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 March 25, 2001
-------------------------------------------------
Commission File Number: 0-23400
DT INDUSTRIES, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 44-0537828
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1949 E. Sunshine, Suite 2-300, Springfield, Missouri 65804
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(417) 890-0102
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares of Common Stock, $0.01 par value, of the registrant
outstanding as of May 4, 2001 was 10,337,274.
----------- ----------
2
DT INDUSTRIES, INC.
INDEX
PAGE 1
--------------------------------------------------------------------------------
Page
Number
Part I Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at March 25, 2001
and June 25, 2000 2
Consolidated Statement of Operations for the three and
nine months ended March 25, 2001 and March
26, 2000 3
Consolidated Statement of Changes in Stockholders'
Equity for the nine months ended March 25,
2001 4
Consolidated Statement of Cash Flows for the nine
months ended March 25, 2001 and March
26, 2000 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 3. Defaults Upon Senior Securities 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures
3
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 2
--------------------------------------------------------------------------------
March 25, June 25,
2001 2000
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 6,884 $ 8,705
Accounts receivable, net 52,179 58,924
Costs and estimated earnings in excess of amounts
billed on uncompleted contracts 109,292 94,925
Inventories, net 66,913 52,926
Prepaid expenses and other 18,662 14,296
--------- ---------
Total current assets 253,930 229,776
Property, plant and equipment, net 66,650 73,218
Goodwill, net 168,214 173,823
Other assets, net 3,264 4,253
--------- ---------
$ 492,058 $ 481,070
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 671 $ 713
Senior secured term and revolving credit facility (Note 4) 118,246 --
Accounts payable 46,414 47,189
Customer advances 40,683 22,411
Accrued liabilities 27,911 35,446
--------- ---------
Total current liabilities 233,925 105,759
--------- ---------
Senior secured term and revolving credit facility (Note 4) -- 116,928
Other long-term debt 7,657 9,216
Deferred income taxes 10,375 10,375
Other long-term liabilities 3,676 3,709
--------- ---------
Total long-term obligations 21,708 140,228
--------- ---------
Commitments and contingencies (Note 10)
Company-obligated, mandatorily redeemable convertible
preferred securities of subsidiary DT Capital Trust holding solely
convertible junior subordinated debentures of the Company 79,241 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; 10,157,274 and 10,107,274 shares outstanding, respectively 113 113
Additional paid-in capital 132,247 133,348
Retained earnings 56,891 64,378
Cumulative translation adjustment (2,462) (1,978)
Unearned portion of restricted stock (204) --
Treasury stock (1,218,488 and 1,268,488 shares, respectively), at cost (29,401) (30,778)
--------- ---------
Total stockholders' equity 157,184 165,083
--------- ---------
$ 492,058 $ 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
--------------------------------------------------------------------------------
Three months ended Nine months ended
March 25, March 26, March 25, March 26,
2001 2000 2001 2000
------------ ----------- ------------ ------------
Net sales $ 123,965 $ 121,995 $ 371,841 $ 331,105
Cost of sales 103,371 95,958 306,567 262,624
------------ ----------- ------------ ------------
Gross profit 20,594 26,037 65,274 68,481
Selling, general and
administrative expenses 19,456 19,688 59,052 58,906
Net loss on disposal of assets 558 -- 558 --
------------ ----------- ------------ ------------
Operating income 580 6,349 5,664 9,575
Interest expense 3,776 2,834 11,455 7,274
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 1,387 1,298 4,095 3,826
------------ ----------- ------------ ------------
Income (loss) before provision
(benefit) for income taxes (4,583) 2,217 (9,886) (1,525)
Provision (benefit) for income
taxes (1,149) 1,114 (2,399) 396
------------ ----------- ------------ ------------
Net income (loss) $ (3,434) $ 1,103 $ (7,487) $ (1,921)
============ =========== ============ ============
Net earnings (loss) per common
share:
Basic $ (0.34) $ 0.11 $ (0.74) $ (0.19)
Diluted $ (0.34) $ 0.11 $ (0.74) $ (0.19)
============ =========== ============ ============
Weighted average common
shares outstanding:
Basic 10,154,163 10,107,274 10,129,995 10,107,274
Diluted 10,154,163 10,216,318 10,129,995 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 NINE MONTHS ENDED MARCH 25, 2001
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 4
--------------------------------------------------------------------------------
Accumulated Unearned
other Additional portion of
Retained comprehensive Common paid-in Treasury restricted
earnings loss stock capital stock stock Total
--------------------------------------------------------------------------------------------
Balance, June 25, 2000 $ 64,378 $ (1,978) $ 113 $ 133,348 $ (30,778) -- $ 165,083
Comprehensive loss:
Net loss (7,487)
Foreign currency translation (484)
