SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: SEPTEMBER 30, 1997
[ ] 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
Exact Name of Registrant as
Specified in Its Charter: DDL ELECTRONICS, INC.
State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization: DELAWARE Identification No.: 33-0213512
Address of Principal Executive Offices: 2151 Anchor Court
Newbury Park, CA 91320
Registrant's Telephone Number: (805) 376-9415
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
The registrant had 24,593,858 shares of Common Stock outstanding as of
November 14, 1997.
RESTATEMENT OF FINANCIAL STATEMENTS
Effective July 1, 1997, the Company changed its amortization period for
goodwill related to the acquisition of SMTEK, Inc. (SMTEK) from 5 to 20 years.
This action was taken after management, based in part on an analysis of
SMTEK's projected cash flows and profitability and goodwill practices in the
electronic manufacturing services industry, concluded that 20 years was a more
appropriate goodwill amortization period. However, the Securities and
Exchange Commission did not agree with the Company's conclusions and has
required the Company to restate its financial statements for the quarter ended
September 30, 1997 to amortize goodwill over the originally-determined five
year period rather than over 20 years. This restatement had the effect of
decreasing operating income, pretax income and net income for the three months
ended September 30, 1997 by $257,000 or $.01 per share.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DDL ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, except June 30, 1997)
September 30, June 30,
1997 1997
------ ------
Assets
Current assets:
Cash and cash equivalents $ 563,000 $ 4,718,000
Accounts receivable, net 7,910,000 9,198,000
Costs and estimated earnings
in excess of billings on
uncompleted contracts 3,568,000 3,161,000
Inventories, net 3,502,000 3,211,000
Prepaid expenses 255,000 132,000
---------- ----------
Total current assets 15,798,000 20,420,000
---------- ----------
Property, equipment and
improvements, at cost:
Buildings and improvements 5,909,000 6,037,000
Plant equipment 14,671,000 14,962,000
Office and other equipment 2,010,000 1,952,000
---------- ----------
22,590,000 22,951,000
Less: Accumulated depreciation
and amortization (16,092,000) (16,161,000)
---------- ----------
Property, equipment and
improvements, net 6,498,000 6,790,000
---------- ----------
Other assets:
Goodwill, net 4,122,000 4,439,000
Deposits and other assets 233,000 231,000
---------- -----------
4,355,000 4,670,000
---------- -----------
$ 26,651,000 $ 31,880,000
========== ===========
DDL ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
(Unaudited, except June 30, 1997)
September 30, June 30,
1997 1997
------ ------
Liabilities and Stockholders' Equity
Current liabilities:
Bank lines of credit payable $ 2,663,000 $ 1,378,000
Current portion of
long-term debt 820,000 4,167,000
Accounts payable 6,663,000 9,084,000
Accrued payroll and
employee benefits 943,000 1,145,000
Other accrued liabilities 2,103,000 2,321,000
---------- ----------
Total current liabilities 13,192,000 18,095,000
---------- ----------
Long-term debt:
7% Convertible Subordinated
Debentures, less current
portion 398,000 398,000
8-1/2% Convertible
Subordinated Debentures 1,580,000 1,580,000
Notes payable, capitalized
lease obligations and
other long-term debt,
less current portion 5,629,000 5,842,000
---------- ----------
Total long-term debt 7,607,000 7,820,000
---------- ----------
Stockholders' equity:
Common stock 246,000 246,000
Additional paid-in capital 6,527,000 6,410,000
Accumulated deficit since
June 27, 1997 (128,000) -
Foreign currency translation
adjustment (793,000) (691,000)
---------- ----------
Total stockholders' equity 5,852,000 5,965,000
---------- ----------
$ 26,651,000 $ 31,880,000
========== ==========
See accompanying Notes to Unaudited
Consolidated Financial Statements
DDL ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
-----------------------
1997 1996
------ ------
Sales $12,605,000 $ 9,895,000
Cost of goods sold 10,777,000 8,799,000
---------- ---------
Gross profit 1,828,000 1,096,000
---------- ---------
Operating expenses:
Administrative and selling 1,312,000 1,141,000
Goodwill amortization 317,000 317,000
---------- ---------
1,629,000 1,458,000
---------- ---------
Operating income (loss) 199,000 (362,000)
---------- ---------
Non-operating income (expense):
Interest income 13,000 24,000
