SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to
__________
Commission File Number 1-8101
DDL ELECTRONICS, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 33-0213512
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7320 SW Hunziker Rd., Suite 300, Tigard, Oregon
97223-2302 (Address of Principal Executive
Offices)
Registrant's telephone number, including area code
(503) 620-1789
Securities registered pursuant to Section 12(b) of the
Act:
Title of each class Name of each exchange on which
registered
Common Stock, .01 Par Value New York Stock Exchange
Pacific Stock Exchange
7% Convertible Subordinated Debentures
due May 15, 2001 New York Stock Exchange
8-1/2% Convertible Subordinated Debentures
due August 1, 2008 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by
non-affiliates of the registrant based on the closing price as
reported by the New York Stock Exchange on September 15, 1995:
$34,637,179
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of September 15, 1995: 16,299,849
DOCUMENTS INCORPORATED BY REFERENCE
The Annual Report to Stockholders for the fiscal year ended June
30, 1995, is incorporated by reference in Part I and II hereof.
EXHIBIT INDEX
See page 18
<PAGE>
PART I
Item 1. Business
DDL Electronics, Inc. ("DDL" or the "Company") is an
independent provider of electronic contract manufacturing
("ECM") services and a fabricator of printed circuit boards
("PCB") for use primarily in the computer, communications, and
instrumentation industries. The Company provides ECM services
for manufacturers of electronic equipment and fabricates
multilayer PCBs at its operations in Northern Ireland primarily
for customers in Europe.
The Company entered the ECM business by acquiring its
domestic ECM operations in 1985 and by organizing its European
ECM operations in 1990. In its PCB fabrication business, the
Company manufactures PCBs ranging from simple single and
double-sided boards to multilayer boards with more than 20
layers. Since the mid-1980s, the Company has increasingly
focused on the fabrication of advanced multilayer PCBs.
Management believes the market for these boards offers the
opportunity for more attractive margins than the market for less
complex, single and double-sided boards. Since 1985, the
Company has made substantial capital expenditures in its Northern
Ireland ECM and PCB fabrication facilities. In fiscal 1995, the
Company liquidated or sold many assets associated with its
United States PCB fabrication facility and its ECM operations.
The Company maintains its corporate headquarters in Tigard,
Oregon.
The Company also has divested its non-ECM and non-PCB
businesses in recent years, including its communications
business, its pressure gauge and hose manufacturing operations,
its emergency lighting equipment manufacturing operations and its
engineering services operations.
<PAGE>
RECENT DEVELOPMENTS
The Company incurred substantial operating losses in recent
years that have impaired operations and positive cash flows.
These losses totaled $4,970,000, $6,948,000, and $5,067,000, in
the fiscal years ended June 30, 1995, 1994, and 1993, respectively.
The Company realized net profits of $75,000 and $1,073,000 in 1995
and 1993, respectively, and incurred a net loss of $8,354,000 in
the 1994 fiscal year. The fiscal 1995 net profit, however, included
an extraordinary gain of $2,441,000 recognized as a result of the
extinguishment of the Company's senior debt in fiscal year 1995, and a
gain of $3,317 on a sale of assets in fiscal year 1995. The fiscal
1993 net profit included an extraordinary gains from exchanges of the
Company's 7% and 8-1/2% convertible subordinated debentures ("CSDs") for
equity, and a $603,000 gain from the sale of a discontinued business.
The losses in the Company's ECM and PCB fabrication businesses have
resulted from certain Company-specific factors, including yield and quality
problems, facility underutilization, delays in meeting delivery schedules,
collection problems and management turnover, as well as from excess production
capacity
in the industry putting extreme downward pressure on the Company's prices
and production volume. As a result, the Company sold or liquidated its
unprofitable United States operations and concentrated efforts on its
profitable European operations.
In addition to improving its operations, the Company must also increase
sales volume and improve margins in order to maintain its continuing
operations in a profitable position. Notwithstanding the steps that have
been taken to address the Company's operating problems during the past
several years, the Company has only recently realized operating profits
from its continuing operations and there can be no assurance that such
<PAGE>
profits will continue. Maintaining profitability while managing the Company's
working capital is required in order to ensure the Company's liquidity and
the Company's cash balances are at levels required to operate its business.
For management's response to these operating issues, together with other
significant events and conditions occurring during the last three years, see
the 1995 Annual Report to Stockholders under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 3 to 12 thereto.
In December 1994, the Company successfully consummated an integrated plan
retiring over $12,000,000 of its senior debt upon the sale of certain assets
of the Company's Aeroscientifc Corp. subsidiary, located in Beaverton, Oregon,
to Yamamoto Manufacturing (USA), Inc. In addition, the liens of the Company's
two major senior lenders were contemporaneously eliminated. The release of
liens was achieved by the Company concluding termination agreements with
Sanwa Bank California ("Sanwa") which covered Sanwa's term loan to the
Company, and with The Tokai Bank Ltd. ("Tokai") regarding its letter of credit
issued to First Interstate Bank of Oregon, N.A. in connection with Industrial
Revenue Bonds ("IRBs") issued by the State of Oregon.
The January 17, 1994 Los Angeles earthquake caused major structural damage
to two leased buildings in Chatsworth, California housing the Company's
subsidiary, A.J. Electronics, Inc. (A.J.). In August 1994, after three months
of review, the Small Business Administration Disaster Assistance Division
("SBA")
denied A.J.'s request for economic financial assistance regarding damage
suffered in the Los Angeles earthquake. A.J. was unable to recover from the
effects of the earthquake and incurred substantial operating losses and cash
outlays since the January earthquake. In its financial plan, A.J. predicted
that it would not recover economically until sometime in fiscal year 1996.
Management concluded, after the SBA's decision to deny A.J. assistance, that
A.J. would be a substantial economic burden on the consolidated group
considering
the limited working capital available to the Company. On January 17, 1995, the
Company sold
virtually all of A.J.'s operating assets to Raven Industries, Inc., an entity
unaffiliated with the Company.
A program of acquisitions and mergers is being pursued in an effort to
accelerate the turnaround of the Company's operating position and to improve
shareholder value. Given current and anticipated market conditions,
management believes that the Company must develop faster ways of rebuilding
and expanding its customer base to withstand the impact of continued
downsizing at major customers. No assurance can be given that the revised
strategic plan will be successful.
<PAGE>
Financial Information by Business Segment and Geographical Area
The Company is principally engaged in two lines of business, e.g., the
provision of ECM services and the fabrication of PCBs. Information for each
of the Company's last three fiscal years, with respect to the amounts of
revenues from sales to unaffiliated customers, operating profit or loss and
identifiable assets of these segments is set forth under the caption "Selected
Financial Data" appearing on pages 2 and 33 of the Company's 1995 Annual
Report to Shareholders. Such information is incorporated herein by this
reference and is made a part hereof. Electronic Contract Manufacturing and
Printed Circuit Board Fabrication Businesses
The ECM and PCB fabrication industries and the markets in which the
Company's customers compete are characterized by rapid technological change
and product obsolescence. As a result, the end services provided and
products made by the Company's ECM and PCB fabrication customers have
relatively short product lives. The Company believes that its future success
in these industries is dependent on its ability to continue to incorporate new
technology into its ECM and fabrication processes, to satisfy increasing
customer demands for quality and timely delivery, and to be responsive to
future changes in this dynamic market.
The PCB fabrication market is highly fragmented. Numerous factors,
however, have caused a shift toward consolidation in the PCB fabrication
industry, including extreme competition, substantial excess production
capacity experienced by the industry prior to the current fiscal year,
the greatly increased capital and technical requirements to service the
advanced multilayer PCB fabrication market, and the inability of many PCB
fabricators to keep up with the changing demands and expectations of
customers on matters such as technical board characteristics, quality, and
timely delivery of product.
Description of Products and Services--ECM. The Company's ECM operation
provides turnkey ECM services using both surface mount and through-hole
interconnection technologies. Under the turnkey process, the Company
procures customer-specified components from suppliers, assembles the
components onto PCBs, and performs post-assembly testing. The Company
conducts the ECM portion of its business through its DDL Electronics Limited
("DDL-E") subsidiary servicing customers in Western Europe. DDL-E does not
fabricate any of the components or PCBs used in these processes. However,
it has, in the past, procured PCBs from the Company's PCB fabricator. The
ECM business represented approximately 47%, 59% and 55% of the Company's
consolidated sales for the fiscal years ended June 30, 1995, 1994, and 1993,
respectively.
Since turnkey electronic contract manufacturing may be a substitute for
all or some portion of a customer's captive ECM capability, continuous
communication between the Company and the customer is critical. To facilitate
such communication, the Company maintains a customer service department whose
personnel work closely with the customer throughout the assembly process. The
Company's engineering and service personnel coordinate with the customer on
the implementation of new and re-engineered products, thereby providing the
customer with feedback on such issues as ease of assembly and anticipated
production lead times. Component procurement is commenced after component
specifications are verified and approved sources are confirmed with the
customer. Concurrently, assembly routing and procedures for conformance with
the workmanship standards of the Institute for Interconnecting and Packaging
Electronic Circuits ("IPC") are defined and planned. Additionally, "in-circuit"
test fixturing is designed and developed. "In-circuit" tests are normally
performed on all assembled circuit boards for turnkey projects. Such tests
verify that components have been properly inserted and meet certain functional
standards and that electrical circuits are properly completed. In addition,
under protocols specified by the customer, the Company performs customized
functional tests designed to ensure that the board or assembly will perform its
intended function. The Company's personnel monitor all stages of the assembly
process in an effort to provide flexible and rapid responses to the customer's
requirements, including changes in design, order size, and delivery schedule.
The materials procurement element of the Company's turnkey services
consists of the planning, purchasing, expediting, and financing of the
components and materials required to assemble a PCB or system-level assembly.
Customers have increasingly required the Company and other independent providers
of ECM services to purchase all or some components directly from component
manufacturers or distributors and to finance the components and materials.
In establishing a turnkey relationship with an independent provider of ECM
services, a customer must incur expenses in qualifying that provider of ECM
services and, in some cases, its sources of component supply, refining product
design and ECM processes, and developing mutually compatible information and
reporting systems. With this relationship established, the Company believes
that customers experience significant difficulty in expeditiously and
effectively reassigning a turnkey project to a new assembler or in taking on
the project themselves. Alternatively, the Company faces the obstacle of
attracting new customers away from existing ECM providers or from performing
services in-house.
