132
Goodwill, net 180,066 180,066 177,578 177,578 168,401 168,401
Other assets, net 4,051 4,051 6,096 6,096 3,412 3,412
----------- ----------- ------------ ----------- ------------ -----------
$ 456,787 $ 453,265 $ 460,002 $ 451,700 $ 395,196 $ 393,426
=========== =========== ============ =========== ============ ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of
long-term debt $ 384 $ 384 $ 55 $ 55 $ 1,527 $ 1,527
Accounts payable 37,507 37,507 33,627 33,627 31,353 31,353
Customer advances 15,066 15,087 13,573 12,529 11,232 11,232
Billings in excess of
costs and estimated
earnings on uncompleted
contracts 6,837 6,837 8,218 8,218 7,172 7,172
Accrued liabilities 32,418 35,123 43,232 41,391 29,986 29,861
----------- ----------- ------------ ----------- ------------ -----------
Total current
liabilities 92,212 94,938 98,705 95,820 81,270 81,145
----------- ----------- ------------ ----------- ------------ -----------
Long-term debt 103,659 104,209 89,956 89,956 46,978 46,978
Deferred income taxes 8,376 10,442 7,827 7,827 6,435 6,435
Other long-term liabilities 3,400 3,400 3,455 3,455 5,246 5,246
----------- ----------- ------------ ----------- ------------ -----------
115,435 118,051 101,238 101,238 58,659 58,659
----------- ----------- ------------ ----------- ------------ -----------
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 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,
10,502,762 and 11,300,875
shares outstanding,
respectively 113 113 113 113 113 113
Additional paid-in capital 133,348 133,348 134,608 134,608 133,370 133,370
Retained earnings 77,984 68,968 80,561 74,917 51,784 50,139
Cumulative translation
adjustment (1,527) (1,375) (778) (551) --- ---
Less -
Treasury stock (1,268,488,
873,000 and 0 shares,
respectively), at cost (30,778) (30,778) (24,445) (24,445) --- ---
----------- ----------- ------------ ----------- ------------ -----------
Total stockholders' equity 179,140 170,276 190,059 184,642 185,267 183,622
----------- ----------- ------------ ----------- ------------ -----------
$ 456,787 $ 453,265 $ 460,002 $ 451,700 $ 395,196 $ 393,426
=========== =========== ============ =========== ============ ===========
</TABLE>
51
<PAGE> 53
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 JUNE 27, 1998 JUNE 28, 1997 JUNE 29,
AS PREVIOUSLY 1999 AS PREVIOUSLY 1998 AS PREVIOUSLY 1997
REPORTED AS RESTATED REPORTED AS RESTATED REPORTED AS RESTATED
------------- ----------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 442,084 $ 442,084 $ 519,342 $ 519,342 $ 396,110 $ 396,110
Cost of sales 348,487 352,526 380,126 387,515 285,044 287,150
------------ ----------- ------------ ----------- ------------ ------------
Gross profit 93,597 89,558 139,216 131,827 111,066 108,960
Selling, general and
administrative expenses 80,740 80,740 75,246 75,246 54,367 54,367
Restructuring charge 2,500 2,500 --- --- --- ---
Loss on sale of assets of
Knitting Elements division --- --- 1,383 1,383 --- ---
------------ ----------- ----------- ----------- ------------ ------------
Operating income 10,357 6,318 62,587 55,198 56,699 54,593
Interest expense 7,742 7,742 6,509 6,509 11,088 11,088
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 5,012 5,012 5,012 5,012 251 251
------------ ----------- ------------ ----------- ------------ ------------
Income (loss) before provision
for income taxes and
extraordinary loss (2,397) (6,436) 51,066 43,677 45,360 43,254
Provision (benefit) for income
taxes (634) (1,301) 20,182 16,792 18,979 18,518
------------ ----------- ------------ ----------- ------------ ------------
Income (loss) before
extraordinary loss (1,763) (5,135) 30,884 26,885 26,381 24,736
Extraordinary loss on debt
refinancing, net of income tax
benefits of $800 and $216,
respectively --- --- 1,200 1,200 324 324