Interest expense (226,000) (268,000)
Debt issue cost amortization - (124,000)
Other income (expense) net (7,000) 5,000
---------- ---------
(220,000) (363,000)
---------- ---------
Loss before taxes (21,000) (725,000)
Provision for income taxes (107,000) -
---------- ---------
Net loss $ (128,000) $ (725,000)
========== =========
Loss per share $ (.01) $ (.03)
==== ====
Shares used in computing
earnings per share 24,723,854 23,017,458
========== ==========
See accompanying Notes to Unaudited
Consolidated Financial Statements
DDL ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
-----------------------
1997 1996
------ ------
Cash flows from operating activities:
Net loss $ (128,000) $ (725,000)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 714,000 755,000
Utilization of pre quasi-
reorganization tax benefits 107,000 -
Net increase in operating
working capital (2,562,000) (2,099,000)
Increase in deposits and
other assets (2,000) (2,000)
Benefit of non-capital grants - (58,000)
Other 20,000 23,000
--------- ---------
Net cash used by operating activities (1,851,000) (2,106,000)
--------- ---------
Cash flows from investing activities:
Capital expenditures (189,000) (84,000)
Proceeds from sale of assets 19,000 -
--------- ---------
Net cash used by investing activities (170,000) (84,000)
--------- ---------
Cash flows from financing activities:
Proceeds from bank lines of credit 1,295,000 946,000
Proceeds from long-term debt 2,000,000 -
Payments of long-term debt (5,553,000) (199,000)
Proceeds from foreign government grants 122,000 251,000
--------- ---------
Net cash provided by (used in) financing
activities (2,136,000) 998,000
--------- ---------
Effect of exchange rate changes on cash 2,000 6,000
--------- ---------
Decrease in cash and cash equivalents (4,155,000) (1,186,000)
Cash and cash equivalents at
beginning of period 4,718,000 2,519,000
--------- ---------
Cash and cash equivalents at
end of period $ 563,000 $1,333,000
========= =========
See accompanying Notes to Unaudited
Consolidated Financial Statements.
DDL ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
DDL Electronics, Inc. provides customized, integrated electronic manufacturing
services ("EMS") to original equipment manufacturers ("OEMs") in the computer,
telecommunications, instrumentation, medical, industrial and aerospace
industries. The Company also manufactures multilayer printed circuit boards
("PCBs") for use primarily in the computer, communications and instrumentation
industries. The Company's EMS operations are located in Southern California
and Northern Ireland. The Company's PCB facilities are located in Northern
Ireland.
The accompanying consolidated financial statements, which have not been
audited by independent accountants (except for the balance sheet as of June
30, 1997), include the accounts of DDL Electronics, Inc. and its subsidiaries.
All significant intercompany transactions and accounts have been eliminated in
consolidation. In the opinion of the Company's management, the accompanying
consolidated financial statements reflect all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position at September 30, 1997 and its results of operations and cash flows
for the three months ended September 30, 1997 and 1996.
The Company uses a 52-53 week fiscal year ending on the Friday closest to June
30, which for fiscal year 1997 fell on June 27, 1997. In the accompanying
interim consolidated financial statements, the 1997 fiscal year end is shown
as June 30 and the interim period end for both years is shown as September 30
for clarity of presentation. The actual interim periods ended on October 3,
1997 and September 27, 1996. The fiscal 1998 quarter consisted of 14 weeks
compared to 13 weeks in the first quarter of fiscal 1997.
Certain notes and other information are condensed or omitted from the interim
financial statements presented in this Quarterly Report on Form 10-Q.
Therefore, these financial statements should be read in conjunction with the
Company's 1997 Annual Report to Stockholders as filed with the Securities and
Exchange Commission on October 10, 1997.
Certain reclassifications have been made to the interim fiscal 1997 financial
statements to conform with the fiscal 1998 financial statement presentation.
Such reclassifications had no effect on the Company's results of operations or
stockholders' equity.
Note 2 - REVENUE AND COST RECOGNITION
The Company's Northern Ireland operating units recognize sales and cost of
sales upon shipment of products.