Production of product for a customer is only performed when a firm order
is received. Revenue is recognized when product is shipped. Customer
cancellation of orders are infrequent and are subject to cancellation charges.
More often a customer will delay shipment of orders based on its actual or
anticipated needs. Customer orders are produced based on one of two production
methods, either "Turnkey" (where DDL-E provides all materials, labor and
equipment associated with producing the customers' product) or "Consigned"
(DDL-E provides labor and equipment only for manufacturing product). Material
costs customarily represents 70% of the turnkey method's sales price. In
other words, a change from turnkey to consigned orders at DDL-E can result in a
decline in sales volume without a reduction in profit margin.
<PAGE>
Description of Products and Services--PCB Fabrication. The Company
fabricates and sells advanced, multilayer PCBs based on designs and
specifications provided by the Company's customers. These specifications are
developed either solely through the design efforts of the customer or through
the design efforts of the customer working together with the Company's design
and engineering staff. Customers submit requests for quotations on each job
and the Company prepares bids based on its own cost estimates. The Company
currently conducts the fabrication portion of its PCB business through its
Northern Ireland, Irlandus Circuits Limited ("Irlandus") subsidiary. The
Company's fabrication facilities in Anaheim, California were shut down in
fiscal year 1992 and its Beaverton, Oregon facility was sold in the current
fiscal year. The PCB fabrication business represented approximately 53%, 41%
and 45% of DDL's consolidated sales for the fiscal years ended June 30, 1995,
1994, and 1993, respectively, with four or more layer boards constituting a
substantial portion of those sales.
PCBs range from simple single and double-sided boards to multilayer boards
with more than 20 layers. When PCBs are joined with electronic components in
the assembly process, they comprise the basic building blocks for electronic
equipment. Single-sided PCBs are used in electronic games and automobile
ignition systems, whereas multilayer PCBs are used in more advanced applications
such as computers, office equipment, communications, instrumentation, and
defense systems.
PCBs consist of fine lines of a conductive material, such as copper, which
are bonded to a non-conductive panel, typically rigid laminated epoxy glass.
The conductive pathways in the PCBs form electrical circuits and replace wire as
a means of connecting electronic components. On technologically advanced
multilayer boards, conductive pathways between layers are connected with
traditional plated through-holes and may incorporate surface mount technology.
"Through-holes" are holes drilled entirely through the board that are plated
with a conductive material and constitute the primary connection between the
circuitry on the different layers of the board and the electronic components
attached to the boards later. "Surface mount" boards are boards on which
electrical components are soldered instead of being inserted into through-holes.
Although substantially more complex and difficult to produce, surface mount
boards can substantially reduce wasted space associated with through-hole
technology and permit greatly increased surface and inner layer densities.
Complex boards may also have "via" or "blind-via" holes that connect inner
layers of multi-layer board or connect an inner layer to the outside of the
board.
<PAGE>
The development of increasingly sophisticated electronic equipment, which
combines higher performance and reliability with reduced size and cost, has
created a demand for increased complexity, miniaturization, and density in
electronic circuitry. In response to this demand, multilayer technology is
advancing rapidly on many fronts, including the widespread use of surface
mount technology. More sophisticated boards are being created by decreasing
the width of the tracks on the board and increasing the amount of circuitry
that can be placed on each layer. Fabricating advanced multilayer PCBs
requires high levels of capital investment and complex, rapidly changing
production processes.
As the sophistication and complexity of PCBs increase, manufacturing yields
typically fall. Historically, the Company relied on tactical quality
procedures, in which defects are assumed to exist and quality inspectors
examine product lot by lot and board by board to identify deficiencies, using
automated optical inspection and electrical test equipment. This traditional
approach to quality control is not adequate to produce acceptably high yields
in an advanced multilayer PCB fabrication environment, as it focuses on
identifying, rather than preventing, defects. In recognition of this
limitation, Irlandus is striving to create a positive environment encompassing
management's awareness, process understanding, and operator involvement in
identifying and correcting production problems before defects occur.
The International Standards Organization ("ISO") has published
internationally recognized standards of workmanship and quality. Both
Irlandus and DDL-E, the Company's ECM and PCB operations in Northern Ireland,
have achieved ISO 9002 certification which will be increasingly necessary to
attract business.
ECM Facilities. DDL-E conducts its operations from a 67,000 square foot
facility in Northern Ireland that was purchased in 1989. Prior to DDL-E
commencing operations in the Spring of 1990, approximately 1,600,000 pounds
Sterling (approximately $2,700,000) was expended on auto-insertion equipment,
surface mount device placement equipment, wave solder equipment, visual
inspection equipment, and automated test equipment. The Company believes that
this facility possesses the technology to compete effectively and that the
facility is capable of supporting projected growth for up to the next two years.
Fabrication Facilities. Irlandus occupies a 63,000 square foot production
facility and an adjacent 9,000 square foot office and storage facility.
Irlandus' existing capacity is expected to be adequate to meet anticipated order
levels for the next three years. Aeroscientific stopped recognizing revenue
at its 44,000 square foot Beaverton, Oregon facility when it was sold to
Yamamoto in December 1994.
<PAGE>
Marketing and Customers. The Company's sales in the ECM and fabrication
businesses and the percentage of its consolidated sales to the principal end-
user markets it serves for the last three fiscal years were as follows (dollars
in thousands):
<TABLE>
Year Ended June 30,
Markets 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Computer $ 7,115 24.1% $23,905 49.3% $25,479 44.0%
Communications 6,926 23.4 8,396 17.3 14,881 25.7
Financial 2,067 7.0 - - - -
Industrial &
Instrumentation 6,044 20.4 6,196 12.8 6,555 11.3
Medical 4,668 15.8 6,533 13.4 6,582 11.4
Automotive 175 .6 889 1.8 1,035 1.8
Government/
Military 1,362 4.6 1,411 2.9 1,509 2.6
Other 1,219 4.1 1,199 2.5 1,842 3.2
Total $29,576 100.0% $48,529 100.0% $57,883 100.0%
</TABLE>
The Company markets its ECM and PCB fabrication services through both a
direct sales force and independent manufacturers' representatives. The
Company's marketing strategy is to develop close relationships with, and to
increase sales to, certain existing and new major ECM and fabrication customers.
This includes becoming involved at an early stage in the design of PCBs for
these customers' new products. DDL believes that this strategy is necessary
to keep abreast of rapidly changing technological needs and to develop new
ECM and fabrication processes, thereby enhancing the Company's ECM and
fabrication capabilities and its position in the industry. As a result of this
strategy, however, fluctuations experienced by one or more of these customers
in demand for their products may have and have had adverse effects on the
Company's sales and profitability.
At the end of the fiscal year ended June 30, 1995, the Company's ECM
business had approximately 16 customers, all of which were located in Western
Europe, compared to 60 in fiscal 1994 and 37 in fiscal year 1993. At the end
of fiscal year 1995, the Company fabricated PCBs for approximately 98
customers, substantially all of which are located in Western Europe, compared to
211 in fiscal year 1994 and 169 in fiscal year 1993. The Company's five
largest customers accounted for 21%, 45% and 39% of consolidated sales during
fiscal years 1995, 1994, and 1993, respectively. For all three fiscal years, no
single PCB fabrication customer accounted for more than 4% of the Company's
consolidated sales. The Company's largest European ECM customer accounted for
approximately
8% of consolidated sales in fiscal year 1994. Dataproducts Corporation, the
largest customer of the
Company's former domestic ECM operation, accounted for 13% of consolidated sales
in both fiscal years 1993 and 1994. No single
customer of the Company's domestic PCB or ECM discontinued businesses accounted
for more than 2% of consolidated sales in
fiscal year 1995.
Two customers of the Company's European ECM operation made combined
purchases equal to or in excess of 12% and 10% of consolidated sales during
fiscal years 1995 and 1994, respectively. These two customers, GE Medical
Systems, a General Electric Company ("GE Medical") and DeLaRue Fortronic, LTD,
<PAGE>
("Fortronic") comprised almost 90% of the Company's European ECM sales in
fiscal year 1994. This amount dropped in fiscal year 1995 to 36%. Sales to
both of these customers diminished in the latter part of fiscal year 1994.
Fortronic's purchases declined due to reduced orders of its magnetic card
reader products in the European market, while orders from GE Medical have
been reduced as that company relocated its headquarters to the United States.
Weakness in orders from these two customers continued into the first half of
fiscal year 1995, but orders increased in the last half of fiscal year 1995.
The decreased number of customers in both the ECM and PCB businesses
reflects the impact of the Company's discontinuance of business at several of
its subsidiaries. The number of European customers, however, has increased
reflecting the Company's change in marketing activities to increase its
customer base in smaller, higher margin entities and reduce the Company's
dependency on large run volume, low margin customers.
Raw Materials and Suppliers. In its ECM business, the Company uses
numerous suppliers of electronic components and other materials. The
Company's customers may specify the particular manufacturers and components,
such as the Intel 80486 microprocessor, to be used in the ECM process. To
the extent these components are not available on a timely basis or are in short
supply because of allocations imposed by the component manufacturer, and the
customer is unwilling to accept a substitute component, delays may occur.
Such delays are experienced in the ECM business from time to time and have
caused sales and inventory fluctuations at the Company's ECM business.
The principal materials used by the Company in its fabrication processes
are copper laminate, epoxy glass, copper alloys, gold and various chemicals,
all of which are readily available to the Company from various sources. The
Company believes that its sources of materials for its fabrication business
are adequate for its needs and that it is not substantially dependent upon any
one supplier.
Industry Conditions and Competition. The markets in which the ECM and PCB
fabrication businesses operate are intensely competitive and have experienced
excess production capacity during the past few years. Seasonality is not a
factor in the ECM and PCB fabrication businesses. There has been significant
downward pressure on the prices that the Company is able to charge for its ECM
and fabrication services. More recently, market conditions have improved
which has resulted in an increase in product demand. While the Company believes
that market conditions will continue to improve, it does not believe that
prices will increase as quickly. ECM and fabrication customers are increasing
their orders, but are reluctant to pay more for such services primarily due
to the industry's excess capacity and price competition. Additionally,
competition is principally based on price, product quality, technical
capability, and the ability to deliver products on schedule. Both the price of
and the demand for ECM services and PCBs are sensitive to economic conditions,
changing technologies, and other factors. The technology used in the ECM
services and fabrication of PCBs is widely available, and there are a large
number of domestic and foreign competitors. Many of these firms are larger
than the Company and have significantly greater financial, marketing, and
other resources. In addition, the Company faces a competitive disadvantage
against better financed competitors because the Company's current financial
situation causes certain customers to be reluctant to do business with the
Company's operating subsidiaries. Many of the Company's competitors have
also made substantial capital expenditures in recent years and operate
technologically advanced ECM and fabrication facilities. In addition, some
of the Company's customers have substantial in-house ECM capability, and to a
lesser extent, PCB fabrication capacity. There is a risk that when these
customers are operating at less than full capacity they will use their own
facilities rather than purchase from the Company. Despite this risk,
management believes that the Company has not experienced a significant loss of
business to in-house fabricators or assemblers. There also are risks that
other customers, particularly in the ECM market, will develop their own
in-house capabilities, that additional competitors will acquire the ability
to produce advanced, multilayer boards in commercial quantities, or the
ability to provide ECM services, and that foreign firms, including large,
technologically advanced Japanese firms, will increase their share of the
United States or European market.