------------ ----------- ------------ ----------- ------------ ------------
Net income (loss) $ (1,763) $ (5,135) $ 29,684 $ 25,685 $ 26,057 $ 24,412
============ =========== ============ =========== ============ ============
Basic earnings (loss) per
common share:
Income (loss) before
extraordinary loss $ (0.17) $ (0.51) $ 2.73 $ 2.38 $ 2.55 $ 2.40
Extraordinary loss --- --- 0.10 0.11 0.03 0.03
------------ ----------- ------------ ----------- ------------ ------------
Net income (loss) $ (0.17) $ (0.51) $ 2.63 $ 2.27 $ 2.52 $ 2.37
============ =========== ============ =========== ============ ============
Diluted earnings (loss) per
common share:
------------ ----------- ------------ ----------- ------------ ------------
Income (loss) before
extraordinary loss $ (0.17) $ (0.51) $ 2.49 $ 2.19 $ 2.41 $ 2.26
Extraordinary loss --- --- 0.09 0.09 0.03 0.03
------------ ----------- ------------ ----------- ------------ ------------
Net income (loss $ (0.17) $ (0.51) $ 2.40 $ 2.10 $ 2.38 $ 2.23
============ =========== ============ =========== ============ ============
Weighted average common shares
outstanding:
Basic 10,149,215 10,149,215 11,297,409 11,297,409 10,349,444 10,349,444
Diluted 10,181,800 10,149,215 13,621,481 13,621,481 11,022,080 11,022,080
============ =========== ============ =========== ============ ============
</TABLE>
52
<PAGE> 54
NOTE 18 - QUARTERLY FINANCIAL DATA (UNAUDITED)
As described in Note 1, the unaudited quarterly information for the interim
periods in the fiscal years ended June 27, 1999, June 28, 1998 and June 29, 1997
have been restated.
Unaudited quarterly financial data for the fiscal years ended June 27, 1999,
June 28, 1998 and June 29, 1997 are as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
As Previously 1st Quarter As Previously 2nd Quarter As Previously 3rd Quarter As Previously 4th Quarter
Reported As Restated Reported As Restated Reported As Restated Reported As Restated
------------- ----------- ------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended June 27,
1999
Net sales $ 112,907 $ 112,907 $ 111,627 $ 111,627 $ 104,097 $ 104,097 $ 113,453 $ 113,453
Cost of sales 84,682 85,754 86,052 86,768 79,604 80,166 98,149 99,838
Gross profit 28,225 27,153 25,575 24,859 24,493 23,931 15,304 13,615
Operating income
(loss) 9,444 8,372 5,051 4,334 3,777 3,214 (7,915) (9,602)
Net income (loss) 3,785 3,121 1,092 647 492 143 (7,132) (9,046)
Diluted earnings $ 0.37 $ 0.31 $ 0.11 $ 0.06 $ 0.05 $ 0.01 $ (0.70) $ (0.89)
(loss) per share
Year ended June 28,
1998
Net sales $ 115,764 $ 115,764 $ 132,431 $ 132,431 $ 132,561 $ 132,561 $ 138,586 $ 138,586
Cost of sales 84,856 86,316 96,454 98,001 96,054 97,860 102,762 105,338
Gross profit 30,908 29,448 35,977 34,430 36,507 34,701 35,824 33,248
Operating income 13,819 12,359 16,848 15,301 15,544 15,015 16,376 12,523
Net income 5,335 4,430 8,228 7,269 7,714 6,594 8,407 7,392
Diluted earnings per $ 0.44 $ 0.38 $ 0.66 $ 0.59 $ 0.62 $ 0.54 $ 0.68 $ 0.59
share
Year ended June 29,
1997
Net sales $ 82,635 $ 82,635 $ 100,693 $ 100,693 $ 103,359 $ 103,359 $ 109,423 $ 109,423
Cost of sales 59,870 60,268 73,023 73,555 73,652 74,177 78,499 79,150
Gross profit 22,765 22,367 27,670 27,138 29,707 29,182 30,924 30,273
Operating income 11,177 10,780 13,908 13,377 14,952 14,429 16,662 16,007
Net income 4,549 4,301 6,038 5,708 7,216 6,891 8,254 7,512
Diluted earnings per $ 0.48 $ 0.45 $ 0.58 $ 0.54 $ 0.61 $ 0.58 $ 0.69 $ 0.66
share
</TABLE>
53
<PAGE> 55
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
3.1 Restated Certificate of Incorporation of the Registrant
effective November 13, 1998 (filed with the Commission as
Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 27, 1998 filed with the Commission on
February 10, 1999 and incorporated herein by reference thereto)
