1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 24, 2000
-------------------------------------------------
Commission File Number: 0-23400
DT INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 44-0537828
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1949 E. Sunshine, Suite 2-300, Springfield, Missouri 65804
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(Address of principal executive offices) (Zip Code)
(417) 890-0102
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- ---------
The number of shares of Common Stock, $0.01 par value, of the registrant
outstanding as of February 2, 2001 was 10,107,274.
---------------- ----------
2
DT INDUSTRIES, INC.
INDEX
PAGE 1
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Page
Number
Part I Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at December 24, 2000
and June 25, 2000 2
Consolidated Statement of Operations for the three and
six months ended December 24, 2000 and December
26, 1999 3
Consolidated Statement of Changes in Stockholders'
Equity for the six months ended December 24,
2000 4
Consolidated Statement of Cash Flows for the six
months ended December 24, 2000 and December
26, 1999 5
Notes to Consolidated Financial Statements 6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-20
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 20
Part II Other Information
Item 1. Legal Proceedings 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signature 24
3
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 2
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December 24, June 25,
2000 2000
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,544 $ 8,705
Accounts receivable, net 53,520 58,924
Costs and estimated earnings in excess of amounts
billed on uncompleted contracts 118,451 94,925
Inventories, net 59,291 52,926
Prepaid expenses and other 17,072 14,296
----------- -----------
Total current assets 256,878 229,776
Property, plant and equipment, net 69,978 73,218
Goodwill, net 170,670 173,823
Other assets, net 4,258 4,253
----------- -----------
$ 501,784 $ 481,070
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 680 $ 713
Senior secured term and revolving credit facility (Note 4) 135,208 ---
Accounts payable 43,223 47,189
Customer advances 34,662 22,411
Accrued liabilities 26,010 35,446
----------- -----------
Total current liabilities 239,783 105,759
----------- -----------
Senior secured term and revolving credit facility (Note 4) --- 116,928
Other long-term debt 8,855 9,216
Deferred income taxes 10,375 10,375
Other long-term liabilities 3,858 3,709
----------- -----------
Total long-term obligations 23,088 140,228
----------- -----------
Commitments and contingencies (See Note 10)
Company-obligated, mandatorily redeemable convertible
preferred securities of subsidiary DT Capital Trust
holding solely convertible junior subordinated debentures
of the Company 77,854 70,000
----------- -----------
Stockholders' equity:
Preferred stock, $0.01 par value; 1,500,000 shares
authorized; no shares issued and outstanding
Common stock, $0.01 par value; 100,000,000 shares
authorized; 10,107,274 shares outstanding 113 113
Additional paid-in capital 133,420 133,348
Retained earnings 60,325 64,378
Cumulative translation adjustment (2,021) (1,978)
Less -
Treasury stock (1,268,488 shares), at cost (30,778) (30,778)
----------- -----------
Total stockholders' equity 161,059 165,083
----------- -----------
$ 501,784 $ 481,070
----------- -----------
See accompanying Notes to Consolidated Financial Statements.
4
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 3
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Three months ended Six months ended
December 24, December 26, December 24, December 26,
2000 1999 2000 1999
------------- ------------ ------------ ------------
Net sales $ 131,425 $ 107,982 $ 247,876 $ 209,111
Cost of sales 106,750 85,588 203,197 166,666
------------ ------------ ------------ ------------
Gross profit 24,675 22,394 44,679 42,445
Selling, general and
administrative expenses 19,875 19,372 39,596 39,218
------------ ------------ ------------ ------------
Operating income 4,800 3,022 5,083 3,227
Interest expense 4,218 2,642 7,679 4,440
Accrued dividends on Company-
obligated, mandatorily
redeemable convertible
preferred securities of
subsidiary DT Capital Trust
holding solely convertible
junior subordinated debentures
of the Company, at 7.16% per
annum 1,365 1,275 2,707 2,528
------------ ------------ ------------ ------------
Loss before provision (benefit)
for income taxes (783) (895) (5,303) (3,741)
Provision (benefit) for income
taxes 146 (8) (1,250) (717)
------------ ------------ ------------ ------------
Net loss $ (929) $ (887) $ (4,053) $ (3,024)
------------ ------------ ------------ ------------
Net loss per common share:
Basic $ (0.09) $ (0.09) $ (0.40) $ (0.30)
Diluted $ (0.09) $ (0.09) $ (0.40) $ (0.30)
------------ ------------ ------------ ------------
Weighted average common shares
outstanding:
Basic 10,107,274 10,107,274 10,107,274 10,107,274
Diluted 10,107,274 10,107,274 10,107,274 10,107,274
------------ ------------ ------------ ------------
See accompanying Notes to Consolidated Financial Statements.
5
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 24, 2000
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 4
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Accumulated
other Additional
Retained comprehensive Common paid-in Treasury
earnings loss stock capital stock Total
---------- ------------- ----------- ----------- ----------- ----------
Balance, June 25, 2000 $ 64,378 $ (1,978) $ 113 $ 133,348 $ (30,778) $ 165,083
Comprehensive loss:
Net loss (4,053)
Foreign currency translation (43)
Total comprehensive loss (4,096)
Payment on stock subscriptions receivable 72 72
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Balance, December 24, 2000 $ 60,325 $ (2,021) $ 113 $ 133,420 $ (30,778) $ 161,059
================================================================================
See accompanying Notes to Consolidated Financial Statements.