Price competition in the computer marketplace which comprises the Company's
largest market is intense. This has caused price erosion and lower margins,
particularly in the Company's PCB fabrication business. Significant improvement
in the Company's PCB gross margins may not be achieved in the near future due to
excess PCB production capacity worldwide and substantial competitive pressures
in the Company's principal market. Generally, the Company's customers are
reducing inventory levels and seeking lower prices from their vendors, such as
the Company, to compete effectively.
General
Backlog. At June 30, 1995, 1994, and 1993, the Company's ECM and PCB
fabrication businesses had combined backlogs of $9,247,000, $6,902,000 and
$19,612,000, respectively. Backlog is comprised of orders believed to be
firm for products that have scheduled shipment dates during the next 12
months. Some orders in the backlog may be canceled under certain conditions.
Historically, a substantial portion of the Company's orders have been for
shipment within 90 days of the placement of the order and, therefore, backlog
information as of the end of a particular period is not necessarily indicative
of trends in the Company's business. In addition, the timing of orders from
major customers may result in significant fluctuations in the Company's backlog
and operating results from period to period.
<PAGE>
Backlog at June 30, 1995 included only the Company's European subsidiaries.
The increase from fiscal year 1994 reflects higher order demand from existing
ECM customers and new outstanding orders from new ECM customers. The Company's
European PCB backlog increased slightly from the last fiscal year. The
fabrication group has and is expected to further increase sales volume, but
will not increase backlog as the sales increase is expected to come from quick
turn orders that are completed within a one month accounting cycle and would,
therefore, not be included in the period end backlog.
Backlog at June 30, 1994 had declined from previous years primarily due to
the following reasons:
1. Loss of large customers and their projected orders in the Company's
ECM business. Total backlog for the Company's ECM operations was $4,214,000 at
fiscal year end 1994 versus $17,612,000 at fiscal year end 1993.
2. Change in customer base in both the Company's ECM and PCB units to a
larger customer base with smaller, higher margin purchase orders. Many of these
customers have short notice, quick turn requirements, and few orders in the
Company's backlog therefore extend beyond a one to two month period. Many of
last year's backlogged orders covered an eight to 12 month period. On July 1,
1993, the largest customer at the Company's domestic ECM operation in fiscal
year 1993, Dataproducts Corporation, ("Dataproducts") issued a temporary stop
work order on the bulk of its existing purchase orders. Dataproducts' total
purchases for the year ended June 30, 1993, were approximately $7,703,000, or
approximately 13% of the Company's consolidated revenues for the year and
$6,322,000 or 13% of fiscal year 1994 consolidated sales. Dataproducts' order
backlog as of June 30, 1993 was approximately $5,747,000 or approximately 29%
of the Company's consolidated backlog at such date. Approximately $700,000
of the Dataproducts backlog was canceled as a result of the stop work order
and the remaining orders were rescheduled for delivery during the first six
months of fiscal year 1994. There were no Dataproducts orders in the fiscal
year end 1994 backlog. Because of the Dataproducts cancellation and
reschedules, the level of A.J.'s revenues were adversely affected in that year.
Events of this nature can materially delay or undermine the Company's ability to
complete a successful turnaround and achieve operating profitability which is
critical to the Company's viability.
Environmental Regulation. Federal, state, and local provisions relating
to the protection of the environment affect the Company's ECM and PCB
fabrication businesses. Aeroscientific has used or uses chemicals in the
manufacture of their products that are classified by the Environmental
Protection Agency ("EPA") as hazardous substances. In the past, some of these
chemicals were either treated on site or removed from the Company's facilities
and disposed of elsewhere by arrangement with the owners or operators of
disposal sites. The Company's current operation treats all hazardous
substances on site and reclaims, as reusable material, virtually 100% of the
byproducts produced. In late 1982, Aeroscientific-Anaheim received notice
from the EPA that it was regarded as a potentially responsible party ("PRP")
under federal environmental laws in connection with a waste disposal site known
as the "Stringfellow Superfund Site" in Riverside County, California, which is
presently being considered by governmental authorities for remediation.
Aeroscientific-Anaheim has been named as a third party defendant by other PRPs
in a case brought in U.S. District Court for the Southern District of California
in 1984, by the United States Government. The information developed during
discovery and investigation thus far indicates that Aeroscientific-Anaheim
supplied relatively small amounts of waste to the site as compared to the
many other defendants. As part of the currently proposed Settlement Agreement,
de minimis polluters would pay a fixed amount plus an amount that varies based
on volume of material dumped at the site. Under these guidelines, the
Company's
probable liability will be $120,000. Final settlement and timing of payment
are currently undeterminable, and no assurances can be given that any
settlement will be achieved. The Company, however, has accrued sufficient
liability reserves to cover the proposed settlement as of fiscal year end 1995.
Any further remedial costs or damage awards in these cases may be significant
and management believes that the Company's allocated share of such costs or
damages could have a material adverse effect on the Company's business or
financial condition. The actions are still in the pre-trial and discovery
stages and a prediction of outcome is difficult. There is, as in the case of
most environmental litigation, the theoretical possibility of joint and
several liability being imposed upon Aeroscientific for damages which may be
awarded. Total estimated cleanup costs for the Stringfellow site have been
estimated at $600 million. The Company's possible range of liability is
undeterminable, and the reliability and precision of estimated cleanup costs
are subject to a myriad of factors which are not currently measurable.
The Company is aware of certain chemicals that exist in the ground at its
previously leased facility at 1240-1244 South Claudina Street, Anaheim,
California. The Company has notified the appropriate governmental agencies and
is proceeding with remediation and investigative studies regarding soil and
groundwater contamination. The Company believes that it will be required to
implement a continuing remedial program for the site, the cost of which is
currently unknown. The installation of water and soil extraction wells was
completed in August 1994. A plan for soil remediation was completed about
the same time and was submitted to regulatory authorities. The full extent
of potential ground water pollution could not be determined given preliminary
estimates. The Company retained the services of Harding Lawson and Associates
in May 1995 to begin the vapor extraction of pollutant from the soil and to
perform exploratory hydro-punch testing to determine the full extent and cost
of the potential ground water contamination. These processes are in their
preliminary stages and a complete and accurate estimate of the full and
potential costs cannot be determined at this time. The Company believes that
the resolution of these matters will require a significant cash outlay. Initial
estimates from Harding Lawson indicate that it could cost as much as $3,000,000
for full remediation of the site and take over ten years to complete. The
Company and Aeroscientific entered into an agreement to share the costs of
environmental remediation with the landlord at the Anaheim facility. Under
this agreement, the Company is obligated to pay 80% of the site's total
remediation costs up to $725,000 (i.e., up to the Company's share of $580,000)
with any costs above $725,000 being shared equally between the Company and the
landlord. To date, the Company has paid $239,000 as its share of the
remediation costs. The Company anticipates that its share of the final
remediation cost should approximate the amount it has presently reserved.
Under the current remediation agreement, the Company is making monthly payments
of approximately $18,000 through the end of the current fiscal year.
Management
believes that the Company has the ability to make these payments when due.
From time to time the Company is also involved in other waste disposal
remediation efforts and proceedings associated with its other facilities.
Based on information currently available to the Company, management does not
believe that the costs of such efforts and proceedings will have a material
adverse effect on
the Company's business or financial condition.
Headquarters Operations
The Company maintains its corporate headquarters in a 3,000 square foot
leased building located in Tigard, Oregon. In addition to executive officers,
5 employees work in the Company's headquarters. The Company's headquarters
operations include the management of the Company's operating subsidiaries on
a consolidated basis, the arranging of financing for those operations and
capital expenditures and the management of the remaining assets of the
Company's
discontinued United States operations.
Employees. The Company currently employs approximately 340 persons.
<PAGE>
Item 2. Properties
The following table lists principal plants and properties of
the Company and its subsidiaries:
<TABLE>
Owned
Square or
Location Footage Leased
<S> <C> <C>
ECM and PCB fabrication businesses:
Tigard, Oregon 3,000 Leased
Chatsworth, California
(sublet during fiscal 1995) 48,000 Leased
Craigavon, Northern Ireland 63,000 Owned
Craigavon, Northern Ireland 67,000 Owned
Craigavon, Northern Ireland 9,000 Owned
</TABLE>
The Northern Ireland properties are pledged as security for installment
loans payable to the Industrial Development Board for Northern Ireland from
which the properties were purchased. These loans had an aggregate outstanding
balance of approximately $1,350,000 at June 30, 1995.
The Company's Tigard, Oregon headquarters facility is leased for a
two year term expiring on January 6, 1997 from an unaffiliated third party.
Rent on the headquarters is paid monthly in advance. Management believes that
the Tigard facilities are adequate to meet the Company's needs for the
foreseeable future.
Item 3. Legal Proceedings
As to other litigation matters that are not specifically described under
the caption "General - Environmental Regulation', Item 1 above, no material
legal proceedings are presently pending to which the Company or any of its
property is subject, other than ordinary routine litigation incidental to the
Company's business
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders on May 31, 1995, Bernee D.L. Strom and
Erven Tallman were elected as Class II directors by the shareholders,
replacing former Class II directors Rockell N. Hankin and John F. Coyne.
Election of Directors was the only matter proposed at the Annual Meeting of
Shareholders. The results of the election are as follows:
<TABLE>
FOR WITHHELD
<S> <C> <C>
John F. Coyne 2,743,980 42,782
Rockell N. Hankin 2,744,980 41,782
Bernee D. L. Strom 9,988,812 28,458
Erven Tallman 9,988,812 28,458
</TABLE>
In recognition of the shareholder vote, and prior to the certification of the
results by the independent inspectors of election, John F. Coyne and Rockell N.