3.3 Amended By-Laws of the Registrant (filed as Exhibit 3.2 to the
Company's 1994 Registration Statement on Form S-1, Registration
No. 33-75174, filed with the Commission on February 11, 1994, as
amended on March 22, 1994 (the "1994 Registration Statement")
and incorporated herein by reference thereto)
4.1 Rights Agreement dated as of August 18, 1997 between DT
Industries, Inc. and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent (filed as Exhibit 1 to the Company's Form 8-K
dated August 18, 1997, filed with the Commission on August 19,
1997 and incorporated herein by reference thereto). The Rights
Agreement includes as Exhibit A thereto the Certificate of
Designations, Preferences and Rights of Series A Preferred Stock
of DT Industries, Inc., as Exhibit B thereto the Form of Rights
Certificate and as Exhibit C thereto the Summary of Rights to
Purchase Series A Preferred Stock.
4.2 Amendment No. 1 to the Rights Agreement by and between DT
Industries, Inc. and ChaseMellon Shareholder Services, L.L.C.,
dated as of November 5, 1998 (filed with the Commission as
Exhibit 10 to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 27, 1998, filed with the Commission
on February 10, 1999 and incorporated hereby by reference
thereto).
10.1* Purchase and Stockholder Agreement, dated September 30, 1993, by
and between Detroit Tool and Engineering Company and Stephen J.
Gore (filed as Exhibit 10.1 to the 1994 Registration Statement
and incorporated herein by reference thereto)
10.2* Stock Pledge Agreement, dated September 30, 1993, by and between
Stephen J. Gore and Detroit Tool and Engineering Company (filed
as Exhibit 10.2 to the 1994 Registration Statement and
incorporated herein by reference thereto)
10.3* $84,600 Promissory Note, dated September 30, 1993, by Stephen J.
Gore to Detroit Tool and Engineering Company (filed as Exhibit
10.3 to the 1994 Registration Statement and incorporated herein
by reference thereto)
10.4* Letter Agreement, dated September 30, 1993, by Stephen J. Gore
to Detroit Tool and Engineering Company (filed as Exhibit 10.4
to the 1994 Registration Statement and incorporated herein by
reference thereto)
10.5* Employment Agreement, dated September 19, 1990, by and between
Detroit Tool Group, Inc. and Stephen J. Gore (filed as Exhibit
10.5 to the 1994 Registration Statement and incorporated herein
by reference thereto)
10.6* Amendment to Promissory Note and Stock Pledge Agreement, dated
March 16, 1994, by and among DT Industries, Inc., Peer
Investors, L.P. and Stephen J. Gore (filed as Exhibit 10.6 to
the 1994 Registration Statement and incorporated herein by
reference thereto)
10.7* DT Industries, Inc. Employee Stock Option Plan (filed as Exhibit
10.21 to the 1994 Registration Statement and incorporated herein
by reference thereto)
10.8* DT Industries, Inc. 1994 Directors Non-Qualified Stock Option
Plan (filed as Exhibit 10.22 to the 1994 Registration Statement
and incorporated herein by reference thereto)
10.9 Agreement of Lease, dated April 30, 1997, between Teecan
Properties Inc. and Kalish Canada Inc. (filed as Exhibit 10.15
to the Company's Annual Report on Form 10-K for the fiscal year
ended June 29, 1997 filed with the Commission on September 29,
1997 (the "1997 10-K") and incorporated herein by reference
thereto)
10.10 Lease Agreement, dated February 7, 1995, between Lanard &
Axibund, Inc., as agent, I-95 Business Center at Keystone
Park-1, as lessor, and Stokes-Merrill Corporation as lessee
(filed as Exhibit 10.46 to the Company's Annual Report on Form
10-K for the fiscal year ended June 25, 1995 filed with the
Commission on September 25, 1995 (the "1995 10-K") and
incorporated therein by reference thereto)
54
<PAGE> 56
10.11* Purchase and Stockholder Agreement, dated November 30, 1993, by
and between Detroit Tool and Engineering Company and Bruce P.