SMTEK, the Company's U.S. operating unit which was acquired in January 1996,
has historically generated the majority of its revenue through long-term
contracts with suppliers of electronic assemblies and products to the federal
government. Consequently, SMTEK uses the percentage of completion method to
recognize sales and cost of sales. SMTEK determines percentage complete on
the basis of costs incurred to total estimated costs. Contract costs include
all direct material and labor costs and those indirect costs related to
contract performance, such as indirect labor, supplies, tools, repairs and
depreciation costs. Selling, general and administrative costs are charged to
expense as incurred. In the period in which it is determined that a loss will
result from the performance of a contract, the entire amount of the estimated
loss is charged to income. Other changes in contract price and estimates of
costs and profits at completion are recognized prospectively. This method
recognizes in the current period the cumulative effect of the changes on
current and prior periods. The asset "Costs and estimated earnings in excess
of billings on uncompleted contracts" represents revenues recognized in excess
of amounts billed.
Note 3 - ACCOUNTS RECEIVABLE
The components of accounts receivable are as follows:
September 30, June 30,
1997 1997
---- ----
Trade receivables $7,708,000 $8,810,000
Other receivables 383,000 546,000
Less allowance for doubtful
accounts (181,000) (158,000)
--------- ---------
$7,910,000 $9,198,000
========= =========
Note 4 - COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED
CONTRACTS
The components of costs and estimated earnings in excess of billings on
uncompleted contracts are as follows:
September 30, June 30,
1997 1997
---- ----
Costs incurred on uncompleted
contracts $25,041,000 $20,455,000
Estimated earnings 2,695,000 2,714,000
---------- ----------
27,736,000 23,169,000
Less: Billings to date (24,168,000) (20,008,000)
---------- ----------
$ 3,568,000 $ 3,161,000
========== ==========
Costs and estimated earnings in excess of billings on uncompleted contracts
consists of revenue recognized under electronics assembly contracts which
amounts were not billable at the balance sheet date. Essentially all of the
unbilled receivables are expected to be billed within 90 days of the balance
sheet date.
Note 5 - INVENTORIES
Inventories consist of the following:
September 30, June 30,
1997 1997
---- ----
Raw materials $3,026,000 $2,889,000
Work in process 659,000 654,000
Finished goods 309,000 160,000
Less reserves (492,000) (492,000)
--------- ---------
$3,502,000 $3,211,000
========= =========
Note 6 - OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following:
September 30, June 30,
1997 1997
---- ----
Environmental liabilities $ 674,000 $ 684,000
Accrued taxes payable 794,000 794,000
Other 635,000 843,000
--------- ---------
$2,103,000 $2,321,000
========= =========
Note 7 - FINANCING ARRANGEMENTS AND ACQUISITION COMMITMENT
The Company has an accounts receivable-based working capital bank line of
credit for SMTEK, its U.S. EMS operation, which provides for borrowings of up
to $2,500,000 at an interest rate of prime plus 1.25%. At September 30, 1997,
borrowings outstanding under this credit facility amounted to $1,351,000. The
Company also has a credit facility agreement with Ulster Bank Markets for its
Northern Ireland operations. This agreement includes a working capital line
of credit of 3,000,000 pounds sterling (approximately $4,860,000), and
provides for interest on borrowings at 1.50% over the bank's base rate. At
September 30, 1997, borrowings outstanding under this credit facility amounted
to $1,312,000.
On June 30, 1997 (which is subsequent to the year ended June 27, 1997), the
Company repaid its 10% Senior Notes due July 1, 1997 in the amount of
$5,300,000 plus accrued interest of $43,000. Of the funds used to repay the
10% Senior Notes, $2,000,000 was borrowed from a private investor (the
"Investor") on June 30, 1997 under an 8% note payable due February 1, 1999
which is secured by the common stock of SMTEK.
Following is pro forma information for certain consolidated balance sheet line
items presented as if the issuance of the $2,000,000 note payable and
repayment of the 10% Senior Notes had occurred on June 27, 1997:
June 27, 1997
---------------------------
As Reported Pro forma
----------- -----------
Assets:
Cash and cash equivalents $4,718,000 $1,375,000
Liabilities:
Current portion of long-term debt $4,167,000 $ 867,000
Other accrued liabilities $2,321,000 $2,278,000
Concurrent with issuing the $2,000,000 note payable on June 30, 1997, the
Company agreed to acquire all of the issued and outstanding shares of Jolt
Technology, Inc.("Jolt"), a privately-held electronic manufacturing services
company controlled by the Investor, for nine million shares of the Company's
common stock. The acquisition of Jolt is subject to executing a definitive
agreement, obtaining a fairness opinion on the transaction, and obtaining the
approval of the Company's stockholders. Upon consummation of the Jolt
acquisition, the maturity date of the $2,000,000 note payable will be extended
from February 1, 1999 to October 31, 1999.