Total comprehensive loss (7,971)
Issuance of 50,000 shares of
restricted stock to executive
management (1,173) 1,377 (204) --
Payment on stock subscriptions
receivable 72 72
--------------------------------------------------------------------------------------------
Balance, March 25, 2001 $ 56,891 $ (2,462) $ 113 $ 132,247 $ (29,401) $ (204) $ 157,184
============================================================================================
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
--------------------------------------------------------------------------------
Nine Months Ended
March 25, March 26,
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,487) $ (1,921)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 7,243 8,252
Amortization 5,311 4,573
Net loss on disposal of assets 558 --
(Increase) decrease in current assets, excluding the
effect of acquisitions/dispositions:
Accounts receivable 6,745 (20,161)
Costs and earnings in excess of amounts billed (14,367) (1,966)
Inventories (15,739) 964
Prepaid expenses and other (3,774) 7,069
Increase (decrease) in current liabilities, excluding the
effect of acquisitions/dispositions:
Accounts payable (774) (6,131)
Customer advances 19,178 (1,856)
Accrued liabilities and other (2,657) (4,530)
-------- --------
Net cash used by operating activities (5,763) (11,762)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,649) (4,539)
Acquisition of C.E. King net assets -- (2,116)
Proceeds from the sale of assets 2,008 --
Other -- (621)
-------- --------
Net cash used by investing activities (641) (7,276)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from revolving loans 3,791 18,686
Payments on borrowings (1,611) (443)
Deferral of dividends on convertible preferred securities 4,095 3,826
Financing costs (1,160) (1,143)
Payments on stock subscriptions receivable 72 --
-------- --------
Net cash provided by financing activities 5,187 17,100
-------- --------
Effect of exchange rate changes (604) (1,368)
-------- --------
Net decrease in cash (1,821) (3,306)
Cash and cash equivalents at beginning of period 8,705 10,487
-------- --------
Cash and cash equivalents at end of period $ 6,884 $ 7,181
======== ========
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
--------------------------------------------------------------------------------
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 accounting principles generally accepted in
the United States.
3. ACQUISITIONS AND DISPOSITIONS
In March 2001, the Company completed the sale of substantially all of
the assets of Vanguard Technical Solutions, Inc., a wholly-owned
subsidiary of DT Industries, Inc., for approximately $523. The loss on
the sale, including the write-off of certain other remaining assets,
was approximately $1,152. The Company also sold its corporate airplane
in January 2001 for approximately $1,465 recording a gain of
approximately $640.
The pro forma effects of the above dispositions are not material to the
Company's financial results for the nine months ended March 25, 2001.
8
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 7
--------------------------------------------------------------------------------
4. FINANCING
As of March 25, 2001 and June 25, 2000, long-term debt consisted of the
following:
March 25, June 25,
2001 2000
--------- --------
Term and revolving loans under senior credit facility:
Term loan $ 9,888 $ 10,000
Revolving loans 108,358 106,928
Other long-term debt 8,328 9,929
--------- ---------
126,574 126,857
Less - senior credit facility maturing July 2, 2001 118,246 --
Less - current portion of other long-term debt 671 713
--------- ---------
$ 7,657 $ 126,144
========= =========
The Company's credit facility includes a $128,542 revolving credit
facility and a $9,888 term credit facility and matures on July 2, 2001.
Borrowings under the senior credit facility bear interest at floating
rates based on the prime rate plus 2 5/8% or LIBOR plus 3 3/4% (at the
option of DTI). Borrowings under the credit facility are secured by
substantially all of the assets of DTI and its domestic subsidiaries.
Because the company's credit facility matures on July 2, 2001,
borrowings of $118,246 under this facility have been presented within
current liabilities in the Company's March 25, 2001 consolidated
balance sheet. Total borrowing availability under the credit facility
as of March 25, 2001 was $14,850.
As a result of the Company's third quarter financial results, the
Company is in default of certain financial covenants under its senior
credit agreement and another agreement. The Company has obtained a
temporary waiver of existing defaults of covenants and breaches of
representations and warranties. The Company expects to announce before
the end of the fourth quarter that it has reached an agreement with its
lenders to amend the covenants under the senior credit agreement of
which the Company is currently in default and to extend by 12 months
the maturity of the credit facility, although there can be no assurance
that such agreement will be reached. If the Company fails to obtain the
necessary amendments, it will continue to be in default under such
covenants and in breach of its representations and warranties.