Erdel (filed as Exhibit 10.55 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 26, 1994 filed with the
Commission on September 23, 1994 (the "1994 10-K") and
incorporated herein by reference thereto)
10.12* Stock Pledge Agreement, dated November 30, 1993, by and between
Bruce P. Erdel and Detroit Tool and Engineering Company (filed
as Exhibit No. 10.56 to the 1994 10-K and incorporated herein by
reference thereto)
10.13* $33,300 Promissory Note, dated November 30, 1993, by Bruce P.
Erdel to Detroit Tool and Engineering Company (filed as Exhibit
No. 10.57 to the 1994 10-K and incorporated herein by reference
thereto)
10.14* Letter Agreement, dated November 30, 1993, by and between Bruce
P. Erdel and Detroit Tool and Engineering Company (filed as
Exhibit No. 10.58 to the 1994 10-K and incorporated herein by
reference thereto)
10.15* Amendment to Promissory Note and Stock Pledge Agreement, dated
March 16, 1994, by and among DT Industries, Inc., Peer
Investors, L.P. and Bruce P. Erdel (filed as Exhibit No. 10.59
to the 1994 10-K and incorporated herein by reference thereto)
10.16 Fourth Amended and Restated Credit Facilities Agreement, dated
July 21, 1997, among NationsBank, N.A. (successor by merger to
The Boatmen's National Bank of St. Louis) and any other persons
who become lenders as provided therein and DT Industries, Inc.
and the other borrowers listed on the signature pages thereof
(filed as Exhibit 10.31 to the 1997 10-K and incorporated herein
by reference thereto)
10.17 First Amendment to Fourth Amended and Restated Credit Facilities
Agreement, dated as of December 31, 1997, among NationsBank,
N.A., as Administrative Agent, and NationsBank, N.A. and the
other Lenders listed therein and DT Industries, Inc. and the
other Borrowers listed therein (filed as Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 29, 1998 filed with the Commission on May 12, 1998 and
incorporated herein by reference thereto)
10.18 Second Amendment to Fourth Amended and Restated Credit
Facilities Agreement, dated as of April 30, 1998, among
NationsBank, as Administrative Agent, and NationsBank, N.A. and
the other Lenders listed therein and DT Industries, Inc. and the
other Borrowers listed therein (filed as Exhibit 10.22 to the
Company's Annual Report on Form 10-K for the fiscal year ended
June 28, 1998 filed with the Commission on September 25, 1998
(the "1998 10-K") and incorporated herein by reference thereto)
10.19 Third Amendment to Fourth Amended and Restated Credit Facilities
Agreement, dated as of August 26, 1998, among NationsBank, N.A.,
as Administrative Agent, and NationsBank, N.A. and the other
Lenders listed therein and DT Industries, Inc. and the other
Borrowers listed therein (filed as Exhibit 10.23 to the 1998
10-K and incorporated herein by reference thereto)
10.20 Lease dated as of February 20, 1996 by and between CityWide
Development Corporation and Advanced Assembly Automation, Inc.