6
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
PAGE 5
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Six Months Ended
December 24, December 26,
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,053) $ (3,024)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 4,862 5,528
Amortization 3,452 2,973
(Increase) decrease in current assets, excluding the
effect of acquisitions:
Accounts receivable 5,404 (12,072)
Costs and earnings in excess of amounts billed (23,526) 3,225
Inventories (6,365) (1,541)
Prepaid expenses and other (2,966) 4,191
Increase (decrease) in current liabilities, excluding the
effect of acquisitions:
Accounts payable (3,966) (8,330)
Customer advances 12,251 4,268
Accrued liabilities (1,582) (1,945)
Other 149 75
-------- --------
Net cash used by operating activities (16,340) (6,652)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,799) (3,419)
Acquisition of C.E. King net assets -- (2,116)
Other -- (528)
-------- --------
Net cash used by investing activities (1,799) (6,063)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from revolving loans 19,460 21,385
Payments on borrowings (717) (396)
Financing costs (808) (993)
Payments on stock subscriptions receivable 72 --
-------- --------
Net cash provided by financing activities 18,007 19,996
-------- --------
Effect of exchange rate changes (29) 30
-------- --------
Net increase (decrease) in cash (161) 7,311
Cash and cash equivalents at beginning of period 8,705 10,487
-------- --------
Cash and cash equivalents at end of period $ 8,544 $ 17,798
======== ========
See accompanying Notes to Consolidated Financial Statements.
7
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 6
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1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of DT
Industries, Inc. (DTI or the Company) have been prepared in accordance
with the instructions for Form 10-Q and do not include all of the
information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.
However, in the opinion of management, the information includes all
adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the results of operations for the periods
presented. Operating results for any quarter are not necessarily
indicative of the results for any other quarter or for the full year.
These statements should be read in conjunction with the consolidated
financial statements and notes to the consolidated financial statements
included in the Company's Form 10-K Annual Report for the fiscal year
ended June 25, 2000.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.
The accounts of the Company's foreign subsidiaries are maintained in
their respective local currencies. The accompanying consolidated
financial statements have been translated and adjusted to reflect U.S.
dollars in accordance with U.S. generally accepted accounting
principles.
3. ACQUISITIONS
In July 1999, the Company completed the acquisition of certain net
assets of C. E. King, Ltd. (King), a manufacturer of tablet counting,
liquid filling and capping equipment located in Chertsey, England. The
purchase price of $2,116 was primarily financed by borrowings under the
Company's revolving credit facility. The purchase price has been
allocated to the acquired assets and assumed liabilities based on their
estimated fair value at the date of acquisition. The excess of purchase
price over the estimated fair value of net assets acquired has been
recorded as goodwill and is being amortized over a 40 year period. The
accompanying consolidated financial statements include the results of
King from the date of acquisition.
The pro forma effect of the above acquisition is not material to the
Company's financial results for the six months ended December 26, 1999.
8
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 7
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4. FINANCING
As of December 24, 2000 and June 25, 2000, long-term debt consisted of
the following:
December 24, June 25,
2000 2000
------------------- -----------------
Term and revolving loans under senior credit facility:
Term loan $ 9,989 $ 10,000
Revolving loans 125,219 106,928
Other long-term debt 9,535 9,929
------------------- -----------------
144,743 126,857
Less - senior secured credit facility maturing July 2, 2001 135,208 ---
Less - current portion of other long-term debt 680 713
------------------- -----------------
$ 8,855 $ 126,144
=================== =================
The Company's credit facility includes a $130,000 revolving credit
facility and a $10,000 term credit facility and matures on July 2,
2001. Borrowings under the credit facility bore interest at floating
rates based on the prime rate plus 2 3/8% or LIBOR plus 3 1/2% for
foreign currency borrowings. Borrowings under the credit facility are
secured by substantially all of the assets of DTI and its domestic
subsidiaries. The Company had substantially no borrowing availability
under the credit facility as of December 24, 2000.
As a result of the Company's fiscal 2000 financial results, the Company
was in default of a number of provisions of its senior credit agreement
and another agreement. The Company and the lenders amended the relevant
credit agreements effective October 10, 2000. The amendment to the
credit agreements included provisions that amended the financial
covenants, waived certain existing defaults of covenants and breaches
of representations and warranties and increased the interest rate on
borrowings made pursuant to the facility. From October 10, 2000 until
February 14, 2001, all borrowings under the amended credit facility
bear interest at a floating rate based on the prime rate plus 2 3/8%,
except for foreign currency borrowings, which bear interest at a
floating rate equal to LIBOR plus 3 1/2%. After February 15, 2001, such
borrowings will bear interest at floating rates based on the prime rate
plus 2 5/8% or LIBOR plus 3 3/4%, as applicable. The overall line of
credit and maturity were not amended.
Since the Company's credit facility matures on July 2, 2001, borrowings
of $135,208 under this facility have been presented within current
liabilities in the Company's December 24, 2000 consolidated balance
sheet. The Company has initiated discussions with several lenders for
purposes of refinancing borrowings under its credit facilities, and
expects to complete such refinancing prior to July 2, 2001, although
there can be no assurance that such refinancing will be completed by
this date. The Company has also implemented other cash management
initiatives for fiscal 2001, including a reduction in discretionary
capital expenditures, increased focus on collections of accounts
receivable, accelerated payment terms from customers, among other
things. On a longer term basis, the Company has engaged an investment
banking firm and is actively marketing the sale of several business
units.
