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, 1998
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
___________
Exact Name of Registrant as
Specified in Its Charter: DDL ELECTRONICS, INC.
______________________________
DELAWARE 33-0213512
_____________________________ _____________
State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization No. Identification
Address of Principal Executive Offices: 2151 Anchor Court
Newbury Park, CA 91320
_________________________
Registrant's Telephone Number: (805) 376-9415
_________________________
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 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 Part III of 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 August 21, 1998 was $13,472,000. The registrant had 34,088,128
shares of Common Stock outstanding as of August 21, 1998.
Part III (Items 10, 11, 12, and 13) is hereby added to the registrant's
Form 10-K filed on August 31, 1998.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
PRINCIPAL OCCUPATION AND YEAR FIRST
BUSINESS EXPERIENCE INCLUDING ELECTED A
NAME SERVICE ON OTHER BOARDS AGE DIRECTOR
Class I Director to Continue in Office Until the 1999 Annual Meeting:
Charlene A. Gondek Restaurant proprietor 37 1997
Class II Director to Continue in Office Until the 2000 Annual Meeting:
Gregory L. Horton Chief Executive Officer, 42 1996
President and Chairman of
the Board of Directors,
DDL Electronics, Inc.
Class III Directors to Continue in Office Until the 1998 Annual Meeting:
Karen Beth Brenner President, Fortuna Advisors, 45 1996
Inc., an investment advisory
firm; director, Krug
International Corp. and
Creative Bakeries, Inc.
Richard K. Vitelle Vice President*Finance and 44 1996
Administration, Chief
Financial Officer, Treasurer
and Secretary, DDL Electronics,
Inc.
Thomas M. Wheeler Chairman, TMW Enterprises, 71 1997
Inc., an investment holding
company
Ms. Gondek was appointed a director on June 30, 1997, and serves as a
member of the Audit Committee and Compensation Committee of the Board. She
served as president of Jolt Technology, Inc. ("Jolt"), from 1992 to 1996,
and as a director of Jolt from 1992 to 1998. She has been a restaurant
proprietor since 1998. Jolt was acquired by the Company on June 30, 1998.
Mr. Horton became the Company's President and Chief Executive Officer
in January 1996, following the Company's acquisition of SMTEK, Inc. He was
appointed a director in February 1996, and was appointed Chairman of the
Board in July 1997. Since 1986, he has also served as the President and
Chief Executive Officer of SMTEK, Inc., a subsidiary of the Company.
Ms. Brenner was appointed a director of the Company in July 1996, and
serves as a member of the Audit Committee and Compensation Committee.
Since January 1996, she has served as president of Fortuna Advisors, Inc.,
the successor to Karen Beth Brenner, Registered Investment Advisor, a sole
proprietorship which she operated from 1984 to 1995. Ms. Brenner is also a
director of Krug International Corp. and Creative Bakeries, Inc., both
Nasdaq-traded companies.
Mr. Vitelle, a certified public accountant, was appointed Vice
President, Chief Financial Officer and Treasurer in January 1996, and was
elected a director in July 1996. From 1993 to 1996, Mr. Vitelle served as
Chief Financial Officer of InVitro International, a publicly held company
engaged in the development and marketing of in vitro diagnostic testing
systems.
Mr. Wheeler was appointed a director on June 30, 1997, and serves as a
member of the Audit Committee and Compensation Committee. From 1970 until
1995, Mr. Wheeler was the founder, chairman of the board and sole
stockholder of Electro-Wire Products, Inc., a manufacturer of automotive
electrical power distribution systems. Since 1995, Mr. Wheeler has been
chairman of the board of TMW Enterprises, Inc., a private investment
holding company. From 1992 to 1998, he served as director of Jolt.
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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the directors and
executive officers of the Company and persons who own more than 10% of
the Company's Common Stock ("statutory insiders") are required to file
reports of their ownership of the Company's Common Stock on Form 3 and
any subsequent changes in that ownership on Form 4 or Form 5 with the
Securities and Exchange Commission and the New York Stock Exchange.