(filed as Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 24, 1996 filed with the
Commission on May 3, 1996 and incorporated herein by reference
thereto)
10.21 Single-Tenant Industrial Business Lease dated July 19, 1996,
between American National Bank and Trust Company of Chicago, as
Trustee under Trust No. 63442, Landlord, and Mid-West Automation
Enterprises, Inc., an Illinois corporation and Mid-West
Automation Systems, Inc., an Illinois corporation, collectively,
Tenant (filed as Exhibit No. 10.58 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
filed with the Commission on September 30, 1996 (the "1996
10-K") and incorporated herein by reference thereto)
10.22* DT Industries, Inc. Amendment to 1994 Employee Stock Option
Plan, adopted May 16, 1996 (filed as Exhibit 10.59 to the 1996
10-K and incorporated herein by reference thereto)
10.23* DT Industries, Inc. Second Amendment to 1994 Employee Stock
Option, adopted September 18, 1996 (filed as Exhibit 10.60 to
the 1996 10-K and incorporated herein by reference thereto)
10.24* DT Industries, Inc. 1996 Long-Term Incentive Plan (filed as
Exhibit 10.61 to the 1996 10-K and incorporated herein by
reference thereto)
55
<PAGE> 57
10.25* Employment and Noncompetition Agreement, dated August 28, 1995,
between Kalish Canada Inc. and Graham Lewis (filed as Exhibit
No. 10.37 to the 1997 10-K and incorporated herein by reference
thereto)
10.26* Employment and Noncompetition Agreement, dated February 26,
1997, between DT Industries, Inc. and Eugene R. Haffely (filed
as Exhibit No. 10.38 to the 1997 10-K and incorporated herein by
reference thereto)
10.27 Lease Agreement by and between Van Buren N. Hansford, Jr., the
Stockholder and Landlord, and Hansford Manufacturing
Corporation, the Tenant, dated as of September 30, 1996 (filed
as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 29, 1996 filed with the
Commission on November 8, 1996 and incorporated herein by
reference thereto)
10.28 Lease Agreement dated February 11, 1997 between Kersten Randolph
Street Property and Mid-West Automation Enterprises, Inc. (filed
as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 30, 1997 filed with the Commission
on May 12, 1997 and incorporated herein by reference thereto)
10.29 Amended and Restated Declaration of Trust of DT Capital Trust
dated as of June 1, 1997 among DT Industries, Inc., as Sponsor,
the Bank of New York, as Property Trustee, The Bank of New York
(Delaware), as Delaware Trustee, and Stephen J. Gore, Bruce P.
Erdel and Gregory D. Wilson, as Trustees (filed as Exhibit 4.2
to the Company's Registration Statement on Form S-3,
Registration No. 333-30909, filed with the Commission on July 8,
1997 (the "1997 Registration Statement") and incorporated herein
by reference thereto)
10.30 Indenture for the 7.16% Convertible Junior Subordinated
Deferrable Interest Debentures Due 2012 dated as of June 1, 1997
among DT Industries, Inc. and The Bank of New York, as Trustee
(filed as Exhibit 4.3 to the 1997 Registration Statement and
incorporated herein by reference thereto)
10.31 Preferred Securities Guarantee Agreement dated June 12, 1997
between DT Industries, Inc., as Guarantor, and The Bank of New
York, as Preferred Guarantee Trustee (filed as Exhibit 4.6 to
the 1997 Registration Statement and incorporated herein by
reference thereto)
10.32 Umbrella Agreement relating to the Sale and Purchase of Assets
of Lucas Assembly & Test Systems in the United Kingdom, Germany
and the United States of America, dated July 29, 1997 (filed as
Exhibit No. 10.52 to the 1997 10-K and incorporated herein by
reference thereto)
10.33 Agreement relating to the Sale and Purchase of the United States
Assets of Lucas Assembly & Test Systems, dated July 29, 1997, by