Hankin resigned from the Board of Directors immediately following the Annual
Meeting of Shareholders. At a meeting of the Board, the remaining Directors
accepted these resignations and elected Bernee D. L. Strom and Erven Tallman
to fill the vacancies and to serve as directors pending certification of the
election results. Solicitation for election of Ms. Strom and Mr. Tallman as
Class II Directors was made by an opposition shareholder committee known as
"Shareholders Committee to Remove a Moribund Management" ("SCRMM"). A
Settlement Agreement was entered into between the departing Board members of
management and SCRMM that, among other things, provided for the election
without dispute, of Ms. Strom and Mr. Tallman as Directors, required the
resignation without dispute, of William E. Cook, the acceptance and recognition
by SCRMM of prior company employment and severance agreements with management,
and provision for payment of proxy solicitation expenses of DDL up to $150,000
paid by the Company
and a similar amount paid for SCRMM's proxy solicitation expenses.
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters
The information set forth under the caption "Market Information" on page
35 of the Company's 1995 Annual Report to Shareholders is incorporated herein
by reference and made a part hereof.
Item 6. Selected Financial Data
The information set forth under the caption "Selected Financial Data" on
page 2 of the Company's 1995 Annual Report to Shareholders is incorporated
herein by reference and made a part hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results
of Operations
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 3 through
12
of the Company's 1995 Annual
Report to Shareholders is incorporated herein by reference and made a part
hereof.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements set forth on page 14
through 34 of the Company's 1995 Annual Report to Shareholders,
and the report of independent public accountants set forth on
page 13 of said Annual Report, with respect to the consolidated
financial statements, are incorporated herein by reference and
made a part hereof.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Effective June 13, 1994, Price Waterhouse was dismissed as DDL Electronic's
Inc.'s independent accountants for fiscal year-end 1994.
Price Waterhouse's report on the financial statements for the fiscal years
1993 and 1992 contained no adverse opinion or disclaimer of opinion, nor was it
qualified or modified as to audit scopes or accounting principles, except that
as follows:
The report of Price Waterhouse dated August 20, 1993, for the fiscal year
ended June 30, 1993, included the following
explanatory paragraph:
"The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from
operations and has failed to generate positive cash flows from operations.
In addition, the Company's bank term loan matures on May 1, 1995 and the
letter of credit, which secures payment of interest and principal on the
Company's industrial development bonds, also expires on May 1, 1995. At this
time, there is no indication that the Company will be able to either fulfill
their obligations when due or secure financing to replace these obligations.
These matters raise substantial doubt about the Company's ability to continue
as
a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty."
Price Waterhouse's report dated September 4, 1992 for the fiscal year
ended June 30, 1992 included the following explanatory paragraph:
"The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
has few alternative financing sources, and has a net capital deficiency that
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty."
The Company's management was given approval by its Board of Directors and
the Board's Audit Committee to retain another certified accountant after
Price Waterhouse required an 80% increase in its annual service fees.
There has never been any and continues to be no disagreements between the
Company and Price Waterhouse on any matter of accounting principles or
practices, financial statement disclosure or audit scope or procedure, including
up until the time of Price Waterhouse's dismissal. The Company has given
Price Waterhouse unlimited authority to discuss its audit practices of the
Company with the Company's successor auditor.
The Company retained KPMG Peat Marwick LLP as its new independent auditors
effective June 13, 1994. The Company did not consult with KPMG Peat Marwick LLP
on any accounting or tax matter prior to Peat Marwick's appointment.
Attached to the Company's Form 8-K, filed June 13, 1994, was Price
Waterhouse's letter addressed to the Commission regarding its response to
Regulation S-K, Item 304. Furthermore, Price Waterhouse was informed that
statements in the Company's 8-K/A, Item 4(a)(1)(iv) included the period up
until the time of Price Waterhouse's dismissal.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
<TABLE>
Principal Occupation and Year First
Business Experience Including Elected/Appointed
Service on Other Boards Age a Director
Class I Director to Continue for Term Expiring in 1996:
<S> <C> <C> <C>
Philip H. Alspach President, Intercon, Inc., a 71 1986
management consulting and
mergers and acquisitions firm
Class II Director to Continue in Office Until 1997:
Bernee D. L. Strom President, USA Digital Radio 48 1995
a limited partnership,
Chicago, Illinois
Erven Tallman Chief Executive Officer of DDL 68 1995
Electronics, Inc. and Chairman
of the Board
Class III Director to Continue in Office Until 1995:
Melvin Foster Principal and attorney, Melvin 69 1995
Foster & Associates, Boston,
Massachusetts
Don A. Raig President and Chief Operating 54 1995
Officer of DDL Electronics, Inc.
Robert Gordon Wilson Vice President of DDL 51 1995 Inc.
Electronics, Inc.
</TABLE>
Executive Officers and Directors
Set forth below is a list showing the names, ages, and positions of each of
the Company's executive officers and directors.
<TABLE>
Name Age Position
<S> <C> <C>
William E. Cook 46 Former Chief Executive Officer and Class III
Director*
John F. Coyne 45 Former President, Chief Operating Officer
& Class II Director*
Rock Hankin 47 Former Class II Director
M. Charles Van Rossen 39 Chief Financial Officer and Secretary
Erven Tallman 68 Acting Chief Executive Officer and Class II
Director*
Don A. Raig 54 Interim President, Chief Operating Officer &
Class III Director*
Rob Wilson 51 Interim Vice President and Class III Director* Philip H. Alspach 71 Class I Director*
Melvin Foster 69 Class III Director*
Bernee D. L. Strom 48 Class II Director*
</TABLE>
*The Company's Certificate of Incorporation provides that the Board of Directors
shall be divided into three classes, designated as Class I, Class II, and Class
III. The Board currently consists of six directors, one in Class I, two in
Class
II, and three in Class III, whose current terms of office expire on the date
of the 1996, 1997, and 1995 annual meeting of stockholders, respectively.
<PAGE>
Mr. Cook was elected President and Chief Executive Officer and a director
of the Company in December 1991, and served as Chairman and Chief Executive
Officer. Prior to 1991, he was a special partner with TBM Associates, a venture
capital firm. From 1981 to 1990, he was President, Chief Executive Officer
and a founder of Signal Technology Corporation, a publicly traded manufacturer
of electronic engineered products. Mr. Cook resigned from the Company and the
Board of Directors subsequent to the May 31, 1995 Annual Meeting.
Mr. Coyne joined the Company in November 1990 as Managing Director of
the Company's European operations and became Executive Vice President in
June 1994. Mr. Coyne subsequently became President and Chief Operating Officer
in August 1994. Prior to his employment by the Company, Mr. Coyne was Regional
Vice President in Europe for SCI Inc., a publicly traded electronic contract
manufacturer. Prior to that time, Mr. Coyne worked in various capacities
with Western Digital Corporation, a publicly traded entity primarily engaged
in the manufacture and sale of disk drives. Mr. Coyne was not elected a
Director at the May 31, 1995 Annual Shareholder Meeting and was not
reappointed as an officer of the Company subsequent to the meeting. Mr. Coyne
continues as Managing Director of the Company's European Operation.
Mr. Van Rossen joined the Company as Controller in May 1992 and became
Chief Financial Officer and Secretary in March 1994. Prior to his employment
by the Company, Mr. Van Rossen worked in various financial positions with
Pacificorp, a publicly traded holding company for a diversified group of
utilities. Mr. Van Rossen resigned from the Company on July 21, 1995 and
currently acts as a consultant until November 1, 1995.
Mr. Alspach has been a director of the Company since 1986. He has also
been President of Intercon, Inc., a management consulting and mergers and
acquisitions firm, since December 1985.
Mr. Hankin has been a director of the Company since 1986. He has also
been Senior Partner at Hankin & Co., a business advisory and management firm,
since July 1986. Prior to that date, he was a partner of Price Waterhouse.
Mr. Hankin is also a director of Alpha Microsystem (a publicly traded
microcomputer
and peripheral equipment manufacturer), Sparta, Inc. (a private engineering
services company), LaVictoria Foods, Inc. (a private food preparation and
distribution company), Kavlico (a private electronic contract equipment
manufacturer), and Semtech (a publicly traded electronic contract equipment
manufacturing company). Mr. Hankin was Chairman of the Audit Committee and is
a member of the Compensation Committee. Mr. Hankin was not re-elected as a
Director at the May 31, 1995 Annual Shareholder Meeting.
Mr. Tallman was elected to the Company's Board of Directors at the May
31, 1995 Annual Shareholders' Meeting. He was made acting Chairman of the
Board and Chief Executive Officer replacing Mr. Cook, at the Board Meeting
following the Shareholders' meeting. Mr. Tallman is a member of the
Compensation Committee of the Board of Directors. Besides Mr. Tallman's
involvement with DDL, his positions with other companies include General Manager
and Partner of Inland Empire Properties Ltd., General Manager and President
of Phone Alert Corp., President and General Manager of Pactall Corp., and
President and CEO of E.B. Tall, Inc. Mr. Tallman is also a Board member and
is an active member of the Compensation Committees of each of the
aforementioned
enterprises.
Mr. Raig was appointed to the Board of Directors and made Interim
President and Interim Chief Operating Officer, replacing Mr. Coyne,
subsequent to the May 31, 1995 Annual Shareholders' Meeting. Prior to his
employment with the Company, Mr. Raig worked and continues to work as an
independent attorney and trustee for various groups in Southern California.
Mr. Wilson was appointed to the Board of Directors and made an Interim
Vice President subsequent to the May 31, 1995 Annual Shareholders' Meeting.
Mr. Wilson is a member of the Compensation Committee of the Board of Directors.
Mr. Wilson is an independent business consultant operating within a family-held
private corporation unaffiliated with the Company as its chief financial
officer, director and member of the compensation committee of Brandevor
Enterprises, Ltd., a Toronto Stock Exchange listed company, a director of
Crystallex Mines a Vancouver Stock Exchange listed company, director of
Amusements International Ltd. listed on the Alberta Stock Exchange, director,
Job Industries Ltd, listed on the Vancouver Stock Exchange, and director,
chief executive officer and member of the Compensation Committee of Bonkers
Indoor Playgrounds, Inc., a privately held company.