To the Company's knowledge, based solely upon its review of the
copies of such reports required to be furnished to the Company during or
with respect to the fiscal year ended June 30, 1998, the Company
believes that all Section 16(a) filing requirements applicable to its
statutory insiders during or for such fiscal year were satisfied, except
that Robert Wilson, who served as a director until the annual
stockholders meeting on June 29, 1998, failed to file one or more Form
4s to report dispositions of the Company's common stock during fiscal
1998. These dispositions were reported on Mr. Wilson's Form 5 filed in
August 1998.
Item 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION TABLE
The following table sets forth the cash compensation paid or
accrued by the Company, as well as certain other compensation, for its
fiscal years ended June 30, 1998, 1997 and 1996 to each of the Company's
executive officers whose compensation exceeded $100,000 for the fiscal
year ended June 30, 1998:
Long-Term
Name and Annual Compensation Compensation
Principal -------------------------- Awards:
Positions Year Salary Bonus(1) Other Options (#)
-------------- ---- ------ ------- ----- -------
Gregory L. Horton 1998 $150,000 $126,000 (3) -0-
Chairman, President and 1997 150,000 97,000 (3) 100,000
Chief Executive Officer 1996 69,000(2) 24,000 (3) 400,000
Richard K. Vitelle 1998 $125,000 $ -0- (3) -0-
VP Finance & Admin., 1997 123,000 37,000 (3) 200,000
CFO and Secretary 1996 50,000(2) -0- (3) 185,000
(1) Bonus amounts shown for Mr. Horton were earned and accrued in the
periods indicated, but payment of these bonuses was deferred until
July 1998 because of the Company's cash constraints.
(2) Mr. Horton joined the Company in mid-fiscal 1996 as Chief Executive
Officer and President on January 12, 1996. Mr. Vitelle joined the
Company mid-fiscal 1996 as Vice President-Finance and
Administration and Chief Financial Officer on January 25, 1996.
(3) Total perquisites did not exceed the lesser of $50,000 or 10% of
the executive's salary and bonus.
OPTION GRANTS IN FISCAL YEAR ENDED JUNE 30, 1998
No options were granted to the Company's executive officers during
the fiscal year ended June 30, 1998.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth information concerning options held
by each of the named executive officers as of June 30, 1998:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Year-End Fiscal Year-End
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable(1) Unexercisable(2)
------ -------- -------- ------------- -------------
Gregory L. Horton -0- -0- 263,333/236,667 $ -0- /$ -0-
Richard K. Vitelle -0- -0- 223,332/161,668 $ -0- /$ -0-
(1) All options listed in the table are exercisable at option prices
equal to fair market value on the date of grant.
(2) The value of unexercised in-the-money options is based upon the
fair market value for the common stock on June 30, 1998 of
$0.75 less the applicable option conversion price.
EMPLOYMENT AGREEMENTS AND EXECUTIVE SEVERANCE ARRANGEMENTS
Mr. Horton's employment agreement provides for a base salary of
$150,000, subject to annual reviews of the Compensation Committee, and
annual bonus compensation ranging up to 200% of his base salary. Such
bonus compensation is to be based in part on increases in the Company's
revenues and profits and upon the achievement of other objectives and
criteria as the Board may establish. Mr. Horton's employment is "at
will." Should he voluntarily resign or be terminated for cause, Mr.
Horton will not be entitled to severance pay. He is entitled to
severance equal to 20 months' base salary if he is terminated without
cause. As further described in the accompanying Report of the
Compensation Committee, Mr. Horton was awarded cash bonuses for fiscal
years 1996, 1997, and 1998. See "Compensation of Chief Executive
Officer."
Mr. Vitelle's employment agreement provides for a base annual
salary of $125,000. Mr. Vitelle's employment is "at will". If his
employment is terminated by the Company for cause, then he is not
entitled to severance pay. However, he is entitled to 12 months' base
salary and benefits as severance if he is terminated by the Company
without cause, or if he is terminated as the result of a change in
control of the Company. In addition, if the principal place of Mr.