Accordingly, the lenders could accelerate their debt under the senior
credit agreement.
9
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 8
--------------------------------------------------------------------------------
5. COMPANY-OBLIGATED, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF SUBSIDIARY DT CAPITAL TRUST HOLDING SOLELY CONVERTIBLE
JUNIOR SUBORDINATED DEBENTURES OF THE COMPANY (CONVERTIBLE PREFERRED
SECURITIES)
On June 12, 1997, the Company completed a private placement to
institutional investors of 1,400,000 7.16% Convertible Preferred
Securities (liquidation preference of $50 per Convertible Preferred
Security). The placement was made through the Company's wholly owned
subsidiary, DT Capital Trust (Trust), a Delaware business trust. The
securities represent undivided beneficial ownership interests in the
Trust. The sole asset of the Trust is the $72,165 aggregate principal
amount of the 7.16% Convertible Junior Subordinated Deferrable Interest
Debentures Due 2012 of the Company, which were acquired by the Trust
with the proceeds from the offering as well as the sale of Common
Securities of the Trust to the Company. The Company's obligations under
the Convertible Junior Subordinated Debentures, the Indenture pursuant
to which they were issued, the Amended and Restated Declaration of
Trust of the Trust and the Guarantee of DTI, taken together, constitute
a full and unconditional guarantee by DTI of amounts due on the
Convertible Preferred Securities. The Convertible Preferred Securities
are convertible at the option of the holders at any time into the
common stock of DTI at an effective conversion price of $38.75 per
share, are redeemable at DTI's option after June 1, 2000 and are
mandatorily redeemable in 2012. The net proceeds of the offering of
approximately $67,750 were used by DTI to retire indebtedness. In
conjunction with an amendment to the Company's senior credit facility
in September 1999, the Company elected to defer interest payments on
the Convertible Junior Subordinated Debentures. As a result, quarterly
distributions on the Convertible Preferred Securities have also been
deferred and DTI will not declare or pay dividends on its common stock.
Dividends on the Convertible Preferred Securities in the amount of
$9,241 have been deferred and accrued as of March 25, 2001 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 Nine Months Ended
March 25, March 26, March 25, March 26,
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales
Automation $ 95,409 $ 81,633 $ 277,277 $ 209,401
Packaging 19,682 30,004 67,381 93,981
Other
8,874 10,358 27,183 27,723
---------- --------- --------- ---------
Consolidated total $ 123,965 $ 121,995 $ 371,841 $ 331,105
========== ========= ========= =========
10
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 9
--------------------------------------------------------------------------------
The reconciliation of segment operating income (loss) to consolidated
income (loss) before income taxes consisted of the following:
Three Months Ended Nine Months Ended
March 25, March 26, March 25, March 26,
2001 2000 2001 2000
--------- --------- --------- --------
Automation $ 5,574 $ 5,288 $ 17,825 $ 7,535
Packaging (1,995) 1,881 (4,559) 6,263
-------- -------- --------- ---------
Operating income for
reportable segments 3,579 7,169 13,266 13,798
Operating income for
immaterial businesses 144 1,129 878 1,951
Net loss on disposal of
assets (558) -- (558) --
Corporate (2,585) (1,949) (7,922) (6,174)
Interest expense (3,776) (2,834) (11,455) (7,274)
Accrued dividends on
Company-obligated,
mandatorily redeemable
convertible preferred
securities (1,387) (1,298) (4,095) (3,826)
-------- -------- --------- ---------
Consolidated loss
before income taxes $ (4,583) $ 2,217 $ (9,886) $ (1,525)
======== ======== ========= =========
The results of operations of the Company's Automation segment for the
nine months ended March 25, 2001 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 is
amortizing these engineering costs over the systems currently in
backlog. Approximately $600 was amortized in the three months ended
March 25, 2001.
Corporate operating loss for the three and nine months ended March 25,
2001 includes approximately $800 and $2,600, respectively, of
non-recurring legal, professional and severance costs as a result of
the accounting irregularities.
7. SUPPLEMENTAL BALANCE SHEET INFORMATION
March 25, 2001 June 25, 2000
-------------- -------------
Inventories, net:
Raw materials $ 28,081 $ 26,776
Work in process 32,844 17,236
Finished goods 5,988 8,914
-------------- -------------
$ 66,913 $ 52,926
============== =============
Accrued liabilities:
Accrued employee compensation and benefits $ 12,327 $ 14,747
Dividends on convertible preferred securities -- 5,146
Accrued warranty 2,442 2,566
Other 13,142 12,987
-------------- -------------
$ 27,911 $ 35,446
============== =============
11
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 10
--------------------------------------------------------------------------------
The dividends on convertible preferred securities have been classified
as long-term and included in the principal balance of the securities at
March 25, 2001.