Note 8 - INFORMATION RELATING TO STATEMENT OF CASH FLOWS
"Net cash used by operating activities" includes cash payments for interest as
follows:
Three months ended
September 30,
---------------------
1997 1996
------ ------
Interest paid $ 244,000 $ 276,000
======= =======
"Net increase in operating working capital" is comprised of the following:
Three months ended
September 30,
---------------------
1997 1996
------ ------
(Increase) decrease in
accounts receivable $ 1,024,000 $ (1,168,000)
Increase in costs and estimated
earnings in excess of billings
on uncompleted contracts (407,000) (556,000)
(Increase) decrease in
inventories (369,000) 616,000
(Increase) decrease in
prepaid expenses (125,000) 3,000
Decrease in accounts payable (2,285,000) (728,000)
Decrease in accrued payroll
and employee benefits (186,000) (157,000)
Decrease in other liabilities (214,000) (109,000)
--------- ---------
Net increase in operating
working capital $(2,562,000) $(2,099,000)
========= =========
Following is the supplemental schedule of non-cash investing and financing
activities:
Three months ended
September 30,
---------------------
1997 1996
------ ------
Capital expenditures financed by
lease obligations $ 36,000 $ 395,000
Conversion of debt to equity $ 10,000 $ 76,000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements made below are forward-looking in nature and reflect the
Company's current expectations and plans. Such statements involve various
risks and uncertainties that could cause actual results to differ materially
from those currently expected by the Company. Meaningful factors that might
cause such differences include, but are not limited to, significant historical
losses, limited capital resources and a continuing need for financing,
dependence on key personnel, concentration of revenues among major customers,
historical dependence on government business on the part of the Company's U.S.
operating unit and a recent shift into commercial business, industry
conditions, competition, environmental matters, dependence on suppliers and
other factors as discussed in the Company's Securities and Exchange Commission
filings, including other factors described as "Risk Factors" in the Company's
Registration Statement on Form S-3 (No. 333-31349).
DESCRIPTION OF THE BUSINESS
The Company provides customized, integrated electronic manufacturing services
("EMS") to original equipment manufacturers ("OEMs") in the computer,
telecommunications, instrumentation, medical, industrial and aerospace
industries. The Company also manufactures multilayer printed circuit boards
("PCBs") for use primarily in the computer, communications, and
instrumentation industries. The Company's EMS operations are located in
Southern California and Northern Ireland. Its PCB facilities are located in
Northern Ireland.
The Company entered the EMS business by acquiring its domestic EMS operations
in 1985 and by organizing its European EMS operations in 1990. In fiscal
1995, the Company liquidated or sold all assets associated with its PCB and
EMS operations in the United States. In January 1996, as the first step
toward rebuilding a domestic presence in the EMS industry, the Company
acquired SMTEK, Inc. ("SMTEK"), a provider of integrated design and electronic
manufacturing services.
QUASI-REORGANIZATION
The Company, with the authorization of its Board of Directors, implemented a
quasi-reorganization effective June 27, 1997. The quasi-reorganization, which
did not require the approval of the Company's stockholders, resulted in an
elimination of the accumulated deficit of $23,678,000 by a transfer from
additional paid-in capital of an equivalent amount. This deficit was
attributable primarily to operations which were divested or discontinued in
prior years. Following a review and evaluation by management, no adjustment
was made to the carrying values of the Company's assets and liabilities
because such amounts were deemed to be not in excess of estimated fair values.
RESULTS OF OPERATIONS
The Company uses a 52-53 week fiscal year ending on the Friday closest to June
30. In the accompanying interim consolidated financial statements, the
interim period end for both years is shown as September 30 for clarity of
presentation. The actual periods ended on October 3, 1997 and September 27,
1996. The fiscal 1998 quarter consisted of 14 weeks compared to 13 weeks in
the first quarter of fiscal 1997.
Consolidated sales for the quarter ended September 30, 1997 were $12,605,000,
compared to $9,895,000 for the first quarter of last year. The additional
week of production in the latest quarter was a contributing factor to the
increase in sales. Sales for the Company's EMS operations increased
$2,544,000 in the latest quarter compared to the first quarter of last year.
Sales to new customers as well as increased sales to existing customers
contributed to the sales growth of the EMS operations. For the three months
ended September 30, 1997, sales of the PCB operations increased approximately
9% over sales for the first quarter of the prior year.