Vitelle's employment is relocated to any site beyond the 35-mile radius
of the Company's present headquarters, then he may resign at any time
within the following 12 months, whereupon he will be entitled to 12
months' severance payments and benefits.
DIRECTOR COMPENSATION
Directors do not receive cash compensation for their services on
the Company's Board of Directors except for reimbursement of travel
expenses.
Pursuant to the 1996 Non-Employee Directors Stock Option Plan (the
"Directors Plan"), annually on July 1 each non-employee director is
automatically granted, without further action by the Board, a stock
option to purchase 30,000 shares of the Company's Common Stock. The
exercise price per share of all options granted under the Director Plan
is equal to 100% of the fair market value of the Common Stock at the
time of grant. Under the terms of the Directors Plan, each option
granted becomes exercisable six months after the grant date. Each
option grant has a ten-year term. In July 1998 options covering a total
of 90,000 shares were granted to non-employee directors at an option
price of $0.81 per share, and in July 1997 options covering a total of
150,000 shares were granted to five non-employee directors at an option
price of $1.06 per share.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the
"Committee") administers the Company's executive compensation programs
and reviews and approves salaries 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 1996 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
positions in comparable companies. The Committee reviews management's
recommendations 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, achievement of goals and objectives, sustained
performance and comparison to peer level positions outside the Company.
Incentive Compensation Program. Incentive compensation for the
Company's executive officers is designed to reward such individuals for
their contributions to corporate and individual objectives. In
addition, the Company's operating units maintain profit sharing plans
under which operating unit managers and other key employees receive
incentive cash compensation based on the performance and pre-tax profits
of those operations. The Company's executive officers named above do
not participate in these operating unit profit sharing plans.
Stock Options. The Committee administers the Company's 1993 and
1996 Stock Incentive Plans, which are designed to align the interests of
management and other key employees with those of the Company's
stockholders. The number of stock options granted is related to the
recipient's base compensation, level of responsibility and
accomplishments. 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. No options were granted to the Company's executive
officers in fiscal 1998.
Compensation of Chief Executive Officer. Gregory L. Horton was
appointed President and Chief Executive Officer of the Company in
January 1996. The Committee addressed Mr. Horton's incentive
compensation during its meetings on April 1, 1997 and May 28, 1997.
During its deliberations on these dates, the Committee noted that Mr.
Horton had served as President and Chief Executive Officer of the
Company since January 1996 and had not yet been awarded any cash
incentive compensation, despite operational improvements that had been
effected since the beginning of his tenure. The Committee also noted
that the Company was at that time confronted with several important
challenges which, if managed successfully, would justify a significant
award to Mr. Horton. These challenges were the need to repay the
Company's $5.3 million 10% Senior Notes on or before the July 1, 1997
due date, the need to consummate a strategic acquisition or merger, and
the need to keep the Company's common stock listed on an organized
national stock market. In consideration of all of these factors, the
Committee approved incentive compensation for Mr. Horton which included
the following elements:
(1) a $60,000 cash bonus for services rendered from January 1996
through March 1997;
(2) a cash bonus of 25% of his $150,000 base salary for the period from
April 1997 through March 1998; and
(3) cash bonuses of $50,000 each for achievement of three special
short-term goals:
a) avoiding default on the Company's $5.3 million 10% Senior Notes
due July 1, 1997,
b) consummating an acquisition or merger, and
c) retaining the Company's listing on the New York Stock Exchange.
As a result of these actions, Mr. Horton was awarded cash bonuses
for the fiscal years ended June 30, 1996, 1997 and 1998 of $24,000,
$97,000 and $126,000, respectively. Payment of these bonuses was
deferred until July 1998 because of the Company's cash constraints. In
its deliberations, the Committee recognized that Mr. Horton's employment
agreement provides for incentive compensation up to 200% of his base
salary. The actual cash bonuses awarded amount to substantially less
than 200% of Mr. Horton's base salary.