9
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 8
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5. COMPANY-OBLIGATED, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF SUBSIDIARY DT CAPITAL TRUST HOLDING SOLELY CONVERTIBLE
JUNIOR SUBORDINATED DEBENTURES OF THE COMPANY (CONVERTIBLE PREFERRED
SECURITIES)
On June 12, 1997, the Company completed a private placement to
institutional investors of 1,400,000 7.16% Convertible Preferred
Securities (liquidation preference of $50 per Convertible Preferred
Security). The placement was made through the Company's wholly owned
subsidiary, DT Capital Trust (Trust), a Delaware business trust. The
securities represent undivided beneficial ownership interests in the
Trust. The sole asset of the Trust is the $72,165 aggregate principal
amount of the 7.16% Convertible Junior Subordinated Deferrable Interest
Debentures Due 2012 of the Company, which were acquired by the Trust
with the proceeds from the offering as well as the sale of Common
Securities of the Trust to the Company. The Company's obligations under
the Convertible Junior Subordinated Debentures, the Indenture pursuant
to which they were issued, the Amended and Restated Declaration of
Trust of the Trust and the Guarantee of DTI, taken together, constitute
a full and unconditional guarantee by DTI of amounts due on the
Convertible Preferred Securities. The Convertible Preferred Securities
are convertible at the option of the holders at any time into the
common stock of DTI at an effective conversion price of $38.75 per
share, are redeemable at DTI's option after June 1, 2000 and are
mandatorily redeemable in 2012. The net proceeds of the offering of
approximately $67,750 were used by DTI to retire indebtedness. In
conjunction with the amendment of the credit facility as discussed in
Note 4, the Company elected to defer interest payments on the
Convertible Junior Subordinated Debentures. As a result, quarterly
distributions on the Convertible Preferred Securities have also been
deferred and DTI will not declare or pay dividends on its common stock.
Dividends on the Convertible Preferred Securities in the amount of
$7,854 have been deferred and accrued as of December 24, 2000 and are
included in the principal amount of the securities.
6. BUSINESS SEGMENTS
Financial information for the Company's reportable segments consisted
of the following:
Three Months Ended Six Months Ended
December 24, December 26, December 24, December 26,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net sales
Automation $ 97,511 $ 66,975 $181,868 $127,768
Packaging 24,888 32,109 47,699 63,977
Other 9,026 8,898 18,309 17,366
-------- -------- -------- --------
Consolidated total $131,425 $107,982 $247,876 $209,111
======== ======== ======== ========
10
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 9
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The reconciliation of segment operating income (loss) to consolidated
income (loss) before income taxes consisted of the following:
Three Months Ended Six Months Ended
December 24, December 26, December 24, December 26,
2000 1999 2000 1999
---------------- --------------- --------------- ---------------
Automation $ 9,309 $ 2,124 $ 12,324 $ 2,247
Packaging (1,458) 2,300 (2,564) 4,383
-------- -------- -------- --------
Operating income for
reportable segments 7,851 4,424 9,760 6,630
Operating income for
immaterial businesses 333 599 735 823
Corporate (3,384) (2,001) (5,412) (4,226)
Interest expense (4,218) (2,642) (7,679) (4,440)
Accrued dividends on
Company-obligated,
mandatorily redeemable
convertible preferred
securities (1,365) (1,275) (2,707) (2,528)
-------- -------- -------- --------
Consolidated loss
before income taxes $ (783) $ (895) $ (5,303) $ (3,741)
======== ======== ======== ========
In the second quarter, results of operations of the Company's
Automation segment reflect the capitalization of $2,400 of certain
engineering costs on the first of multiple systems being manufactured
for a significant electronics customer. The Company will be amortizing
these engineering costs over the systems currently in backlog.
Corporate operating loss in the second quarter of fiscal 2001 includes
approximately $1,800 of non-recurring legal, professional and severance
costs as a result of the accounting irregularities.
7. SUPPLEMENTAL BALANCE SHEET INFORMATION
December 24, 2000 June 25, 2000
-------------------- ------------------
Inventories, net:
Raw materials $28,697 $26,776
Work in process 24,955 17,236
Finished goods 5,638 8,914
------- -------
$59,291 $52,926
======= =======
Accrued liabilities:
Accrued employee compensation and benefits $11,687 $14,747
Dividends on convertible preferred securities -- 5,146
Accrued warranty 2,040 2,566
Other 12,283 12,987
------- -------
$26,010 $35,446
======= =======
The dividends on convertible preferred securities have been classified
as long-term and included in the principal balance of the securities at
December 24, 2000.
11
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 10
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8. STOCK OPTION PLANS
A summary of stock option transactions pursuant to the 1994 Employee
Stock Option Plan, the 1994 Directors Non-Qualified Stock Option Plan
and the 1996 Long-Term Incentive Plan follows:
AVERAGE SHARES SUBJECT
PRICE TO OPTION
---------------- --------------
Options outstanding at June 25, 2000 $ 14.27 1,328,513
Options granted $ 4.62 102,000
Options exercised --- ---
Options forfeited $ 13.52 (264,546)
--------------
Options outstanding at December 24, 2000 $ 13.60 1,165,967
==============
Exercisable at December 24, 2000 703,042
==============
9. DERIVATIVES
Statement of Financial Accounting Standards No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities",
establishes accounting and reporting standards for derivative
instruments and for hedging activities and requires recognition of all
derivatives on the balance sheet at fair value. The Company adopted the
provisions of SFAS 133 during the fiscal year ended June 24, 2001. The
Company holds no material derivative financial instruments at or for
the six months ended December 24, 2000.
10. COMMITMENTS AND CONTINGENCIES
Following the Company's announcements in August and September 2000
regarding the restatements of previously reported financial statements,
the Company, its Kalish subsidiary and certain of their officers have
been named as defendants in at least five complaints in purported class
action lawsuits. 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 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.
12
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 11
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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 discussed in the Company's Annual
Report on Form 10-K for the fiscal year ended June 25, 2000. The
additional purchase price specified within the Kalish agreement, based
on earnings from the acquisition date to June 28, 1998, amounted to
$3,000 and was paid through a combination of stock and cash. This
additional purchase price was recorded as goodwill. Mr. Lewis, a former
director of the Company, was the controlling shareholder of Kalish
prior to its acquisition by the Company. Because of the overstatement
of certain asset accounts of the acquired business and the resulting
restatement of the Company's financial statements for fiscal years 1997
and 1998, the additional purchase price was recalculated to be zero. In
connection with the termination of Mr. Lewis' employment with the
Company, the Board of Directors requested Mr. Lewis' immediate
resignation from the Board and the Company made a written demand for
the return of the additional purchase price and any bonuses deemed
unearned as a result of the restatements. No amounts with respect
thereto have been reflected in the June 25, 2000 or December 24, 2000
consolidated financial statements. Mr. Lewis resigned from the Board
effective November 2, 2000. The Company intends to commence legal
action against Mr. Lewis in the third quarter to recover these amounts.