Consolidated gross profit for the latest quarter was $1,828,000, compared to
$1,096,000 for the three months ended September 30, 1996. Gross profit of the
EMS operations was $1,425,000 for the first quarter of fiscal 1998, compared
to $822,000 for the prior year first quarter, which accounted for $603,000 of
the overall increase. The higher sales volume of the EMS operations,
increased productivity, and lower material prices contributed to the increase
in EMS gross profit. For the three months ended September 30, 1997, gross
profit from PCB operations increased approximately 51% over gross profit for
the first quarter of the prior year. This improvement is attributable
primarily to material price reductions and processing cost savings. The
Company's consolidated gross profit margin increased from 11.1% in the three
months ended September 30, 1996 to 14.5% in the latest quarter as a result of
the aforementioned factors.
Administrative and selling expenses for the three months ended September 30,
1997 were $1,312,000, compared to $1,141,000 for the same period in the
previous year. The increase is primarily attributable to the additional week
of operations included in the latest quarter as a result of the Company's
52-53 week fiscal year.
In the three months ended September 30, 1997, consolidated operating income
was $199,000, compared to a consolidated operating loss of ($362,000) in the
three months ended September 30, 1996.
Interest expense decreased from $268,000 in the three months ended September
30, 1996 to $226,000 in the three months ended September 30, 1997 because the
Company repaid its 10% Senior Notes in the amount of $5,300,000 on June 30,
1997. Of the funds used to repay the 10% Senior Notes, $2,000,000 was
borrowed on June 30, 1997 under an 8% promissory note due February 1, 1999.
Debt issue cost amortization expense of $124,000 for the three months ended
September 30, 1996 relates to the 10% Senior Notes. There is no such
amortization expense in the latest quarter because these debt issue costs were
fully amortized as of June 30, 1997.
The provision for income taxes of $107,000 for the three months ended
September 30, 1997 represents the utilization of pre-quasi reorganization tax
benefits. Pursuant to quasi-reorganization accounting, as the portion of loss
carryforwards and deferred tax benefits originating prior to the June 27, 1997
quasi-reorganization are utilized, the corresponding tax effect ($107,000 for
the quarter ended September 30, 1997) is credited to paid-in capital instead
of being treated as a reduction of the provision for income taxes.
Additionally, because the Company's goodwill amortization expense is not
deductible for income taxes, the provision for income taxes in the three
months ended September 30, 1997 is greater than the amount which would result
from applying statutory tax rates to pretax income.
The net loss for the three months ended September 30, 1997 was ($128,000) or
($.01) per share, compared to ($725,000) or ($.03) per share for the same
period of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are its cash and cash equivalents,
which amounted to $563,000 at September 30, 1997, and its bank lines of
credit. During the three months ended September 30, 1997, cash and cash
equivalents decreased by $4,155,000. This decrease consisted of cash used by
operating activities of $1,851,000, capital expenditures of $189,000, and net
reductions of long-term debt of $2,258,000, partially offset by cash inflows
of $122,000 from government grants, proceeds from the sale of assets of
$19,000, and the effect of exchange rate changes on cash of $2,000.
Components of operating working capital increased by $2,562,000 during the
first three months of fiscal 1998, comprised of a $407,000 increase in costs
and earnings in excess of billings on uncompleted contracts, a $369,000
increase in inventories, a $125,000 increase in prepaid expenses, and a
$2,685,000 decrease in accounts payable and other accrued liabilities,
partially offset by a $1,024,000 decrease in accounts receivable.
Accounts receivable decreased from $9,198,000 at June 30, 1997 to $7,910,000
at September 30, 1997. This decrease results primarily from a decrease in
sales from $14,259,000 in the three months ended June 30, 1997 to $12,605,000
in the three months ended September 30, 1997.
The Company has an accounts receivable-based working capital bank line of
credit for SMTEK which provides for borrowings of up to $2,500,000 at an
interest rate of prime plus 1.25%. At September 30, 1997, borrowings
outstanding under this credit facility amounted to $1,351,000. The Company
also has a credit facility agreement with Ulster Bank Markets for its Northern
Ireland operations. This agreement includes a working capital line of credit
of 3,000,000 pounds sterling (approximately $4,860,000), and provides for
interest on borrowings at 1.50% over the bank's base rate. At September 30,
1997, borrowings outstanding under this credit facility amounted to
$1,312,000.