8. STOCK COMPENSATION 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 $ 4.58 122,000
Options exercised -- --
Options forfeited $ 13.30 (323,746)
--------------
Options outstanding at March 25, 2001 $ 13.50 1,126,767
==============
Exercisable at March 25, 2001 680,292
==============
During fiscal 2001, the Company issued 50,000 shares of restricted
common stock of the Company with three and four-year vesting periods.
Upon issuance of the restricted shares, unearned compensation
equivalent to the market value at the date of grant was charged to
Stockholders' Equity and will be amortized to expense over the vesting
period. The lapsing of restrictions on these shares will be accelerated
in certain circumstances, one of which is a change in control of the
Company.
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 nine months ended March 25, 2001.
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 directors and
officers were named as defendants in five complaints in putative class
action lawsuits. During the third quarter, these actions were
consolidated into a single class action and an amended complaint was
filed (the "Securities Action") adding the Company's Sencorp subsidiary
and certain additional officers and directors as defendants. The
Consolidated Amended Complaint asserts causes of action under Section
10(b), and Rule 10b-5 promulgated thereunder, and Section 20(a) of the
Securities Exchange Act of 1934, and alleges, among other things, that
the accounting irregularities caused the Company's previously issued
financial statements to be materially false and misleading. The
Consolidated Amended Complaint also seeks damages in an unspecified
amount and purports 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 currently
is evaluating these claims asserted as well as possible defenses
thereto and intends to defend the Securities Action vigorously.
While it is not feasible to predict or determine the final outcome of
the Securities Action or similar proceedings, or to estimate the
amounts or potential range of loss with respect to these matters,
management believes the Company, its subsidiaries and their officers
and directors have adequate liability insurance to cover the
liabilities, costs and expenses arising out of the Securities Action,
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 Action will not
have a material adverse impact on the Company's financial condition,
results of operations or cash flow.
In addition, in November 1998, pursuant to the agreement by which the
Company acquired Kalish, Mr. Graham L. Lewis, a former director of the
Company, received an additional payment based on Kalish's earnings for
each of the three years after the closing. As a result of the
restatement discussed in the Company's Annual Report on Form 10-K for
the fiscal year ended June 25, 2000, the Company believes that the
additional payment should not have been made. During the third
quarter, the Company commenced legal action against Mr. Lewis to
recover this payment, and Mr. Lewis has counter-sued for wrongful
termination against the Company. Management believes that the
Company's suit against Mr. Lewis has merit. Management further
believes that Mr. Lewis' counter-suit is without merit and the Company
intends to defend this counter-suit vigorously.
12
DT INDUSTRIES, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PAGE 11
--------------------------------------------------------------------------------
The Company also is 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
--------------------------------------------------------------------------------
GENERAL OVERVIEW
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of DT Industries, Inc.
(DTI or the Company) for the three and nine months ended March 25, 2001 compared
to the three and nine months ended March 26, 2000. 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.
The Company is reviewing various policies in place related to the valuation and
collection of accounts receivable and the valuation and disposal of inventories.
An assessment of the impairment of goodwill is also expected to be completed in
the fourth quarter. Upon completion of such reviews, the Company anticipates
possible charges in the fourth quarter, including a restructuring charge within
the Packaging segment related to the closure of a facility and the downsizing of
personnel.
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
14
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 13
--------------------------------------------------------------------------------
terms, ability to obtain amendments of, the Company's senior credit agreement,
the Company's ability to sell existing business units on favorable 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".