<PAGE>
Melvin Foster was appointed a Director of the Company subsequent to the
May 31, 1995 Annual Shareholders' Meeting. Mr. Foster is a member of the
Audit Committee of the Board of Directors. Mr. Foster is an attorney and
principal in Melvin Foster & Associates in Boston, Massachusetts.
Ms. Strom was elected a Class II Director at the May 31, 1995 Annual
Shareholders' Meeting and serves as Chairperson of the Audit Committee of the
Board of Directors. Ms. Strom is President of USA Digital Radio, a limited
partnership. She also serves on the Board of Directors of Software Publishing
Corporation, a NASDAQ listed company, and is Chairman of the Board of Quantum
Development Corporation, a privately held Company.
None of the Company's executive officers or directors are related by blood
or marriage. There are no arrangements or understandings between the listed
individuals and any other person pursuant to which those individuals were
selected as an officer or director.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the securities laws of the United States, the directors and
executive officers of the Company and persons who own more than 10% of the
Company's Common Stock are required to report their ownership of the Company's
Common Stock and any subsequent changes in that ownership to the Securities
and Exchange Commission. The Company is required to disclose in its proxy
statement any late filings during the 1995 fiscal year. To the Company's
knowledge, based solely upon its review of the copies of such reports
required to be furnished to the Company during the fiscal year ended June 30,
1995, during the two years ended June 30, 1995, all Section 16(a) filing
requirements applicable to its officers, directors and greater than 10% owners
were complied with.
<PAGE>
Item 11. EXECUTIVE COMPENSATION
Executive Compensation Table
The following table sets forth the cash compensation paid or accrued by the
Company to the Chief Executive Officer and other executive officers of the
Company attributable to their services for each of the fiscal years in the
three-year period ended June 30, 1995:
<TABLE>
Long Term
Compensation
Annual Compensation Awards
Name and Principal Other Annual
Positions Year Salary(1) Bonus Compensation(2) Options(#)
<S> <C> <C> <C> <C> <C>
Erven Tallman 1995 $ -- $ -- $ -- --
Acting Chairman 1994 -- -- -- --
and Chief 1993 -- -- -- --
Executive Officer
William E. Cook 1995 $171,000 -- $268,000(3) --
Chairman and 1994 166,000 -- 18,000 4,183(4)
Chief Executive 1993 165,000 -- 20,000 512,586(4)
Officer
John F. Coyne 1995 $ 119,000(5) $27,000 $50,000 100,000
President and 1994 78,000 -- 67,000 --
Chief Operating 1993 91,000 -- 74,000 50,000
Officer
M. Charles
Van Rossen 1995 $90,000(6) -- -- --
Controller & 1994 73,000 -- 8,000 15,000
Chief Financial 1993 70,000 -- 9,000 20,000
Officer
</TABLE>
[FN]
(1) Amounts shown include compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers. Amounts paid in British Pound Sterling translated into the Company's
functional currency using the average annual translation rate .
(2) Amounts in the "Other Annual Compensation" column include amounts
credited to individual 401(k) accounts from a suspense account within the
401(k) Plan, statutory pension amounts as required in Northern Ireland and
other non-cash benefits.
(3) Other Annual Compensation received by Mr. Cook in fiscal 1995 includes
severance and earnings realized from exercise of non-statutory stock options.
An agreement was entered into by the Company and Mr. Cook at the Annual
Shareholders Meeting held May 31, 1995, in which Mr. Cook resigned from the
Company and was granted severance equal to one year's salary or $165,000 of
which $35,000 was paid in the current fiscal year.
(4) Such options were granted pursuant to an anti-dilution provision
contained in Mr. Cook's 1991 stock option agreement. The anti-dilution
provision was triggered as a result of the conversion and exchanges of
convertible subordinated debentures and the exercise of stock options by
others.
(5) Mr. Coyne was promoted to President and Chief Operating Officer and
made a Director of the Company in August 1994, At the May 31, 1995 Annual
Shareholders Meeting Mr. Coyne was not elected a director or appointed an
officer of the Company, but continued as Managing Director of the Company's
Northern Ireland subsidiaries.
(6) Mr. Van Rossen resigned as an officer of the Company effective July
21, 1995 and currently acts as a consultant until November 1, 1995.
<PAGE> OPTION GRANTS IN FISCAL 1995
The following table sets forth information concerning options granted
to each of the named executive officers during fiscal 1995:
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
for Option Term
5% 10%
Name
Options
Granted
% of Total
Options
Granted to
Employees in
Fiscal Year
Exercise or
Base price
($/Sh)
Expiration
Date
5%
10%
John F. Coyne
50,000
41.7%
$1.25
07/06/2004
$35,000
$63,000
John F. Coyne
50,000
41.6%
1.37
08/09/2004
26,000
$49,000
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1995 AND FISCAL YEAR END
OPTION/SAR VALUES
The following table sets forth information concerning options held by
each of the named executive officers as of June
30, 1995.
Number of
Unexercised
Options Value of Unexercised In the
Shares Acquired at FY-End
Money Options at FY-End Name on Exercise Value
Realized Exercisable/Unexercisable
Exercisable/Unexercisable
John F. Coyne - - 170,833/29,167
$57,986/10,764 M. Charles Van Rossen - -
25,833/17,167 $10,417/$7,709
Directors who are not also officers receive $750 per
month, $1,000 for each meeting of the Board of Directors
attended, and $1,000 for attendance at each committee meeting not
scheduled in conjunction with meetings of the Board of Directors.
Indemnity Agreements. On August 3, 1987, as contemplated by the
Company's Bylaws, the Board authorized the Company to enter into
separate indemnity agreements with directors and former directors
of the Company as well as executive officers of the Company and
its subsidiaries. Such separate indemnity agreements were deemed
necessary since, in the past, the Company had furnished at its
expense directors and officers liability insurance protecting the
foregoing individuals from personal liability in connection with
their service to the Company. Such insurance is not always
available to the Company at a reasonable cost or at desired
policy limits. There was some concern that, in the absence of
insurance, the indemnities available under the Company's
Certificate of Incorporation and Bylaws may not be adequate to
protect such individuals against the risk of personal liability
associated with their service to the Company. The indemnity
agreements provide that the Company will pay any amount which an
indemnitee (i.e., a director or former director of the Company or
an executive officer of the Company and/or its subsidiaries) is
legally obligated to pay because of any claim or claims made
against such indemnitee as a result of any act or omission,
neglect, or breach of duty, including any actual or alleged error
or misstatement or misleading statement, such indemnitee commits
while acting in his capacity as a director of the Company or as
an officer of the Company and/or its subsidiaries, or while
serving at the request of the Company as a director or officer of
another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise. No indemnification is
provided in situations involving dishonesty or improper personal
profit, among other situations. The payments to be made under
the indemnity agreements include damages, judgments, fines, ERISA
excise taxes and penalties, settlements and costs, including
defense costs, and costs of attachment or similar bonds.
<PAGE>
Employment Agreement. On December 3, 1991, William E.
Cook was elected President, Chief Executive Officer and a
director of the Company. In connection therewith, Mr. Cook
entered into a one year employment agreement which provided for
an annual salary of $165,000. The employment agreement also
provided that Mr. Cook receive an option vesting over 19 months
to purchase a number of shares equal to 9% (596,992 shares) of
the Company's then outstanding Common Stock at $.50 per share,
which represented the lowest closing price of the Common Stock
during the 30 days preceding December 3, 1991. The number of
shares subject to option have been increased pursuant to
dilution and anti-dilution provisions of the option agreement.
On January 1, 1995, Mr. Cook entered into a new employment
agreement with the Company under the same terms as Mr. Cook's
prior agreement with the exception of Mr. Cook's severance
benefits that were extended to one year.
Executive Severance Arrangements. In December 1994 and
January 1995, the Company entered into severance agreements with
Dave Anderson, then President of A.J. Electronics., Inc. (A.J.),
John Coyne, the President and Chief Operating Officer of the
Company, and M. Charles Van Rossen, Chief Financial Officer for
the Company. Under these Agreements, if a participant's
employment were terminated other than for cause or voluntary
resignation ("Involuntary Termination"), then he would be
entitled to severance pay in the form of monthly payments equal
to his then current monthly salary, less applicable withholdings
and welfare benefits from his termination date until the earlier
of (i) the date on which the participant accepts other full time
employment or (ii) 180 days following the date of Involuntary
Termination.
Notwithstanding the foregoing, if the participant accepts part
time employment or consulting engagements during the severance
period, the severance obligations of the Company will be reduced
by the amount the participant receives for such part-time work or
consulting. The agreement also provides that for up to one year
after the occurrence of a "change in control" of the Company,
each participant is entitled to the severance provisions of the
agreement upon voluntary resignation. Such a change in control
was triggered by events at the Company's May 31, 1995 Annual
Shareholders Meeting. Additionally, the severance provisions of
Mr. Cook's employment agreement were also triggered by events at
the Annual Shareholders Meeting and accordingly, Mr. Cook is
entitled to one year of severance pay and full benefits as
existing at the time of the meeting. Mr. Anderson's severance
agreement was trig-
gered on March 10, 1995 upon the liquidation of A.J.'s operations
in Southern California.
The Board of Directors believes that these
executive severance arrangements will help assure continued
dedica-
tion, availability of objective advice, and counsel from key
management.
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors
(the "Committee") administers the Company's executive
compensation programs and reviews and approves salaries of all
elected officers, including those of the executive officers named
in the Executive Compensation Table. The Committee is also
responsible for administering the Company's stock option plans
(except for the non--discretionary 1993 Non-Employee Directors
Stock Option Plan) and making incentive awards. The Company's
executive compensation programs are designed to:
- provide competitive levels of base compensation in
order to attract, retain and motivate high quality
employees;
- tie individual total compensation to individual
performance and the success of the Company; and
- align the interests of the Company's executive
officers with those of its stockholders.
Base Salary
Base salary is targeted to be moderate yet competitive
in relation to salaries commanded by those in similar posi-
tions in comparable companies. Additional consideration is to be
made in the form of bonuses or stock options, the latter through
potential increases in the price of the Company's stock. The
Committee reviews management recom-
mendations for executives' salaries and examines survey data for
executives with similar responsibilities in comparable companies
to the extent such data is available. Individual salary
determinations are based on experience, sustained performance and
comparison to peers inside and outside the Company. With the
exception of Mr. Coyne none of the other executive officers named
in the Executive Compensation Table received salary increases
during fiscal 1995.