The Company's EMS and PCB fabrication businesses require continuing investment
in plant and equipment to remain competitive. Recently, however, the
Company's financial position has severely restricted its ability to make
capital improvements in its facilities. Capital expenditures during fiscal
1997, 1996 and 1995 were approximately $2,210,000, $1,599,000 and $643,000,
respectively. The Company anticipates it will need to increase its capital
spending in the coming years in order to stay competitive as technology
evolves. Capital expenditures for the three months ended September 30, 1997
were $225,000. Management estimates that capital expenditures of as much as
$2 million may be required in fiscal 1998. Of that amount, the substantial
majority is expected to be financed by a combination of capital leases,
secured loans and foreign government grants.
The Company's financial statements are presented on a going concern basis,
which contemplates the realization of assets and satisfaction of liabilities
in the normal course of business. The Company incurred negative cash flow
from operating activities of $1,851,000 during the three months ended
September 30, 1997.
The achievement of sustained operating profitability is the most significant
internal factor to ensure the Company's long-term viability. No assurance can
be given that the Company will sustain operating profitability or that cash
generated from non-operating sources will be adequate to fund future cash
needs. As a necessary step to ensure the Company's increased profitability,
the Company is actively pursuing strategic merger and acquisition candidates
that will help ensure growth of the Company in the markets and industries in
which it has expertise. No assurance can be given that any such merger or
acquisition will occur.
With the exception of the three quarters ended September 30, 1997, during
which the Company generated cumulative operating income of $795,000, the
Company has incurred operating losses for a number of years. Operating losses
could return and persist until such time as sales increase to a level
sufficient to cover costs and operating expenses. No assurance can be given
as to whether or when sales increases may be achieved. Sales increases will
depend in part upon strengthening the Company's sales and marketing functions
for its existing operations and improving its price competitiveness in the EMS
industry by achieving economies of scale in the procurement of electronic
components.
Management believes that the Company's cash resources and borrowing capacity
on its working capital lines of credit are sufficient to fund operations for
at least the next 12 months.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
11 Computation of Earnings Per Share
27 Financial Data Schedule (electronic filing only)
b. Reports on Form 8-K:
On July 9, 1997, a Form 8-K was filed regarding a press release announcing
the repayment in full of 10% Senior Secured Notes, the issuance of a
$2,000,000 promissory note, and the agreement in principle to acquire the
stock of Jolt Technology, Inc.
On September 29, 1997, a Form 8-K was filed regarding a press release
announcing that DDL had commenced litigation against Century Electronics
Manufacturing, Inc. ("Century") over a breach of contract.
On November 7, 1997, a Form 8-K was filed disclosing that the Company and
Century entered into a settlement agreement which generally releases and
resolves all claims between them.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 26, 1998 /s/ Richard K. Vitelle
- --------------------------------- -----------------------------------
Date Richard K. Vitelle
Vice President -Finance
(Principal Financial Officer)
EXHIBIT 11
DDL ELECTRONICS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Three Months Ended
September 30,
------------------------
1997 1996
------ ------
PRIMARY EARNINGS PER SHARE:
Net loss $ (128,000) $ (725,000)
========== ==========
Weighted average number of common
shares outstanding 24,591,103 23,017,458
Assumed exercise of options and warrants
net of shares assumed reacquired 132,751 -
---------- ----------
Average common shares and common
share equivalents 24,723,854 23,017,458
========== ==========
Primary earnings (loss) per share $ (.01) $ (.03)
==== ====
FULLY DILUTED EARNINGS PER SHARE:
Net loss $ (128,000) $ (725,000)
Add back net interest related to
convertible subordinated debentures 34,000 34,000
---------- ----------
Net loss for fully
diluted computation $ (94,000) $ (691,000)
========== ==========
Weighted average number of common
shares outstanding 24,591,103 23,017,458
Assumed exercise of options and warrants
net of shares assumed reacquired
under treasury stock method using
period end market price, if higher
than average market price 132,751 309,562
Assumed conversion of convertible
subordinated debentures 310,206 310,206
---------- ----------
Average fully diluted shares 25,034,060 23,637,226
========== ==========
Fully diluted earnings
(loss) per share $ (.01) $ (.03)
==== ====
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
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<DEPRECIATION> 16092000
<TOTAL-ASSETS> 26651000
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<COMMON> 246000
0
0
<OTHER-SE> 5606000
<TOTAL-LIABILITY-AND-EQUITY> 26651000
<SALES> 12605000
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<INCOME-PRETAX> (21000)
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