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 Nine Months Ended
March 25, March 26, March 25, March 26,
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 83.4 78.7 82.4 79.3
--------- --------- --------- ---------
Gross profit 16.6 21.3 17.6 20.7
Selling, general and administrative
expenses 15.7 16.1 15.9 17.8
Net loss on disposal of assets 0.4 -- 0.2 --
--------- --------- --------- ---------
Operating income 0.5 5.2 1.5 2.9
Interest expense 3.1 2.3 3.1 2.2
Dividends on Company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary DT
Capital Trust 1.1 1.1 1.1 1.2
--------- --------- --------- ---------
Income loss before provision (benefit)
for income taxes (3.7) 1.8 (2.7) (0.5)
Provision (benefit) for income taxes (0.9) 0.9 (0.7) 0.1
--------- --------- --------- ---------
Net income (loss) (2.8)% 0.9% (2.0)% (0.6)%
========= ========= ========= =========
15
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 14
--------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 25, 2001
COMPARED TO THREE MONTHS ENDED MARCH 26, 2000
Consolidated net sales for the three months ended March 25, 2001 were $124.0
million, an increase of $2.0 million, or 1.6%, from $122.0 million for the three
months ended March 26, 2000. Net sales by segment were as follows (in millions):
Three Months Ended Three Months Ended Increase
March 25, 2001 March 26, 2000 (Decrease)
------------------ ------------------ ----------
Automation $ 95.4 $ 81.6 $ 13.8
Packaging 19.7 30.0 (10.3)
Other 8.9 10.4 (1.5)
------------------ ------------------ ----------
$ 124.0 $ 122.0 $ 2.0
================== ================== ==========
Automation segment sales increased $13.8 million, or 16.9%, to $95.4 million
during the three months ended March 25, 2001. The increase in sales is primarily
the result of the ongoing capital program within the Company's primary
electronics market. The Company is cross-manufacturing these electronics
assembly systems across several automation business units. The Company expects
continued strong revenue recognition into fiscal 2002 from its substantial
electronics backlog.
Packaging segment sales decreased $10.3 million, or 34.4%, to $19.7 million
during the three months ended March 25, 2001. Plastics-related equipment sales
were down approximately $6.8 million from a combination of the discontinued
extrusion business and significantly lower sales of thermoforming equipment.
Extrusion equipment sales were approximately $3.3 million in the third quarter
of fiscal 2000. Sales from the Company's Kalish business also continue to be
below prior year levels. The Company has hired a new president to assume
responsibility over the Kalish, Lakso, Swiftpack and King business units.
Sales from the Company's other businesses, primarily from Detroit Tool Metal
Products Company (DTMP), a stamping and fabrication business serving the heavy
trucking and agricultural equipment market, decreased $1.5 million, or 14.3%, to
$8.9 million during the three months ended March 25, 2001. 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 decreased $5.4 million, or 20.9%, to $20.6 million for the three
months ended March 25, 2001 from $26.0 million for the three months ended March
26, 2000. The gross margin decreased to 16.6% from 21.3%. The decrease reflects
lower gross margins across all business segments in the third quarter.
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 Company expects
improving Automation segment gross margins on future repetitive systems in
backlog.
The Packaging segment recognized lower gross margins in the third quarter of
fiscal 2001 primarily from the softness in sales and the resulting unfavorable
manufacturing variances. The Company has restructured both Sencorp and Kalish,
significantly reducing labor and overhead costs from prior year levels. The
Company continues to monitor these businesses closely. The Company is actively
marketing the Stokes press and Scheu & Kniss press parts businesses for sale.
Both of these businesses recognized lower gross margins in the third quarter.
16
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 15
--------------------------------------------------------------------------------
SG&A expenses were $19.5 million for the three months ended March 25, 2001
compared to $19.7 million for the three months ended March 26, 2000. The Company
incurred approximately $0.8 million of non-recurring special legal and
professional expenses in the third quarter. These non-recurring legal and
professional expenses related to the accounting irregularities discovered in the
first quarter will continue in future quarters, although the Company expects the
amounts will be less than the amounts expensed in the third quarter.
In the third quarter, the Company sold its corporate airplane and substantially
all of the net assets of its Vanguard business. Proceeds from the sales of these
assets were approximately $2.0 million resulting in a pre-tax loss of $0.6
million.
Operating income was $0.6 million for the three months ended March 25, 2001
versus $6.3 million for the three months ended March 26, 2000, as a result of
the factors noted above.
Interest expense increased $0.9 million, or 33.2%, to $3.8 million for the three
months ended March 25, 2001. 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 March 25, 2001 and March 26, 2000, 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 $3.4 million for the three months ended March 25, 2001 versus net
income of $1.1 million for the three months ended March 26, 2000. Basic and
diluted loss per share were $(0.34) for the three months ended March 25, 2001
compared to basic and diluted earnings per share of $0.11 for the quarter ended
March 26, 2000. Basic and diluted weighted average shares outstanding were
approximately 10.2 million shares for the three months ended March 25, 2001 and
March 26, 2000.
