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Name of Registrant as Specified in Charter: DDL Electronics, Inc.
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<PAGE>
May 4, 1995
To our Shareholders:
Financial performance for the third quarter of fiscal 1995
was most
encouraging, with earnings from operations of $167,000 compared
to the
prior year third quarter loss of $1,287,000. Revenues for the
quarter were
$6,079,000 compared to third quarter fiscal 1994 revenues of
$11,343,000.
The reduced revenues are the result of the previously announced
sale of
substantially all assets of the A. J. Electronics and
Aeroscientific Corp.
subsidiaries.
Three years ago we commenced restructuring DDL. We began
with an
operating group having negative gross margins, over $30 million
of
accumulated debt and large losses. The return to an operating
profit this
quarter was accomplished despite significant working capital
limitations
and the absence of available bank credit during the past three
years. We
have overcome these and other difficulties to improve margins,
eliminate
senior debt and return to an operating profit. We must now turn
our
attention to growing the business to build on this progress.
Our mutual objective, to build a company that delivers
sustained
growth in shareholder value, now requires the following steps.
- We must establish new banking relationships in fiscal
1996 to
provide working capital to finance our growth. Near
term
requirements will be financed with cash from
operations.
- With the payoff of all senior debt accomplished on
December 29,
1994, the Company removed a major barrier to building
new
customer relationships. The expansion of our customer
base in
fiscal 1996 is essential to filling the estimated $60
million of
sales capacity at the existing facilities.
- We will seek opportunities for merger or acquisition
with
companies that would benefit from our public listing,
while
expanding DDL's ability to serve major global
electronics
customers as an important supplier of interconnection
products
and services.
We see opportunities in DDL's markets as the industry
consolidates and
the number of suppliers and captive facilities is reduced.
Considering the
large size of our markets, and the absence of a dominant
competitor, we
believe DDL can build by acquisition in this industry now that
our
excessive debt has been resolved. Having identified a number of
specific
candidates to initiate this strategy over the last three months,
it will be
my primary objective to achieve the financial benefits from these
opportunities as we move forward.
On April 13 ,1995 I added to the cash resources of the
company and
emphasized our belief in the prospects for the implementation of
this
strategy with the purchase of 310,000 shares of common stock
through the
exercise of options granted under my employment agreement.
Your continued support in building a profitable and stronger
company
is appreciated as we transition from our difficult restructuring
phase and
"switch gears" to implement our plans to grow DDL.
Very truly yours
William E. Cook
Chairman and Chief Executive Officer
April 28, 1995
Tigard, Oregon
Third Quarter Operating Statement Highlights (Unaudited)
DDL Electronics, Inc. and Subsidiaries
($ in thousands except per share amounts)
<TABLE>
Three Nine
Months Months
Ended Ended
March 31 March 31
1995 1994 1995
1994
<S> <C> <C> <C>
<C>
Sales $ 6,079 $ 11,343 $ 22,673
$39,512
Costs and Expenses
Cost of goods sold 4,916 11,266 20,629
39,178
Administrative
and Selling
Expenses 913 1,995 4,146
5,729
Restructuring
charges - - 1,173(A)
-
Operating
income (loss) 250 (1,918) (3,275)
(5,395)
Nonoperating income (expense):
Investment income 28 21 85
128
Interest expense (111) (247) (767)
(804)
Other Income - - 33
34
Gain on sale
of assets - 2 3,374(B)
2
Income (loss) before
extraordinary item 167 (2,142) (550)
(6,035)
Extraordinary item - - 2,441(C)
-
Net income (loss) $ 167 $ (2,142) $ 1,891
$(6,035)
Primary earnings
(loss) per share:
Continuing operations $0.01 ($0.14) ($0.03)
($0.40)
Extraordinary item - - $0.15
-
$0.01 ($0.14) $0.12
($0.40)
Average primary
shares (in thousands) 16,013 15,306 15,791
15,105
<FN>
(A) On January 17, 1995, the Company sold substantially all of
the
physical assets of its United States electronic contract
manufacturing
subsidiary, A.J. Electronics, Inc. (A.J.) to Raven Industries,
Inc. In
conjunction with the sale, the Company recorded disposition costs
and
operating losses as of December 31, 1994 totaling $2,050,
including
restructuring charges through A.J.'s disposal and liquidation of
$1,173.
(B) On December 29, 1994, the Company recognized a gain of
$3,774 from the
sale of substantially all of the assets of its Aeroscientific
Corp.
subsidiary to Yamamoto Manufacturing (USA), Inc.
(C) On December 29, 1994, the Sanwa Bank California ("Sanwa")
accepted a
cash payment of $4,500 in full and complete satisfaction of
outstanding
debt. The related gain on extinguishment of the debt is recorded
as an
extraordinary item in accordance with FAS 15.
</FN>
</TABLE>
<PAGE>
Consolidated Balance Sheet
(dollars in thousands except per share amounts)
<TABLE>
March 31, June 30,
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,389 $ 2,540
Accounts receivable 4,149 5,600
Inventories 2,223 3,647
Prepaid expenses 264 231
Total current assets 9,025 12,018
Property, plant and
improvements, net 3,307 10,642
Deposits and other assets 447 598
$12,779 $23,258
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term debt $ 749 $13,524
Accounts payable 4,980 5,086
Accrued payroll and employee
benefits 728 994
Other accrued liabilities 1,344 1,673
Total current liabilities 7,801 21,277
7% Convertible Subordinated
Debentures 729 775
8-1/2% Convertible Subordinated
Debentures 1,580 1,580
Other long-term debt 4,449 4,515
Stockholders' equity (deficit):
Common stock 153 145
Preferred stock - Series B - -
Additional paid-in capital 20,647 19,646
Retained earnings (deficit) (21,782) (23,673)
Foreign currency translation
adjustment (798) (1,007)
Total stockholders'
deficit (1,780) (4,889)
$12,779 $23,258
DEFICIT PER SHARE ($.12)
($.34)
SHARES OUTSTANDING 15,257,663 14,468,718
</TABLE>