and among Lucas Automation & Control Engineering, Inc., Lucas
Industries plc and Assembly Technology & Test, Inc. (filed as
Exhibit No. 10.53 to the 1997 10-K and incorporated herein by
reference thereto)
10.34 Agreement relating to the Sale and Purchase of the English
Assets of Lucas Assembly & Test Systems, dated July 29, 1997, by
and among Lucas Limited, Assembly Technology & Test Limited,
Lucas Industries plc and Lucas Automation & Control Engineering
Limited (filed as Exhibit No. 10.54 to the 1997 10-K and
incorporated herein by reference thereto)
10.35 Agreement relating to the Sale and Purchase of the German Assets
of Lucas Assembly & Test Systems, dated July 29, 1997, by and
among Lucas Automation & Control Engineering GmbH, Lucas
Industries plc and Assembly Technologie & Automation GmbH (filed
as Exhibit No. 10.55 to the 1997 10-K and incorporated herein by
reference thereto)
10.36 Industrial Building Lease, dated July 1991, by and between The
Allen Group Inc. and Lucas Hartridge, Inc. (filed as Exhibit
10.56 to the 1997 10-K and incorporated herein by reference
thereto)
10.37* DT Industries, Inc. Directors Deferred Compensation Plan
(previously filed)
10.38* DT Industries, Inc. Non-Qualified Deferred Compensation Plan
(previously filed)
56
<PAGE> 58
11.0 Computation of Earnings Per Share
21.0 Subsidiaries of the Registrant (previously filed)
23.0 Consent of PricewaterhouseCoopers LLP
24.0 Powers of Attorney
--------------------
* Management contract or compensatory plan or arrangement.
57
<PAGE> 59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DT INDUSTRIES, INC.
By: /s/ Wayne W. Schultz
--------------------------------------------
Wayne W. Schultz
Interim Senior Vice President - Finance
Dated: December 8, 2000 (Principal Financial and Accounting Officer)
58
<PAGE> 60
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and
Stockholders of DT Industries, Inc.
Our audits of the consolidated financial statements of DT Industries,
Inc. and its subsidiaries, referred to in our report dated August 6, 1999,
except as to Note 16 which is as of September 27, 1999 and Notes 1 and 17 which
are as of October 4, 2000, appearing in this Form 10-K/A, also included an audit
of the Financial Statement Schedule of DT Industries, Inc. listed in item 14 of
this Form 10-K/A. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
St. Louis, Missouri
August 6, 1999, except for Note 16 to the consolidated financial statements
which is as of September 27, 1999 and Notes 1 and 17 to the consolidated
financial statements which are as of October 4, 2000
S-1
<PAGE> 61
DT INDUSTRIES, INC.
SCHEDULE VIII
RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G
BALANCE AT
BALANCE AT CHARGED TO CHARGED TO PURCHASE END OF
VALUATION AND BEGINNING COSTS AND OTHER OF NET ASSETS PERIOD
RESERVE ACCOUNTS OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS
FOR THE FISCAL YEAR ENDED JUNE 27, 1999, AS RESTATED
<S> <C> <C> <C> <C> <C> <C>
Deferred Tax Assets
Valuation Allowance $ 998 $ 998
Accounts Receivable
Reserve $ 2,142 $ 1,321 ($ 439) $ 3,024
<CAPTION>
FOR THE FISCAL YEAR ENDED JUNE 28, 1998, AS RESTATED
<S> <C> <C> <C> <C> <C> <C>
Deferred Tax Assets
Valuation Allowance $ 1,029 ($ 31) $ 998
Accounts Receivable
Reserve $ 1,849 $ 624 ($ 461) $ 130(1) $ 2,142
(1) Reflects increase to Accounts Receivable Reserves due to acquisition of ATT and decrease due to Knitting Elements
sale.
<CAPTION>
FOR THE FISCAL YEAR ENDED JUNE 29, 1997, AS RESTATED
<S> <C> <C> <C> <C> <C> <C>
Deferred Tax Assets
Valuation Allowance $ 1,029 $ 1,029
Accounts Receivable
Reserve $ 1,294 $ 356 ($ 373) $ 572(1) $ 1,849
(1) Reflects increase to Accounts Receivable Reserves due to acquisition of Mid-West and Hansford.
</TABLE>
S-2