Incentive Compensation Program
The Company maintains an incentive compensation program
for substantially all officers and executives designed to reward
such individuals for their contributions to corporate and
individual objectives. In the past, the programs have provided
additional compensation based on performance and profits of those
operations for which the various execu-
tives have responsibility. During the last fiscal year, no
amounts were paid to the Company's officers or executives under
the plans due to cash constraints.
Stock Options
The Committee administers the Company's 1993 Stock
Incentive Plan, which is designed to align the interests of
management with those of the Company's stockholders. The number
of stock options granted is related to the recipient's base
compensation and level of responsibility. All options have been
granted with an option exercise price equal to the fair market
value of the Company's common stock on the date of grant. The
tables above set forth information concerning options granted to
named executives during fiscal 1995.
Because of the Company's financial condition and the
importance of conserving cash, the Company has tended to limit
the level of cash remuneration paid to executive officers and
increase the level of stock option grants. Particu-
larly during a period focused on operational and financial
turnaround, the Committee believes that stock options closely
align the objectives of management and the stockholders and
provide a balance given the limits placed on cash remuneration.
In the future, the Committee will continue to evaluate cash and
stock incentive compensation alterna-
tives to best achieve the objectives of the Company's executive
compensation program.
Compensation of Chief Executive Officer
On December 3, 1991, William E. Cook was elected
President, Chief Executive Officer and a director of the Company.
Mr. Cook's compensation package was designed to provide Mr. Cook
with a significant incentive to increase stockholder value
through a successful turnaround effort. His employment agreement
provides for an annual salary of $165,000. In addition, Mr. Cook
received an option vesting over 19 months to purchase a number of
shares equal to 9% of the Company's then outstanding Common Stock
(596,992 shares) at $.50 per share, which represented the lowest
closing price of the Common Stock during the 30 days preceding
December 3, 1991. The number of shares subject to this option
are automatically increased or decreased pursuant to certain
dilution and anti-dilution provisions of the option agreement.
The Committee believes that the increase in the market value of
the Company's Common Stock is in very large part due to Mr.
Cook's success in achieving certain financial and operational
turnaround goals, including (i) restructuring the Company's
senior debt, (ii) facilitating several exchanges of subordinated
debt for equity securities, (iii) selling the Company's
communications subsidiary to a third party, (iv) addressing
serious operating problems (including completion of the shut down
of the Company's Anaheim, California facility), (v) raising
needed cash through the exercise of outstanding warrants and the
private placement of preferred stock, and (vi) reducing the
Company's operating losses and negative cash flow.
Compensation of Current Corporate Officers
None of the Company's current corporate officer are
receiving any cash compensation other than to pay for out of
pocket expenses incurred to administer their executive duties.
The Board anticipates remunerating these individual at a later
date in the form of options or warrants to buy the Company's
common stock.
Compensation Committee
Erven Tallman
Robert G. Wilson
Compensation Committee Interlocks and Insider Participation
Philip H. Alspach and Rockell N. Hankin served on the
Compensation Committee in fiscal 1995. Messrs Alspach and Hankin
resigned from the Compensation Committee on May 31, 1995. Erven
Tallman and Robert G. Wilson were appointed to the Compensation
Committee in June 1995. There are no interlocks between the
Company and other entities involving the Company's executive
officer and board members who serve as executive officer of board
members of other entities.
<PAGE>
Stockholder Return Performance Table
The following performance table compares the cumulative
total return assuming the reinvestment of dividends for the
period from June 30, 1990 through June 30, 1995, from an
investment of $100 in (i) the Company's Common Stock, (ii) the
Dow Jones Industrials as a group, and (iii) the Dow Jones
Computer Index group of companies.
DDL Stock Dow
Jones Dow Jones Value with Computers
Index Industrial Average Reinvestment
06/29/90 $100.00 06/29/90 100.00 06/29/90
$100.00 06/28/91 86.25 06/28/91 107.70
06/28/91 27.58 07/02/92 90.47 07/02/92
124.21 07/02/92 37.93 06/30/93 71.34
06/30/93 141.25 0702/93 61.41 06/30/94
81.06 06/30/94 147.84 07/01/94 31.28
06/30/95 $87.46 06/30/95 181.81 07/01/95
$43.52
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGE-
MENT
PRINCIPAL STOCKHOLDERS
Except as otherwise indicated, the following table sets forth as
of April 3, 1995 the number of shares and percen-
tage of outstanding Common Stock of the Company beneficially
owned by (i) each person who is known by the Company to own
beneficially more than 5% of the Company's outstanding Common
Stock, (ii) each of the Company's directors, (iii) each officer
listed in the Executive Compensation Table, and (iv) all
executive officers and directors of the Company as a group:
Beneficially Owned(1)
Shares of Common Stock Name and Address of
Beneficial Owner* Number Percent of Class
Karen Beth Brenner
16,400(2)(3) ** P.O. Box 9109
Newport Beach, CA 92658
Karen Beth Brenner 1,441,444(2)(4)
8.9% (Sole Proprietorship)
1300 Bristol Street North #230
Newport Beach, CA 92660
Richard Fechtor
443,050(2)(5) 2.7% 17 Emily Road
Framington, MA 01701
Fortuna Investment Partners, L.P.
956,660(2)(6) 5.9% 100 Wilshire Blvd., 15th
Floor
Santa Monica, CA 90401
Ronald J. Vannuki
573,427(2)(7) 3.5% 100 Wilshire Blvd., 15th
Floor
Santa Monica, CA 90401
William E. Cook 880,262(8)
5.4% 14337 SW Peachtree Drive
Tigard, Oregon 97224
Don A. Raig
790,415(9) 4.6%
Philip H. Alspach
101,635(10) **
Erven Tallman 155,664 1.0%
Melvin Foster 174,500
1.1%
Robert G. Wilson 800,000(11)
4.9%
John F. Coyne
170,833(12) 1.1%
M. Charles Van Rossen
25,833(13) **
Directors and Executive
Officers as a Group (6 persons) 2,218,888(14)
13.7%
* Unless otherwise noted, all directors and officers listed above
can be contacted at DDL Electronics, Inc., 7320 SW Hunziker Road
#300, Tigard, Oregon 97223-2302.
** Represents less than 1% of the outstanding shares.
(1) Unless otherwise noted, shares are held with sole voting and
investment power. Stockholdings include, where applicable,
shares held by the spouses and minor children, including shares
held in trust.
(2) This information is based upon a Schedule 13D dated February
23, 1995, as amended by a Schedule 13D dated April 1, 1995, filed
with the Securities and Exchange Commission. Such schedules
state that the beneficial owner is a member of a "group," as that
term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended, comprised of Karen Beth Brenner, Karen Beth
Brenner (Sole Proprietorship), Richard Fechtor, Fortuna
Investment Partners, Ltd., Don A. Raig, and Ronald I. Vannuki.
The members of this group are beneficial owners of 3,950,956
shares of the Company (24.4%) in the aggregate.
(3) The Schedule 13D filed by the beneficial owner indicates
that the beneficial owner has sole voting and dispositive power
as to all 16,400 shares.
(4) The Schedule 13D filed by the beneficial owner indicates
that the beneficial owner has no voting power but sole
dispositive power as to all 1,441,444 shares.
(5) The Schedule 13D filed by the beneficial owner indicates
that the beneficial owner has sole voting and dispositive power
as to all 443,050 shares.
(6) The Schedule 13D filed by the beneficial owner indicates
that the beneficial owner has sole voting and dispositive power
as to all 890,660 shares. Mr. Vannuki is the managing director
of the general partner of this limited partnership.
(7) The Schedule 13D filed by the beneficial owner indicates
that the beneficial owner has sole voting and dispositive power
as to all 469,975 shares.
(8) Shares beneficially owned by Mr. Cook represent options for
689,462 shares that are exercisable or will be exercis-
able within 60 days of June 30, 1995 and share owned of 190,800,
based on Form 4 filed September, 1995.
(9) According to a form 4 filed June 30, 1995, Mr. Raig is
beneficial owner of 790,415 shares of common stock includ- ing
beneficial ownership of 63,115 shares issuable under
conversion rights of the Company's 8 1/2% bonds, held as a
limited partner with Fortuna Investment Partners, L.P.
(10) Shares beneficially owned by Mr. Alspach include options
for 90,000 shares that are exercisable or will be exercis- able
within 60 days of June 30, 1995.
(11) Mr. Wilson's ownership includes beneficial ownership of
240,000 shares of common stock as a partner of Fortuna Investment
Partners.
(12) Shares beneficially owned by Mr. Coyne represent options for
170,833 shares that are exercisable or will be exercisable within
60 days of June 30, 1995.
(13) Shares beneficially owned by Mr. Van Rossen represent
options for 25,833 shares that are or will be exercisable within
60 days of June 30, 1995.
(14) Includes options for 286,666 shares that are or will be
exercisable within 60 days of June 30, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 28, 1995, Erven Tallman, Chairman and Chief
Executive Officer, committed the Company to consulting agreements
with Fechtor, Detwiler & Co. and Fortuna Capital Management, Inc.
Richard Fechtor, principal with Fechtor, Detwiler & Co., Ron
Vannuki, President of Fortuna Capital Management, Inc., and as
general partner of Fortuna Investment Partners, Ltd., are also
identified under Part III, Item 12 as principal stockholders, and
were members of a "group," as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, that
filed a Schedule 13D dated February 23, 1995, as amended by a
Schedule 13D dated April 1, 1995, with the Securities and
Exchange Commission.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
Reference (Page)
1995 Annual
Form 10K Report to
Stockholders (a)(1)
List of Financial statements: List of data
incorporated by reference:
Consolidated balance sheet at June 30, 1995, and 1994*.
. 14 Consolidated statement of operations for the years
ended June 30, 1995, 1994, and 1993 . . . . . 15
Consolidated statement of stockholders' equity for the
years ended June 30, 1995, 1994, and 1993 . . . . 17
Consolidated statement of cash flows for the years
ended June 30, 1995, 1994, and 1993 . . . . 16 Notes
to consolidated financial statements. . . . . .18 Report
of KPMG Peat Marwick LLP on consolidated
financial statements. . . . . . . . . . . . 13 *
The Company utilizes a 52-53 week fiscal year ending on the
Friday closest to June 30, which, for fiscal years 1995 and
1994, fell on June 30 and July 1, respectively. For 10K filing
purposes, June 30, 1995, is utilized for the Company's fiscal
year end.