The Company is also a party to certain lawsuits involving employee
matters, product liability and other matters. Management does not
expect the outcome of any such litigation to have a material adverse
effect on the Company's financial position, results of operations or
liquidity.
13
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 12
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GENERAL OVERVIEW
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of DT Industries, Inc.
(DTI or the Company) for the three months ended December 24, 2000 compared to
the three months ended December 26, 1999. This discussion should be read in
conjunction with the consolidated financial statements and notes to the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the fiscal year ended June 25, 2000.
The Company primarily operates in two business segments, Automation and
Packaging. The Automation segment designs and builds integrated systems for the
assembly, test and handling of discrete products. The Packaging segment
manufactures tablet processing, counting and liquid filling systems and plastics
processing equipment, including thermoforming, blister packaging and
heat-sealing systems.
The percentage of completion method of accounting is used by the Company to
recognize revenues and related costs. Under the percentage of completion method,
revenues for customer contracts are measured based on the ratio of engineering
and manufacturing labor hours incurred to date compared to total estimated
engineering and manufacturing labor hours or, for certain customer contracts,
the ratio of total costs incurred to date to total estimated costs. Any
revisions in the estimated total costs or values of the contracts during the
course of the work are reflected when the facts that require the revisions
become known. For contracts not accounted for under the percentage of completion
method, revenue is recognized upon shipment to unaffiliated customers.
Costs and related expenses to manufacture the products are recorded as cost of
sales when the related revenue is recognized. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined.
Gross margins may vary in a given period as a result of the variations in
profitability of contracts for large orders of automated production systems or
special machines. In addition, changes in the product mix in a given period
affect gross margins.
Certain information contained in this report, particularly the information
appearing under the headings "Results of Operations", "Liquidity and Capital
Resources", "Backlog", and "Seasonality and Fluctuations in Quarterly Results",
includes forward-looking statements. These statements, comprising all statements
which are not historical, are based upon the Company's interpretation of what it
believes are significant factors affecting its businesses, including many
assumptions regarding future events, and are made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. References to
"opportunities", "growth potential", "objectives" and "goals", the words
"anticipate", "believe", "estimate", "expect", and similar expressions used
herein indicate such forward-looking statements. Actual results could differ
materially from those anticipated in any forward-looking statements as a result
of various factors, including economic downturns in industries or markets
served, delays or cancellations of customer orders, delays in shipping dates of
products, significant cost overruns on projects, excess product warranty
expenses, collectability of past due customer receivables, significant
restructuring or other special, non-recurring charges, foreign currency exchange
rate fluctuations, delays in achieving anticipated cost savings or in fully
implementing project and information management systems, availability of
financing at acceptable terms, changes in interest rates, increased inflation,
the outcome of pending litigation related to the previously announced accounting
irregularities, and the Company's ability to implement operational and financial
systems to manage the Company's decentralized operations. Additional information
regarding important factors that could cause actual results of operations or
outcomes of other events to differ materially from any such forward-looking
statement also appears elsewhere herein, including under the headings "Results
of Operations", "Liquidity and Capital Resources", "Backlog", and "Seasonality
and Fluctuations in Quarterly Results".
14
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 13
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
consolidated net sales represented by certain items reflected in the Company's
consolidated statement of operations:
Three Months Ended Six Months Ended
December 24, December 26, December 24, December 26,
2000 1999 2000 1999
---------------- --------------- --------------- ----------------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 81.2 79.3 82.0 79.7
---------------- --------------- --------------- ----------------
Gross profit 18.8 20.7 18.0 20.3
Selling, general and administrative
expenses 15.1 17.9 15.9 18.8
---------------- --------------- --------------- ----------------
Operating income 3.7 2.8 2.1 1.5
Interest expense 3.3 2.4 3.1 2.1
Dividends on Company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary DT
Capital Trust 1.0 1.2 1.1 1.2
---------------- --------------- --------------- ----------------
Loss before provision (benefit) for
income taxes (0.6) (0.8) (2.1) (1.8)
Provision (benefit) for income taxes 0.1 --- (0.5) (0.3)
---------------- --------------- --------------- ----------------
Net loss (0.7)% (0.8)% (1.6)% (1.5)%
================ =============== =============== ================
15
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 14
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THREE MONTHS ENDED DECEMBER 24, 2000
COMPARED TO THREE MONTHS ENDED DECEMBER 26, 1999
Consolidated net sales for the three months ended December 24, 2000 were $131.4
million, an increase of $23.4 million, or 21.7%, from $108.0 million for the
three months ended December 26, 1999. Net sales by segment were as follows (in
millions):
Three Months Ended Three Months Ended Increase
December 24, 2000 December 26, 1999 (Decrease)
------------------- ------------------- -------------------
Automation $ 97.5 $ 67.0 $ 30.5
Packaging 24.9 32.1 (7.2)
Other 9.0 8.9 0.1
------------- ------------- ----------
$ 131.4 $ 108.0 $ 23.4
============= ============= ==========
Automation segment sales increased $30.5 million, or 45.6%, to $97.5 million
during the three months ended December 24, 2000. The increase in sales is
primarily the result of the ongoing capital program within the Company's primary
electronics market. Order activity over the last 18 months from a significant
electronics customer has been strong and the outlook remains positive. The
Company is successfully cross-manufacturing these electronics assembly lines
across several automation business units. The Company expects continued strong
revenue recognition from its substantial electronics backlog throughout fiscal
2001.