17
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 16
--------------------------------------------------------------------------------
NINE MONTHS ENDED MARCH 25, 2001
COMPARED TO NINE MONTHS ENDED MARCH 26, 2000
Consolidated net sales for the nine months ended March 25, 2001 were $371.8
million, an increase of $40.7 million, or 12.3%, from $331.1 million for the
nine months ended March 26, 2000. Net sales by segment were as follows (in
millions):
Nine Months Ended Nine Months Ended Increase
March 25, 2001 March 26, 2000 (Decrease)
----------------- ----------------- ----------
Automation $ 277.3 $ 209.4 $ 67.9
Packaging 67.4 94.0 (26.6)
Other 27.1 27.7 (0.6)
----------------- ----------------- ----------
$ 371.8 $ 331.1 $ 40.7
================= ================= ==========
Automation segment sales increased $67.9 million, or 32.4%, to $277.3 million
during the nine months ended March 25, 2001. The increase in sales is primarily
the result of the ongoing capital program within the Company's primary
electronics market. The Company is cross-manufacturing these electronics
assembly systems across several automation business units. The Company expects
continued strong revenue recognition into fiscal 2002 from its substantial
electronics backlog.
Packaging segment sales decreased $26.6 million, or 28.3%, to $67.4 million
during the nine months ended March 25, 2001. Plastics-related equipment sales
were down approximately $12.4 million from a combination of the discontinued
extrusion business and significantly lower sales of thermoforming equipment.
Extrusion equipment sales were approximately $10.0 million for the nine months
of fiscal 2000. Sales from the Company's other packaging businesses also
decreased substantially in the first nine months of fiscal 2001 versus the first
nine 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 hired a new president to
assume responsibility over the Kalish, Lakso, Swiftpack and King business units.
The Company is actively marketing the Stokes press business and the Scheu &
Kniss press parts business for sale.
Sales from the Company's other businesses, primarily DTMP, decreased $0.6
million, or 1.9%, to $27.1 million during the nine months ended March 25, 2001.
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 decreased $3.2 million, or 4.7%, to $65.3 million for the nine
months ended March 25, 2001 from $68.5 million for the nine months ended March
26, 2000. The gross margin decreased to 17.6% from 20.7%. The decrease reflects
lower gross margins across all business segments in the third quarter.
The Automation segment's margins over the first nine months of fiscal 2001
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 margins during the current year reflect the capitalization of $2.4
million of certain engineering costs on the first system manufactured for this
electronics customer. The first system was shipped in the second quarter. The
Company is amortizing these engineering costs over the systems currently in
backlog. Approximately $0.6 million was amortized in the three months ended
March 25, 2001. The Company expects improving Automation segment gross margins
on the future repetitive systems.
18
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 17
--------------------------------------------------------------------------------
The Packaging segment recognized significantly lower gross margins in the first
nine months of fiscal 2001 versus the prior year's comparable nine months. The
gross margins are a reflection of the 28.3% decrease in sales and the resulting
increase in unfavorable manufacturing absorption. The Company has significantly
restructured both the Sencorp and Kalish operations in fiscal 2001 reducing
headcount and overhead costs. Headcount at Sencorp and Kalish have been reduced
approximately 30% and 45%, respectively. The Company continues to monitor these
businesses closely. The Company is actively marketing the Stokes and Scheu &
Kniss businesses for sale. Both of these businesses recognized lower gross
margins in the quarter.
SG&A expenses were substantially flat at $59.1 million versus $58.9 million for
the nine months ended March 25, 2001 and March 26, 2000, respectively. The
Company incurred approximately $2.6 million in non-recurring legal,
professional, consulting and severance related expenses during the first nine
months of fiscal 2001 related to the effects of the investigations of the
accounting irregularities at Kalish and Sencorp. These expenses will continue in
future quarters, although the Company expects the amounts will be less than the
amounts incurred in the third quarter. Excluding the $2.6 million in
non-recurring expenses, SG&A expenses were down 4.1% from the prior year nine
months.
In the third quarter, the Company sold its corporate airplane and substantially
all of the net assets of its Vanguard business. Proceeds from the sales of these
assets were approximately $2.0 million resulting in a pre-tax loss of $0.6
million.
Operating income decreased $3.9 million, or 40.8%, to $5.7 million for the nine
months ended March 25, 2001 from $9.6 million for the nine months ended March
26, 2000, as a result of the factors noted above.
Interest expense increased $4.2 million, or 57.5%, to $11.5 million for the nine
months ended March 25, 2001. 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 $4.1 million and $3.8 million for the nine
months ended March 25, 2001 and March 26, 2000, respectively. The dividends are
currently being deferred and accrued in conjunction with the September 1999
amendment to the credit facility.
The income tax benefit was $2.4 million for the nine months ended March 25, 2001
versus income tax expense of $0.4 million for the nine months ended March 26,
2000. The income tax benefit reflects book losses less permanent differences,
primarily non-deductible goodwill amortization related to certain acquisitions,
multiplied by statutory federal and applicable state tax rates.