(a)(2) List of Financial statement schedules for the years
ended June 30, 1995, 1994, and 1993:**
Reports of KPMG Peat Marwick LLP and Price Waterhouse on
financial statement schedules. . . . . . . . . . . 15
VIII - Valuation and
Qualifying Accounts and Reserves . 16 IX
- Short-Term Bank Borrowings . . . . . . .
. . . .None
** Schedules other than those listed are omitted since they are
not applicable, not required, or the information required to
be set forth therein is included in the consolidated financial
statements or in the notes thereto.
(a)(3) List of Exhibits:
Exhibit Index . . . . . . . . . . . . . . .18
(b) Reports on Form 8-K:
During the fourth fiscal quarter, the following reports on
Form 8-K were filed:
On April 11, 1995, a Form 8-K/A was filed pursuant to item 2,
Acquisition or Disposition of Assets, for filing of pro forma
financial information pursuant to Regulation S-X.
On April 20, 1995, a Form 8-K was filed pursuant to item 5,
Other Events, for a press release announcing that William E.
Cook, the Company's Chairman and CEO, had exercised stock options
to purchase 300,000 shares of the Company's common stock.
On May 11, 1995, a Form 8-K was filed pursuant to item 5,
Other Events, for a press release that announced the Company's
fiscal third quarter ended March 31, 1995 operating results.
On June 7, 1995, a Form 8-K was filed pursuant to item 5, Other
Events, for a press release issued June 1, 1995 announcing the
resignation of William E. Cook, the Company's Chairman and CEO
and the results of the Company's annual meeting of
shareholders on May 31, 1995 in which five new directors were
added to the board replacing Mr. Cook and two existing directors.
On June 21, 1995, a Form 8-K was filed pursuant to item 1,
Changes in Control of Registrant, that announced the results of
the Company's May 31, 1995 annual meeting of shareholders and the
change in the Company's Board of Directors and management.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 pertaining to the 1975
Nonqualified Stock Option Plan, the 1980 Employee Stock Option
Plan, the 1981 Incentive Stock Plan, and the 1985 and 1987 Stock
Incentive Plans (No. 33-18356) and the 1991 Nonstatutory Stock
Option Plan (No. 33-45102) of DDL Electronics, Inc. of our Report
dated August 20, 1993, which is incorporated in this Annual
Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedules,
which appears in this Form 10-K
Price Waterhouse LLP
September 28, 1995
REPORT OF INDEPENDENT
AUDITORS' ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors
DDL Electronics, Inc.
Under date of August 18, 1995, we reported on the consolidated
balance sheets of DDL Electronics, Inc. and subsidiaries as of
June 30, 1995 and 1994, and the related consolidated statements
of operations, stockholders equity, and cash flows for the years
then ended, as contained in the 1995 annual report to
stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the Annual Report
on Form 10K for the year 1995. In connection with our audit of
the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as
listed in Item 14(a)(2) of this Form 10K. This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express and opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Portland, Oregon
August 18, 1995
<PAGE>
DDL ELECTRONICS, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND
QUALIFYING ACCOUNTS AND RESERVES
Balance atCharged to Balance
Beginning Costs and at End
of Period ExpensesDeductions of Period
Allowance for doubtful accounts -
Year ended:
June 30, 1993 $ 748,000 $ 570,000$ (373,000
) $ 945,000
June 30, 1994 945,000 293,000 (705,000) 533,000
June 30, 1995 533,000 95,000 (446,000)
182,000
Inventory reserves -
Year ended:
June 30, 1993 $ 275,000$ 780,000$ (881,000) $
174,000
June 30, 1994 174,000 266,000 (56,000)
384,000
June 30, 1995 384,000 62,000 (290,000)
156,000
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, DDL Electronics, Inc. has duly
caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DDL Electronics, Inc.
By /s/ Don A. Raig
Don A.Raig
Date Interim President and Chief
Operating
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Don A. Raig
Don A.Raig
Date Interim President and Chief
Operating
Officer and Director
(Principal Financial and Accounting Officer)
/s/ Erven Tallman
Erven
Tallman Date Acting Chairman, Chief
Executive
Officer and Director
/s/ Rob Wilson
Rob Wilson
Date Interim Vice President
and Director
/s/ Philip H. Alspach
Philip H.
Alspach Date Director
/s/ Bernee D. L. Strom
Bernee D.L.
Strom Date Director
/s/ Melvin Foster
Melvin
Foster Date
Director
<PAGE>
EXHIBIT INDEX
3-a Amended and Restated Certificate of Incorporation of
the Company (incorporated by reference to Exhibit 4.2
of the Company's Registration Statement on Form S-8,
Commission File No. 33-7440)
3-b Bylaws of the Company, amended and restated, effective
March 1995
3-c Certificate of Amendment of Certificate of
Incorporation of the Company to increase authorized
number of common shares (incorporated by reference to
Exhibit 3-c of the Company's 1990 Annual Report on Form 10-K)
3-d Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock of the
Company (incorporated by reference to Exhibit 4.2 of
the Company's Registration Statement on Form S-8, Com-
mission File No. 33-7440)
3-e Certificate of Designation, Preferences and Rights of
Series B Convertible Preferred Stock of the Company
(incorporated by reference to Exhibit 4.2 of the
Company's Registration Statement on Form S-8, Commission File No.
33-7440)
4-a Indenture dated July 15, 1988, applicable to the
Company's 8-1/2% Converti-
ble Subordinated Debentures due August 1, 2008
(incorporated by reference to Exhibit 4-c of the
Company's 1988 Annual Report on Form 10-K)
4-b Supplemental Indenture relating to the Company's 8-1/2%
Convertible Sub-
ordinated Debentures due August 1, 2008 (incorporated
by reference to Exhibit 4-b of the Company's 1991
Annual Report on Form 10-K)
4-c Indenture relating to the Company's 7% Convertible
Subordinated Deben-
tures due 2001 (incorporated by reference to Exhibit
4-c of the Company's 1991 Annual Report on Form 10-K)
4-d Rights Agreement dated as of June 10, 1989, between the
Company and Bank of America, as Rights Agent
(incorporated by reference to Exhibit 1 to the
Company's Report on Form 8-K dated June 15, 1989)
4-e Amendment to Rights Agreement dated as of February 21,
1991, amending the Rights Agreement dated as of June
10, 1989, between the Company and Bank of America, as
Rights Agent (incorporated by reference to Exhibit 4.7
of Registration Statement No. 33-39115)
10-a Intentionally not used
10-b 1980 Employee Stock Option Plan (incorporated by
reference to Exhibit 1 of Registration Statement No.
2-69580)
10-c 1981 Incentive Stock Option Plan (incorporated by
reference to Exhibit 4 of Registration Statement No.
2-79576)
10-d 1985 Stock Incentive Plan (incorporated by reference to
Exhibit 4a of Regis-
tration Statement No. 33-3172)
10-e 1987 Stock Incentive Plan (incorporated by reference to
Exhibit 4a of Regis-
tration Statement No. 33-18356)
10-f Form of Indemnity Agreement with officers and directors
(incorporated by reference to Exhibit 10-o of the
Company's 1987 Annual Report on Form 10-K)
10-g Consulting Agreement dated March 26, 1990, between the
Company and Thomas C. Beiseker (incorporated by
reference to Exhibit 10-s of the Company's 1990 Annual
Report on Form 10-K)
10-h Standard Industrial Lease-Net dated August 1,
1984, among the Company, Aeroscientific Corp., and
Bradmore Realty Investment Company, Ltd.
(incorporated by reference to Exhibit 10-w of the Company's 1990
Annual Report on Form 10-K)
10-i Net Lease Agreement dated December 2, 1985, among the
Company, Catel Telecommunications, Inc. and Phoenix
Mutual life Insurance Company (incorporated by
reference to Exhibit 10-x of the Company's 1990 Annual
Report on Form 10-K)
10-j Agreement dated March 10, 1992, between Irlandus
Circuits Limited and the Industrial Development Board
for Northern Ireland amending the Grant Agreement dated
September 16, 1987, between Irlandus and the Industrial
Development Board (incorporated by reference to Exhibit 10-br of
the Company's 1992 Annual Report on Form 10-K)
10-k Agreement dated September 10, 1991, between DDL
Electronics Limited and the Industrial Development
Board for Northern Ireland amending the Grant Agreement
dated August 29, 1989, between DDL Electronics and the
Industrial Development Board (incorporated by reference to
Exhibit 10-bt of the Company's 1992 Annual Report on
Form 10-K)
10-l Agreement dated November 22, 1991, between DDL
Electronics Limited and the Industrial Development
Board for Northern Ireland amending the Grant Agreement
dated August 29, 1989, between DDL Electronics and the
Industrial Development Board (incorporated by reference to
Exhibit 10-bu of the Company's 1992 Annual Report on
Form 10-K)
10-m Agreement dated March 9, 1992, between DDL Electronics
Limited and the Industrial Development Board for
Northern Ireland amending the Grant Agreement dated
August 29, 1989, between DDL Electronics and the
Industrial Development Board (incorporated by reference to
Exhibit 10-bv of the Company's 1992 Annual Report on
Form 10-K)
10-n Agreement dated June 22, 1992, between DDL Electronics
Limited and the Industrial Development Board for
Northern Ireland amending the Grant Agreement dated
August 29, 1989, between DDL Electronics and the
Industrial Development Board (incorporated by reference to
Exhibit 10-bw of the Company's 1992 Annual Report on
Form 10-K)
10-o Standard Offer, Agreement and Escrow Instructions for
Purchase of Real Estate dated July 15, 1992, between
Mark Lainer and/or Nominee and the Company's A.J.