Packaging segment sales decreased $7.2 million, or 22.5%, to $24.9 million
during the three months ended December 24, 2000. Plastics-related equipment
sales decreased $4.1 million or 41% primarily related to extrusion systems
where the Company has struggled to achieve expected profitability levels. The
Company has discontinued its extrusion business. Extrusion equipment sales in
the second quarter of fiscal 2000 were $3.5 million. Sales from the
Company's other packaging businesses also decreased substantially in the second
quarter of fiscal 2001 versus the second quarter of fiscal 2000. The decrease
in sales was across several product lines, primarily presses and liquid filling
systems. The Company has announced the integration of the Kalish, Lakso,
Swiftpack and King business units under common management and is seeking to
hire a president for this integrated business unit and to reestablish the sales
and marketing efforts.
Sales from the Company's other businesses primarily include Detroit Tool Metal
Products Company (DTMP), a stamping and fabrication business serving the heavy
trucking and agricultural equipment market. The Company expects lower sales for
the remainder of fiscal 2001 from the market downturn in heavy trucking. The
Company is seeking to sell DTMP as part of its divestiture program discussed
further under Liquidity and Capital Resources.
Gross profit increased $2.3 million, or 10.2%, to $24.7 million for the three
months ended December 24, 2000 from $22.4 million for the three months ended
December 26, 1999. The gross margin decreased to 18.8% from 20.7%. The decrease
reflects lower gross margins in the Packaging segment in the second quarter of
fiscal 2001. The Automation segment's gross margin increased slightly in the
second quarter versus the prior year's quarter.
The Packaging segment recognized significantly lower gross margins in the second
quarter of fiscal 2001 compared to the prior year's second quarter. The gross
margins are a reflection of the 22.5% decrease in sales and the resulting
increase in unfavorable manufacturing absorption and the ongoing low
profitability on certain projects at Kalish and Sencorp. Sencorp went through a
significant restructuring in the second quarter reducing overhead costs by $2.0
million annually primarily through a 20% headcount reduction. Sencorp's
strategic plans include focusing on its core product lines. The Kalish business
remains in a period of transition as the Company integrates it under common
management.
16
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 15
--------------------------------------------------------------------------------
The Automation segment's margins over the past three quarters reflect a
significant mix of lower margin electronics business. The lower margins are the
result of a number of contributing factors including the significant ramp up of
manufacturing headcount, the heavier use of contract labor and the substantial
engineering being incurred on the first of multiple systems. The slightly higher
gross margin of the Automation segment in the second quarter of fiscal 2001
reflects the capitalization of $2.4 million of certain engineering costs on the
first of multiple systems being manufactured for a significant electronics
customer. The first system was shipped in the second quarter. The Company will
be amortizing these engineering costs over the systems currently in backlog.
SG&A expenses were $19.9 million for the three months ended December 24, 2000
compared to $19.4 million for the three months ended December 26, 1999. The
Company incurred approximately $1.8 million in non-recurring legal,
professional, consulting and severance related expenses in the second quarter
related to the effects of the investigations at Kalish and Sencorp. These
expenses will continue in the third quarter and fourth quarters, although less
than the amounts expensed in the second quarter. Excluding the $1.8 million in
non-recurring expenses, SG&A expenses were down 6.7% from the prior year quarter
on substantially higher sales.
Operating income was $4.8 million for the three months ended December 24, 2000
versus $3.0 million for the three months ended December 26, 1999, as a result of
the factors noted above.
Interest expense increased $1.6 million, or 59.7%, to $4.2 million for the three
months ended December 24, 2000. The substantial increase pertains to both the
increase in the Company's interest rate on borrowings pursuant to the senior
secured credit facility and the increase in average borrowings outstanding.
Average interest rates have increased approximately 2 percentage points.
Borrowings have increased to fund working capital requirements. Dividends on the
convertible preferred securities were $1.4 million and $1.3 million for the
three months ended December 24, 2000 and December 26, 1999, respectively. The
dividends are currently being deferred and accrued as a result of the September
1999 amendment to the credit facility.
The provision for income taxes reflects book income plus permanent differences,
primarily non-deductible goodwill amortization related to certain acquisitions,
multiplied by statutory federal and applicable state tax rates.
Net loss was $0.9 million for the three months ended December 24, 2000 and
December 26, 1999. Basic and diluted loss per share were $0.09 for the three
months ended December 24, 2000 and December 26, 1999. Basic and diluted weighted
average shares outstanding were 10.1 million shares for the three months ended
December 24, 2000 and December 26, 1999.
17
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 16
--------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 24, 2000
COMPARED TO SIX MONTHS ENDED DECEMBER 26, 1999
Consolidated net sales for the six months ended December 24, 2000 were $247.9
million, an increase of $38.8 million, or 18.5%, from $209.1 million for the six
months ended December 26, 1999. Net sales by segment were as follows (in
millions):
Six Months Ended Six Months Ended Increase
December 24, 2000 December 26, 1999 (Decrease)
------------------ ----------------- ------------------
Automation $ 181.9 $ 127.7 $ 54.2
Packaging 47.7 64.0 (16.3)
Other 18.3 17.4 0.9
------------ ----------- -----------
$ 247.9 $ 209.1 $ 38.8
============ =========== ===========
Automation segment sales increased $54.2 million, or 42.3%, to $181.9 million
during the six months ended December 24, 2000. The increase in sales is
primarily the result of the ongoing capital program within the Company's primary
electronics market. Order activity over the last 18 months from a significant
electronics customer has been strong and the outlook remains positive. The
Company is successfully cross-manufacturing these electronics assembly lines
across several automation business units. The Company expects continued strong
revenue recognition from its substantial electronics backlog throughout fiscal
2001.