Submitted by the Compensation Committee:
Karen Beth Brenner, Charlene A. Gondek and Thomas M. Wheeler
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ms. Brenner was appointed to the Compensation Committee in July
1996. Ms. Gondek and Mr. Wheeler were appointed to the Compensation
Committee in July 1997. None of these individuals were officers or
employees of the Company during fiscal 1998. There are no interlocks
between the Company and other entities involving the Company's executive
officers and directors who serve as executive officers or directors of
other entities.
STOCK PERFORMANCE GRAPH
The following performance table compares the cumulative total
return for the period from June 30, 1993 through June 30, 1998, 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 (the Company's peer group). For each group an initial
investment of $100 is assumed on June 30, 1993. The total return
calculation assumes reinvestment of all dividends for the indices. The
Company did not pay dividends on its Common Stock during the time frame
set forth below.
(stock performance graph - omitted)
The data points depicted on the graph are as follows:
Dow Jones Dow Jones
Date Industrial Ave. Computer Index DDL Electronics
-------- ------ ------ ------
06/30/93 100.00 100.00 100.00
06/30/94 103.10 101.40 50.00
06/30/95 129.58 174.89 72.22
06/30/96 160.82 197.34 88.89
06/30/97 218.64 305.82 50.00
06/30/98 254.60 437.98 33.33
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 2, 1998, except as
otherwise indicated, the number of shares and percentage of outstanding
Common Stock known by the Company to be 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 Named Executive Officer and (iv) all executive
officers and directors of the Company as a group. Unless otherwise
noted, shares are held with sole voting and investment power. Holdings
include, where applicable, shares held by spouses and minor children,
including shares held in trust.
SHARES OF COMMON STOCK
------------------------------
NAME AND ADDRESS OF NO. PERCENT OF
BENEFICIAL OWNER * SHARES CLASS
------------------- --------- ----------
Karen Beth Brenner......... 1,094,072(1)(2)(3) 3.2%
P.O. Box 9109
Newport Beach, CA 92658
Charlene A. Gondek......... 1,772,498(4) 5.2%
Gregory L. Horton.......... 1,291,667(5) 3.8%
Richard K. Vitelle......... 249,232(6) **
Thomas M. Wheeler.......... 6,416,254(4) 18.8%
Directors and Executive
Officers as a Group (5
persons).................. 10,823,723(7) 31.8%
- --------
* Unless otherwise noted, the address for the beneficial owner is
c/o DDL Electronics, Inc., 2151 Anchor Court, Newbury Park, CA 91320.
** Represents less than 1% of the outstanding shares.
(1) The beneficial owner has sole voting and dispositive power as to 178,400
shares and no voting and shared dispositive power as to 915,672 shares.
(2) Includes 26,529 shares underlying the Company's 8-1/2% convertible
subordinated debentures.
(3) Includes 60,000 shares underlying exercisable options and 75,000 shares
underlying exercisable warrants.
(4) Includes 30,000 shares underlying exercisable options.
(5) Includes 366,667 shares underlying options exercisable within 60 days.
(6) Includes 223,332 shares underlying options exercisable within 60 days.
(7) Includes 709,999 shares underlying options exercisable within 60 days.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 30, 1997, the Company borrowed $2 million from Mr. Wheeler
under a note payable bearing 8% interest. The note matures on October
31, 1999, and is secured by a pledge of the common stock of SMTEK, Inc.
The Company also agreed to give Mr. Wheeler two seats on its Board of
Directors, which seats were filled by Mr. Wheeler and Ms. Gondek. As a
condition to obtaining the $2 million loan from Mr. Wheeler, the Company
agreed to acquire all of the issued and outstanding shares of Jolt
Technology, Inc., a privately-held electronics manufacturing company
owned by Mr. Wheeler, Ms. Gondek and a third individual, for nine
million shares of the Company's common stock. Mr. Wheeler and Ms.
Gondek received 6,386,254 and 1,742,498 shares of the Company's common
stock, respectively, upon the consummation of the acquisition on June
30, 1998.
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.
September 14, 1998 /s/ Richard K. Vitelle
- --------------------------- -----------------------
Date Richard K. Vitelle
Vice President - Finance
(Principal Financial Officer)