Electronics, Inc. subsidiary (incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for
the quarter ended October 2, 1992)
10-p Standard Industrial Lease - Net dated October 15, 1992,
between L.N.M. Corporation-Desert Land Managing Corp.
and the Company's A.J. Electron-
ics, Inc. subsidiary (incorporated by reference to
Exhibit 10.2 of the Company's Quarterly Report on Form
10-Q for the quarter ended October 2, 1993)
10-q Standard Offer, Agreement and Escrow Instructions for
Purchase of Real Estate dated October 19, 1992, between
Business Ventures Corporation and the Company
(incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the quarter ended January 1,
1993)
10-r Form of Exchange Agreement between certain holders of
the Company's 7% and 8-1/2% Convertible Subordinated
Debentures and the Company dated as of November 11,
1992 (incorporated by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-Q for the quarter ended
January 1, 1993)
10-s Warrant Agreement by and between the Company and
American Stock Transfer & Trust Company dated as of
November 11, 1992 (incorporated by reference to Exhibit
28.2 of the Company's Current Report on Form 8-K dated
January 7, 1993)
10-t Lease Modification and Termination Agreement and
Promissory Note, dated April 28, 1993, between the
Company and Phoenix Home Life Mutual Insurance Company
(incorporated by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-Q for the quarter ended
April 2, 1993)
10-u Form of Exchange Agreement between certain holders of
the Company's 7% and 8-1/2% Convertible Subordinated
Debentures and the Company dated May 14, 1993
(incorporated by reference to Exhibit 28.2 of the Company's
Current Report on Form 8-K dated May 19, 1993)
10-v Amendment to Lease Modification and Termination
Agreement, dated June 11, 1993, between the Company and
Phoenix Home Life Mutual Insurance Company
(incorporated by reference to Exhibit 10-bz of Registration
Statement No 33-63618)
10-w Form of Exchange Agreement between certain holders of
the Company's 7% and 8-1/2% Convertible Subordinated
Debentures and the Company dated June 24, 1993
(incorporated by reference to Exhibit 10-ca of Registration
Statement No. 33-63618)
10-x Stock Purchase Agreement, dated July 7, 1993, between
Meret Optical Communications, Inc. and the Company
(incorporated by reference to Exhibit 10-cb of
Registration Statement No. 33-63618)
10-y Second Amendment to Lease among Bradmore Realty
Investment Company, Ltd., the Company and the Company's
Aeroscientific Corp. subsidiary, dated July 2, 1993
(incorporated by reference to Exhibit 10-cd of Registration
Statement No. 33-63618)
10-z 1991 General Nonstatutory Stock Option Plan adopted on
December 31, 1991 (incorporated by reference to Exhibit
10-cf of the Company's 1993 Annual Report on Form 10-K)
10-aa Form of Series B preferred Stock Purchase
Agreement between the Compa-
ny and the Industrial Development Board for
Northern Ireland (incorpo-
rated by reference to Exhibit 10.2 to the
Company's Report on Form 8-K dated October 22,
1993)
10-ab Data-Design Laboratories, Inc. 1993 Stock
Incentive Plan (incorporated by reference to
Exhibit 4.7 of the Company's Registration Statement on Form
S-8, Commission file No. 33-74400)
10-ac Data-Design Laboratories, Inc. Non-Employee
Directors Stock Option Plan (incorporated by
reference to Exhibit 4.8 of the Company's Registration
Statement on Form S-8, Commission File No. 33-74400)
10-ad Form of Land Registry for the Company's Northern
Ireland subsidiaries dated November 4, 1993
(incorporated by reference to Exhibit 10.1 of the
Company's Quarterly Report of Form 10-Q for the quarter ended
September 30, 1993)
10-ae Form of Guaranty by the Company's Northern Ireland
subsidiaries dated November 4, 1993 in favor of
The Tokai Bank, Ltd. and First Interest Bank of
Oregon (incorporated by reference to Exhibit 10.2 of the
Company's Quarterly Report of Form 10-Q for the
quarter ended September 30, 1993)
10-af Form of Guaranty by the Company's Northern Ireland
subsidiaries dated November 4, 1993 in favor of
Sanwa Bank California (incorporated by reference
to Exhibit 10.3 of the Company's Quarterly Report of Form 10-Q
for the quarter ended September 30, 1993)
10-ag Form of Severance Agreement for Key Employees of
the Company (incorpo-
rated by reference to the Company's 1994 Annual
Report on Form 10-K)
10-ah Subscription Agreement for 760,000 shares of DDL
Electronics, Inc.'s Common Stock (incorporated by
reference to Exhibit 10a of the Company's
Quarterly Report of Form 10Q for the quarter ended September 30,
1994)
10-ai Asset Purchase Agreement by and between Yamamoto
Manufacturing USA Inc. ("Buyer") and
Aeroscientific Corp. ("Seller") (incorporated by reference
to Exhibit 10a of the Company's Report on Form 8K dated
November 2, 1994)
10-aj Asset Purchase Agreement by and between Raven
Industries, Inc., A.J. Electronics, Inc. and DDL
Electronics, Inc. (incorporated by reference to
Exhibit 2.1 of the Company's Report on Form 8K dated January 17,
1995)
10-ak Closing Settlement Statement executed by A.J.
Electronics Inc., DDL Electronics, Inc. and Raven
Industries, Inc. (incorporated by reference to
Exhibit 2.2 of the Company's Report on Form 8K dated January 17,
1995)
10-al Non-Competition and Non-Disclosure Agreement
between A.J. Electronics and Raven Industries,
Inc. (incorporated by reference to Exhibit 2.3 of the
Company's Report of Form 8K dated January 17, 1995)
10-am Payoff Agreement between Sanwa Bank California and
the Company dated December 29, 1994
10-an Termination Agreement between First Interstate
Bank of Oregon, N.A., the Tokai Bank Ltd. and the
Company dated December 29, 1994
10-ao Employment Agreement between DDL Electronics, Inc.
and William E. Cook
10-ap Settlement Agreement between DDL Electronics, Inc.
and opposition share-
holders committee (SCRMM)
11 Statement re: Computation of Per Share Earnings. 13
Annual Report to security holders
16 Letter from Price Waterhouse regarding dismissal as
independent account-
ants (incorporated by reference to Exhibit 16 of the
Company's 1994 Annual Report on Form 10K)
21 Subsidiaries of the Registrant
23a Consent of KPMG Peat Marwick, LLP
23b Consent of Price Waterhouse, LLP
27 Financial Schedule for electronic filers
99 Undertaking for Form S-8 Registration
Statement<PAGE>
EXHIBIT 11
DDL ELECTRONICS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Year Ended
June 30
1995
1994 1993
PRIMARY EARNINGS PER SHARE:
Loss from continuing operations $(2,366,000)
$(8,354,000) $(5,630,000)
Income (loss) from discontinued operations-
- - 603,000
Extraordinary items 2,441,000 -
6,100,000
Net income (loss) $ 75,000
$(8,354,000) $ 1,073,000
Weighted average number of common shares outstanding15,149,968
14,239,292 9,332,774
Assumed exercise of stock options net of shares assumed
reacquired under treasury stock method using average
market price 820,549 857,883
795,906
Average common shares and common
share equivalents 15,970,517
15,097,175 10,128,680
Primary earnings (loss) per share:
Continuing operations $(0.15) $(0.55)
$(0.56) Discontinued operations - -
0.06 Extraordinary items 0.15
- - 0.60 $(0.00)
$(0.55) $ 0.10
NOTE: Calculation of primary earnings per share for fiscal 1994
includes 857,883 of exercisable stock options. Including these
exercisable stock options makes primary earnings per share
antidilutive.
<PAGE>
EXHIBIT 11
DDL ELECTRONICS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Continued)
Year Ended June 30
1995 1994
1993
FULLY DILUTED EARNINGS PER SHARE:
Loss from continuing
operations $(2,366,000) $(8,354,000) $(5,630,000)
Add back net
interest related to
convertible subordinated debentures 134,000
135,000 274,000
Loss from continuing
operations for fully
diluted computation (2,232,000) (8,219,000)
(5,356,000)
Income (loss) from
discontinued operations - -
603,000
Extraordinary items
2,441,000 - 6,100,000
Net income (loss) for
fully diluted
computation$ 209,000 $(8,219,000
$(1,347,000)
Weighted average
number of common shares
outstanding15,149,968 14,239,292
9,332,774
Assumed exercise of
stock options and
warrants net of shares assumed reacquired
under treasury stock method using
period end market
price, if higher than
average market price 1,008,566 852,650
1,975,203
Assumed conversion of convertible sub-
ordinated debentures 748,632
764,964 3,100,996
Average fully diluted
shares 16,907,166 15,856,906
14,408,973
Fully diluted earnings
(loss) per share:
Continuing operations $(0.13) $(0.52)
$(0.37)
Discontinued operations - -
0.04
Extraordinary items 0.14 -
0.42
$ 0.01
$(0.52) $ 0.09
Note: The calculated
fully diluted earnings per share are antidilutive for fiscal
years 1995 and 1994. <PAGE>
EXHIBIT 21
DDL ELECTRONICS, INC.
SUBSIDIARIES OF THE REGISTRANT
All subsidiaries are 100% owned by DDL Electronics, Inc., except
as otherwise indicated, and are included in the consolidated
financial statements.
Subsidiaries
Incorporation
Aeroscientific Corp. (California) (99.9% owned by DDL
Electronics, Inc.)California
Aeroscientific Corp. (Oregon) (100% owned by Aeroscientific Corp.
(California))Oregon
A.J. Electronics, Inc.
California
DDL Europe Limited
Northern Ireland
DDL Electronics Limited (100% owned by DDL Europe
Limited)Northern Ireland
Irlandus Circuits Limited (100% owned by DDL Europe
Limited)Northern Ireland
<PAGE>
EXHIBIT 23a
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
DDL Electronics, Inc.
We consent to the incorporation by reference in the Registration
Statements (Nos. 33-18356, 33-45102 and 33-74400) on Form S-8 of
DDL Electronics, Inc. of our reports dated August 18, 1995 and
August 19, 1994, relating to the consolidated balances sheet of
DDL Electronics, Inc. and subsidiaries as of June 30, 1995 and
1994, respectively, and the related consolidated statements of
operations, shareholders equity, and cash flows and related
schedules for the years then ended, which reports appears in the
June 30, 1995 and 1994 annual report of DDL Electronics, Inc.
As discussed in note 1 to the consolidated financial statements,
in 1994 the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes".
KPMG PEAT MARWICK
Portland, Oregon
September 28, 1995
<PAGE>
EXHIBIT 23B
Report of Independent Accountants on Financial Statement
Schedules
To the Board of Directors of DDL Electronics, Inc.:
Our audits of the consolidated financial statements referred to
in our report dated August 20, 1993, appearing on Page 33 of the
1995 Annual Report to Stockholders of DDL Electronics, Inc. also
included an audit of the Financial Statement Schedules listed in
Item 14(a)(2) of this Form 10-K as relating to the year ending
June 30, 1993. In our opinion, these Financial Statement
Schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
Price Waterhouse LLP
Portland, Oregon
August 20, 1993
<PAGE>
EXHIBIT 99
UNDERTAKING FOR FORM S-8 REGISTRATION STATEMENT
With respect to the Registration Statement previously filed by
the Company on Form S-8, the Company hereby undertakes as
follows:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful
defense of any action, suit or proceeding), is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