Packaging segment sales decreased $16.3 million, or 25.4%, to $47.7 million
during the six months ended December 24, 2000. Plastics-related equipment sales
decreased $5.6 million or 29% primarily related to extrusion systems where the
Company has struggled to achieve expected profitability levels. The Company has
discontinued its extrusion business. Extrusion equipment sales in the first six
months of fiscal 2000 were $6.7 million. Sales from the Company's other
packaging businesses also decreased substantially in the six months of fiscal
2001 versus the six months of fiscal 2000. The decrease in sales was across
several product lines including presses, counters, fillers and line integration
primarily to pharmaceutical and nutritional markets. The Company has announced
the integration of the Kalish, Lakso, Swiftpack and King business units under
common management and is seeking to hire a president for this integrated
business unit and to reestablish the sales and marketing efforts.
Sales from the Company's other businesses primarily include DTMP, a stamping and
fabrication business serving the heavy trucking and agricultural equipment
market. The Company expects lower sales for the remainder of fiscal 2001 from
the market downturn in heavy trucking. The Company is seeking to sell DTMP as
part of its divestiture program discussed further under Liquidity and Capital
Resources.
Gross profit increased $2.3 million, or 5.3%, to $44.7 million for the six
months ended December 24, 2000 from $42.4 million for the six months ended
December 26, 1999. The gross margin decreased to 18.0% from 20.3%. The decrease
in gross margins reflects decreased margins in both the Automation and Packaging
segments.
The margins in the Automation segment were down from the prior year primarily
reflecting lower margins on the new electronics business. The lower margins are
the result of a number of contributing factors including the significant ramp up
of manufacturing headcount, the heavier use of contract labor and the
substantial engineering being incurred on the first of multiple systems. The
margins during the current year reflect the capitalization of $2.4 million of
certain engineering costs on the first of multiple systems being manufactured
for a significant electronics customer. The first system was shipped in the
second quarter. The Company will be amortizing these engineering costs over the
systems currently in backlog.
18
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 17
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The Packaging segment recognized significantly lower gross margins in the six
months of fiscal 2001 versus the prior year's comparable six months. The gross
margins are a reflection of the 25.4% decrease in sales and the resulting
increase in unfavorable manufacturing absorption and the ongoing low
profitability on certain projects at Kalish and Sencorp. Sencorp went through a
significant restructuring in November 2000 reducing overhead costs by $2.0
million annually primarily through a 20% headcount reduction. Sencorp's
strategic plans include focusing on its core product lines. The Kalish business
remains in a period of transition as the Company integrates it under common
management.
SG&A expenses increased $0.4 million to $39.6 million for the six months ended
December 24, 2000 from $39.2 million for the six months ended December 26, 1999.
The Company incurred approximately $1.8 million in non-recurring legal,
professional, consulting and severance related expenses during the first six
months of fiscal 2001 related to the effects of the investigations at Kalish and
Sencorp. These expenses will continue in the third quarter and fourth quarters,
although less than the amounts expensed in the first six months. Excluding the
$1.8 million in non-recurring expenses, SG&A expenses were down 3.6% from the
prior year quarter on substantially higher sales.
Operating income increased $1.9 million, or 57.5%, to $5.1 million for the six
months ended December 24, 2000 from $3.2 million for the six months ended
December 26, 1999, as a result of the factors noted above.
Interest expense increased $3.2 million, or 73.0%, to $7.7 million for the six
months ended December 24, 2000. The substantial increase pertains to both the
increase in the Company's interest rate on borrowings pursuant to the senior
secured credit facility and the increase in average borrowings outstanding.
Borrowings have increased to fund working capital requirements. Dividends on the
convertible preferred securities were $2.7 million and $2.5 million for the six
months ended December 24, 2000 and December 26, 1999, respectively. The
dividends are currently being deferred and accrued in conjunction with the
amendment to the credit facility.
The income tax benefit was $1.3 million and $0.7 million for the six months
ended December 24, 2000 and December 26, 1999, respectively, reflecting an
effective tax benefit rate of approximately 23.6% and 19.2% for each period,
respectively. The income tax benefit reflects book losses less permanent
differences, primarily non-deductible goodwill amortization related to certain
acquisitions, multiplied by statutory federal tax rates. The income tax benefit
reflects minimal state tax benefits.
Net loss increased $1.1 million to $4.1 million for the six months ended
December 24, 2000 from $3.0 million for the six months ended December 26, 1999.
Basic and diluted losses per share were $(0.40) for the six months ended
December 24, 2000 compared to basic and diluted losses per share of $(0.30) for
the six months ended December 26, 1999, respectively. Basic and diluted weighted
average shares outstanding were 10.1 million for the six months ended December
24, 2000 and December 26, 1999.
19
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 18
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LIQUIDITY AND CAPITAL RESOURCES
The net loss plus non-cash operating charges provided $4.3 million of operating
cash flow for the six months ended December 24, 2000. Net increases in working
capital balances used operating cash of $20.6 million, resulting in net cash
used by operating activities of $16.3 million for the six months ended December
24, 2000. The higher working capital balances primarily reflect increased costs
and earnings in excess of amounts billed (CIE) and increased inventories,
partially offset by increased customer advances and lower trade receivables. The
increase in CIE and inventories is primarily in the Automation segment relating
to the high project activity and the timing of customer progress billings. The
higher customer advances reflect the continued higher order levels and several
larger projects at very early stages. Lower trade receivables primarily reflect
the low level of shipping across the Automation segment.
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 six months ended December 24, 2000, the Company borrowed $19.5
million on its revolving credit facility. The funds were used primarily for
working capital requirements discussed above, capital expenditures of $1.8
million and financing costs of $0.8 million.
During the six months ended December 26, 1999, the Company borrowed $21.4
million on its revolving credit facility. The funds were used for working
capital requirements, the acquisition of C. E. King for $2.1 million, capital
expenditures of $3.4 million and financing costs of $1.0 million. The Company
did have a large increase in cash at December 26, 1999, the result of some
significant customer payments received during the last few days of the quarter.