Net loss increased $5.6 million to $7.5 million for the nine months ended March
25, 2001 from $1.9 million for the nine months ended March 26, 2000. Basic and
diluted losses per share were $(0.74) for the nine months ended March 25, 2001
compared to basic and diluted losses per share of $(0.19) for the nine months
ended March 26, 2000. Basic and diluted weighted average shares outstanding were
approximately 10.1 million for the nine months ended March 25, 2001 and March
26, 2000.
19
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 18
--------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The net loss plus non-cash operating charges provided $5.6 million of operating
cash flow for the nine months ended March 25, 2001. Net increases in working
capital balances used operating cash of $11.4 million, resulting in net cash
used by operating activities of $5.8 million for the nine months ended March 25,
2001. The increase in working capital balances reflects 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 several larger projects at very early stages in the
project life. 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, 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 nine months ended March 25, 2001, the Company borrowed $3.8 million
on its revolving credit facility and received proceeds of approximately $2.0
million from the sale of the corporate airplane and substantially all of the
assets of Vanguard Technical Solutions, Inc. The funds were used primarily for
working capital requirements discussed above, capital expenditures of $2.6
million, debt repayments of $1.6 million and financing costs of $1.2 million.
The Company has deferred $4.1 million of dividends on the convertible preferred
securities in fiscal 2001.
During the nine months ended March 26, 2000, the Company borrowed $18.7 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 $4.5 million and financing costs of $1.1 million.
The Company's credit facility includes a $128.5 million revolving credit
facility and a $9.9 million term credit facility and matures on July 2, 2001.
Borrowings under the amended credit facility bear interest at floating rates
based on the prime rate plus 2 5/8% or LIBOR plus 3 3/4% (at the option of DTI).
Borrowings under the credit facility are secured by substantially all of the
assets of DTI and its domestic subsidiaries. Because the Company's credit
facility matures on July 2, 2001, borrowings of $118.2 million under this
facility have been presented within current liabilities in the Company's March
25, 2001 consolidated balance sheet. Total borrowing availability under the
credit facility as of March 25, 2001 was $14.9 million.
As a result of the Company's third quarter financial results, the Company is in
default of certain financial covenants under its senior credit agreement and
another agreement. The Company has obtained a temporary waiver of existing
defaults of covenants and breaches of representations and warranties. The
Company expects to announce before the end of the fourth quarter that it has
reached an agreement with its lenders to amend the covenants under the senior
credit agreement of which the Company is currently in default and to extend by
12 months the maturity of the credit facility, although there can be no
assurance that such agreement will be reached. If the Company fails to obtain
the necessary amendments, it will continue to be in default under such covenants
and in breach of its representations and warranties. Accordingly, the lenders
could accelerate their debt under the senior credit agreement.
20
DT INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 19
--------------------------------------------------------------------------------
The Company has implemented various cash management initiatives in fiscal 2001,
including the reduction of discretionary capital expenditures, increased focus
on collections of accounts receivable, and accelerated payment terms from
customers, among other things. With the assistance of an investment banking
firm, the Company is also actively marketing the sale of several business units
with the intention of using the proceeds to 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 has signed letters of intent and expects to close
the sale of three of these businesses by the end of the current fiscal year. The
Company is also working on the sale of various other smaller businesses and a
product line of the Packaging segment. As discussed earlier, the Company sold
its corporate airplane and substantially all of the net assets of Vanguard
Technical Solutions, Inc. in the third quarter for approximately $2.0 million.
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 $9.2 million have been
deferred and accrued as of March 25, 2001.
Management currently anticipates that capital expenditures in the current fiscal
year will be approximately $3 million to $4 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 March 25, 2001, the Company had $262.3 million of
orders in backlog, which compares to a backlog of approximately $257.5 million
as of March 26, 2000. Orders for the three and nine months ended March 25, 2001
were approximately $79.8 million and $374.6 million, respectively.
The backlog for the Automation segment at March 25, 2001 was $228.1 million,
which increased $13.4 million or 6.2% from a year ago. The increase is a result
of the significant backlog of electronics systems. As part of the current
capital program within the Company's electronics market, additional duplicated
systems orders are expected to be placed in the next six months. The Automation
segment's backlog also reflects a significant project in the diesel engine
market booked in the first quarter of fiscal 2001. Backlog for the Packaging
segment was $26.2 million, a decrease of $9.6 million, or 26.8%, over the
comparable period in fiscal 2000. The decrease in backlog is primarily due to
the soft order activity for Kalish and Sencorp for the first nine 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 expects that less than one-half of the orders in the
backlog will be recognized as sales during the fourth quarter.