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 discussed in the Company's Annual Report on Form 10-K for the fiscal
year ended June 25, 2000. The additional purchase price specified within the
Kalish agreement, based on earnings from the acquisition date to June 28, 1998,
amounted to $3.0 million and was paid through a combination of stock and cash.
This additional purchase price was recorded as goodwill. Mr. Lewis, a former
director of the Company, was the controlling shareholder of Kalish prior to its
acquisition by the Company. Because of the overstatement of certain asset
accounts of the acquired business and the resulting restatement of the Company's
financial statements for fiscal years 1997 and 1998, the additional purchase
price was recalculated to be zero. In connection with the termination of Mr.
Lewis' employment with the Company, the Board of Directors requested Mr. Lewis'
immediate resignation from the Board and the Company made a written demand for
the return of the additional purchase price and any bonuses deemed unearned as a
result of the restatements. No amounts with respect thereto have been reflected
in the June 25, 2000 or December 24, 2000 consolidated financial statements. Mr.
Lewis resigned from the Board effective November 2, 2000. The Company intends to
commence legal action against Mr. Lewis in the third quarter to recover these
amounts.
The Company's credit facility includes a $130 million revolving credit facility
and a $10 million term credit facility and matures on July 2, 2001. Borrowings
under the amended credit facility bore interest at floating rates based on the
prime rate plus 2 3/8% or LIBOR plus 3 1/2% for foreign currency borrowings.
Borrowings under the credit facility are secured by substantially all of the
assets of DTI and its domestic subsidiaries. The Company had substantially no
borrowing availability under the credit facility as of December 24, 2000.
20
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 19
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As a result of the Company's fiscal 2000 financial results, the Company was in
default of a number of provisions of its senior credit agreement and another
agreement. The Company and the lenders amended the credit agreements effective
October 10, 2000. The amendment to the credit agreements included provisions
that amended the financial covenants, waived certain existing defaults of
covenants and breaches of representations and warranties and increased the
interest rate on borrowings made pursuant to the facility. From October 10, 2000
until February 14, 2001, all borrowings under the amended credit facility bear
interest at a floating rate based on the prime rate plus 2 3/8%, except for
foreign currency borrowings, which bear interest at a floating rate equal to
LIBOR plus 3 1/2%. After February 15, 2001, such borrowings will bear interest
at floating rates based on the prime rate plus 2 5/8% % or LIBOR plus 3 3/4%, as
applicable. The overall line of credit and maturity were not amended.
Since the Company's credit facility matures on July 2, 2001, borrowings of
$135.2 million under this facility have been presented within current
liabilities in the Company's December 24, 2000 consolidated balance sheet. The
Company has initiated discussions with several lenders for purposes of
refinancing borrowings under its credit facilities, and expects to complete such
refinancing prior to July 2, 2001, although there can be no assurance that such
refinancing will be completed by this date. The Company has also implemented
other cash management initiatives for fiscal 2001, including a reduction in
discretionary capital expenditures, increased focus on collections of accounts
receivable, accelerated payment terms from customers, among other things. On a
longer term basis, the Company has engaged an investment banking firm that is
actively marketing several business units with the proceeds being used to help
pay down debt. The business units expected to be divested include Detroit Tool
Metal Products Co., the Peer Division, Assembly Technology and Test, Inc., the
Stokes Division and the Scheu & Kniss Division. These five business units had
combined sales in fiscal 2000 of over $120 million. The Company is also working
on the sale of various other smaller businesses and a product line of the
Packaging segment. Also, the Company sold its airplane in January 2001.
In conjunction with an amendment to the credit facility in September 1999, the
Company elected to defer interest payments on its convertible junior
subordinated debentures. The credit facility requires that the deferral continue
until the maturity of the credit facility. As a result, quarterly distributions
on the Convertible Preferred Securities are also being deferred and DTI is not
declaring or paying any dividends on its common stock. Dividends on the
Convertible Preferred Securities in the amount of $7.9 million have been
deferred and accrued as of December 24, 2000.
Management currently anticipates that capital expenditures in the current fiscal
year will be approximately $4 million to $6 million. This includes recurring
replacement or refurbishment of machinery and equipment, and purchases to
improve production methods or processes or to expand manufacturing capabilities.
Funding for capital expenditures is expected to be provided by cash from
operating activities and through the Company's credit facilities.
Based on its ability to generate funds from operations and thereby increase the
availability of funds under its current credit facilities, the Company believes
that it will have sufficient funds available to meet its currently anticipated
operating and capital expenditure requirements.
21
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 20
--------------------------------------------------------------------------------
BACKLOG
The Company's backlog is based upon customer purchase orders that the Company
believes are firm. As of December 24, 2000, the Company had $306.5 million of
orders in backlog, which compares to a backlog of approximately $253.3 million
as of December 26, 1999.
The backlog for the Automation segment at December 24, 2000 was $264.4 million,
which increased $57.8 million or 28.0% from a year ago. The increase is a result
of significant bookings over the last 12 months primarily from the electronics
industry. The Company also booked a significant project in the first quarter of
fiscal 2001 in the diesel engine market. The Company remains cautious about
order expectations for the remainder of fiscal 2001. Backlog for the Packaging
segment was $32.5 million, a decrease of $4.8 million over the comparable period
in fiscal 2000. The decrease in backlog is primarily due to the soft order
activity for Kalish and Sencorp in the first six months of fiscal 2001.
The level of backlog at any particular time is not necessarily indicative of the
future operating performance of the Company. Additionally, certain purchase
orders are subject to cancellation by the customer upon notification. Certain
orders are also subject to delays in completion and shipment at the request of
the customer. The Company believes that a majority of the orders in the backlog
will be recognized as sales during the current fiscal year.
SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS
In general, the Company's business is not subject to seasonal variations in
demand for its products. However, because orders for certain of the Company's
products can be several million dollars, a relatively limited number of orders
can constitute a meaningful percentage of the Company's revenue in any one
quarterly period. As a result, a relatively small reduction or delay in the
number of orders can have a material impact on the timing of recognition of the
Company's revenues. Certain of the Company's revenues are derived from fixed
price contracts. To the extent that original cost estimates prove to be
inaccurate, profitability from a particular contract may be adversely affected.
Gross margins may vary between comparable periods as a result of the variations
in profitability of contracts for large orders of special machines as well as
product mix between the various types of custom and proprietary equipment
manufactured by the Company. Accordingly, results of operations of the Company
for any particular quarter are not necessarily indicative of results that may be
expected for any subsequent quarter or related fiscal year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Market Risk of the Company's Annual Report on Form 10-K for the
year ended June 25, 2000. There has been no material change to that information
that is required to be disclosed in this Quarterly Report on Form 10-Q.
22
DT INDUSTRIES, INC.
PART II. OTHER INFORMATION
PAGE 21
--------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
Following the Company's announcements in August and September 2000
regarding the restatements of previously reported financial statements,
the Company, its Kalish subsidiary and certain of their officers have
been named as defendants in at least five complaints in purported class
action lawsuits. 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 is currently evaluating these claims and possible
defenses thereto and intends to defend these suits vigorously.
While it is not feasible to predict or determine the final outcome of
the Securities Actions or similar proceedings, or to estimate the
amounts or potential range of loss with respect to these matters,
management believes the Company and its officers and directors have
adequate liability insurance to cover the liabilities, costs and
expenses arising out of the Securities Actions, although there can be
no assurance that the insurance proceeds will be adequate to cover any
such losses. Further there can be no assurance that an adverse outcome
with respect to the Securities Actions will not have a material adverse
impact on the Company's financial condition, results of operations or
cash flow.
The Company is also a party to certain lawsuits involving employee
matters, product liability and other matters. Management does not
expect the outcome of any such litigation to have a material adverse
effect on the Company's financial position, results of operations or
liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 9, 2000, the Annual Meeting of the Stockholders of DTI was
held, at which the following matters were voted upon:
1. Election of Directors. Each of the following nominees received
the number of votes set forth opposite his name:
FOR WITHHELD
----------------- ------------------
Class I James J. Kerley 6,078,146 3,476,393
(term expires 2003) Charles F. Pollnow 7,469,727 2,084,812
John F. Logan 7,468,815 2,085,724
2. Ratification of Appointment of Accountants for the fiscal year
ending June 24, 2001. The vote to ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants for the
fiscal year ending June 24, 2001 was 8,161,546 for, 1,384,987
against and 8,006 abstaining.
3. Stockholder Proposal Regarding Rights Plan. The vote on the
stockholder proposal recommending that the Board of Directors
terminate the Company's Rights Plan and redeem the rights
distributed thereunder was 4,502,609 for, 3,704,806 against,
140,870 abstaining and 1,206,247 broker non-votes.
23
DT INDUSTRIES, INC.
PART II. OTHER INFORMATION
PAGE 22
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ITEM 5. OTHER INFORMATION
On November 17, 2000, the Board of Directors of the Company amended the
Company's By-laws. The specific amendments to the By-laws and the full
text of the Amended and Restated By-laws are attached as Exhibits 3.1
and 3.2, respectively. Specifically, the By-laws were amended to
provide that (i) at all times, at least a majority of the Company's
directors shall be "Independent Directors", as such term is defined as
of November 17, 2000 by the Council of Institutional Investors; and
(ii) that the Audit and Finance Committee of the Board of Directors
shall be composed entirely of Independent Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 3.1 Amendment to By-Laws of the Company
Exhibit 3.2 Amended and Restated By-Laws of the Company
Exhibit 10 Seventh Amendment to Fourth Amended and Restated
Credit Facilities Agreement, dated as of October
10, 2000, among Bank of America, N.A., formerly
NationsBank, N.A., as Administrative Agent, and
Bank of America, N.A. and the other Lenders
listed therein and DT Industries, Inc. and the
other Borrowers listed therein.
Exhibit 11 - Statement Regarding Computation of Earnings Per
Share
(b) Reports on Form 8-K:
On September 19, 2000, a Current Report on Form 8-K was filed
to report, pursuant to Item 5 and 7 thereof, a restructuring
of the Company's senior management team, the expansion of the
accounting investigation, and that the Plaster Group proposal
relating to the management of the Company had been considered
and rejected.
On October 18, 2000, a Current Report on From 8-K was filed to
report, pursuant to Items 5 and 7 thereof, the release of the
Company's restatement of its financial data for fiscal years
1997, 1998 and 1999, as well as the first three quarters of
fiscal 2000, the release of the Company's earnings for the
three and twelve months ended June 25, 2000, and the amendment
of the Company's credit facility.
On November 7, 2000, a Current Report on Form 8-K was filed to
report, pursuant to Items 5 and 7 thereof, a release
announcing Stephen J. Perkins as the Company's new President
and Chief Executive Officer.
On November 9, 2000, a Current Report on Form 8-K was filed to
report, pursuant to Items 5 and 7 thereof, the release of the
Company's earnings for the three months ended September 24,
2000.
24
DT INDUSTRIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DT INDUSTRIES, INC.
Date: February 7, 2001 /s/ John M. Casper
-----------------------------------
(Signature)
John M. Casper
Senior Vice President, Finance and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
25
EXHIBIT INDEX
Exhibit 3.1 Amendments to By-Laws of the Company
Exhibit 3.2 Amended and Restated By-Laws of the Company
Exhibit 10 Seventh Amendment to Fourth Amended and Restated Credit
Facilities Agreement, dated as of October 10, 2000, among Bank
of America, N.A., formerly NationsBank, N.A., as
Administrative Agent, and Bank of America, N.A. and the other
Lenders listed therein and DT Industries, Inc. and the other
Borrowers listed therein.
Exhibit 11 Statement Regarding Computation of Earnings Per Share