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 directors and
officers were named as defendants in five complaints in putative class
action lawsuits. During the third quarter, these actions were
consolidated into a single class action and an amended complaint was
filed (the "Securities Action") adding the Company's Sencorp subsidiary
and certain additional officers and directors as defendants. The
Consolidated Amended Complaint asserts causes of action under Section
10(b), and Rule 10b-5 promulgated thereunder, and Section 20(a) of the
Securities Exchange Act of 1934, and alleges, among other things, that
the accounting irregularities caused the Company's previously issued
financial statements to be materially false and misleading. The
Consolidated Amended Complaint also seeks damages in an unspecified
amount and purports 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 currently
is evaluating these claims asserted as well as possible defenses
thereto and intends to defend the Securities Action vigorously.
While it is not feasible to predict or determine the final outcome of
the Securities Action or similar proceedings, or to estimate the
amounts or potential range of loss with respect to these matters,
management believes the Company, its subsidiaries and their officers
and directors have adequate liability insurance to cover the
liabilities, costs and expenses arising out of the Securities Action,
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 Action will not
have a material adverse impact on the Company's financial condition,
results of operations or cash flow.
In addition, in November 1998, pursuant to the agreement by which the
Company acquired Kalish, Mr. Graham L. Lewis, a former director of the
Company, received an additional payment based on Kalish's earnings for
each of the three years after the closing. As a result of the
restatement discussed in the Company's Annual Report on Form 10-K for
the fiscal year ended June 25, 2000, the Company believes that the
additional payment should not have been made. During the third quarter,
the Company commenced legal action against Mr. Lewis to recover this
payment, and Mr. Lewis has counter-sued for wrongful termination
against the Company. Management believes that the Company's suit
against Mr. Lewis has merit. Management further believes that Mr.
Lewis' counter-suit is without merit and the Company intends to defend
this counter-suit vigorously.
The Company also is 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 3. DEFAULTS UPON SENIOR SECURITIES
See Management's Discussion and Analysis of Financial Conditions and
Results of Operations - Liquidity and Capital Resources.
23
DT INDUSTRIES, INC.
PART II. OTHER INFORMATION
PAGE 22
--------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 4 - Amendment No. 2 to Rights Agreement by and between
DT Industries, Inc. and ChaseMellon Shareholder Services,
L.L.C., dated as of November 17, 2000.
Exhibit 10.1* - Employment Agreement, dated as of November 6,
2000, by and between DT Industries, Inc. and Stephen J.
Perkins.
Exhibit 10.2* - Termination and Change of Control Agreement,
dated as of November 6, 2001, by and between DT Industries,
Inc. and Stephen J. Perkins.
Exhibit 10.3* - Restricted Stock Agreement, dated April 25,
2001, by and between DT Industries, Inc. and Stephen J.
Perkins.
Exhibit 11 - Statement Regarding Computation of Earnings Per
Share
-----------------
*Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
On January 24, 2001, a Current Report on Form 8-K was filed to
report, pursuant to Items 5 and 7 thereof, a release
announcing John M. Casper as the Company's new Chief Financial
Officer and the appointment of John F. Schott as the Company's
Chief Operating Officer.
On February 8, 2001, 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 second quarter of fiscal 2001,
among other things.
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: May 9, 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 11 Statement Regarding Computation of Earnings Per Share
Exhibits:
Exhibit 4 - Amendment No. 2 to Rights Agreement by and between
DT Industries, Inc. and ChaseMellon Shareholder Services,
L.L.C., dated as of November 17, 2000.
Exhibit 10.1* - Employment Agreement, dated as of November 6,
2000, by and between DT Industries, Inc. and Stephen J.
Perkins.
Exhibit 10.2* - Termination and Change of Control Agreement,
dated as of November 6, 2001, by and between DT Industries,
Inc. and Stephen J. Perkins.
Exhibit 10.3* - Restricted Stock Agreement, dated April 25,
2001, by and between DT Industries, Inc. and Stephen J.
Perkins.
Exhibit 11 - Statement Regarding Computation of Earnings Per
Share
-----------------
*Management contract or compensatory plan or arrangement.
(c) Reports on Form 8-K:
On January 24, 2001, a Current Report on Form 8-K was filed to
report, pursuant to Items 5 and 7 thereof, a release
announcing John M. Casper as the Company's new Chief Financial
Officer and the appointment of John F. Schott as the Company's
Chief Operating Officer.
On February 8, 2001, 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 second quarter of fiscal 2001,
among other things.