SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 2
(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: SMTEK INTERNATIONAL, 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
Thousand Oaks, 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.
The Form 10-K filed on August 31, 1998, and as amended on September 14,
1998, is hereby amended to add to Item 14, Exhibit 13 (the Annual Report to
security holders) the Corporate Profile and President's Letter to
Stockholders.
CORPORATE PROFILE
SMTEK International, Inc. (NYSE: SMK), formerly DDL Electronics,
Inc., provides customized electronics manufacturing services (EMS) to
original equipment manufacturers (OEMs) in the computer,
telecommunications, instrumentation, medical, industrial and aerospace
industries. The Company also fabricates multilayer printed circuit boards
(PCBs) for use primarily in the computer, communications and
instrumentation industries.
In the area of EMS, SMTEK International's core business, the Company
provides high-complexity, high-mix small to medium volume applications for
customers that stress strong partnership affiliations. The Company also
is expanding its quick-turn EMS capabilities, to be known as SMTEK express
Services, comprised of small, regional production centers located in
proximity to large concentrations of OEMs whose requirements necessitate
speed and rapid turnaround.
Emphasizing exceptional levels of service and customer support, SMTEK
International utilizes the most state-of-the-art manufacturing systems and
processes available for EMS. These leading-edge technologies include
sophisticated enterprise resource planning software to enhance production
efficiencies and the extensive use of robotics in manufacturing.
The Company's EMS operations are located in Southern California,
Florida and Northern Ireland. Its PCB facilities are located in Northern
Ireland. Headquartered in Thousand Oaks, California, SMTEK International
employs approximately 530 people.
(Charts for last five years of Revenue, Operating Income (Loss) (excluding
acquisition expenses), and Net Income (Loss) (excluding non-recurring items))
PRESIDENT'S LETTER TO STOCKHOLDERS
Dear Fellow Stockholders:
In a year of transition, we recorded significant progress across a broad
front, accomplishing the following:
* Returned our Company to sustained profitability;
* Completed the Jolt Technology, Inc. acquisition as a key first step in
creating a nationwide network of quick-turn EMS suppliers;
* Slashed debt and strengthened the balance sheet;
* Continued to build the solid infrastructure and sophisticated capabilities
needed for outstanding customer service and future expansion;
* Established long-term partnership programs with growth-oriented OEMs;
* Closed the year with record backlog of $36.2 million, up 27 percent from
the year earlier level.
These accomplishments relate directly to the ambitious goals we set for
ourselves when this management team assumed responsibility for the Company's
direction in January 1996, concurrent with the acquisition of SMTEK, Inc. We
have made notable progress, but these are only the first steps in what we
hope to achieve. Now we plan to accelerate our aggressive strategy for
profitable growth, further develop our industry presence, expand
profitability and build long-term shareholder value.
(Chart of Backlog for last five years)
A New Era Begins Under A New Name
As we enter a new fiscal year with the Company poised for further gains,
we mark an important new beginning by changing our name to SMTEK
International, Inc. Our new name reflects our core competency in surface
mount technology (SMT) and builds on the thirteen-year reputation for quality
and engineering excellence achieved by the Company's SMTEK, Inc. subsidiary.
We intend to develop a strong, positive image for SMTEK International and a
unified identity for our operating subsidiaries. The Company's stock will
continue to trade on the New York Stock Exchange and Pacific Exchange, now
under the ticker symbol SMK.
Improvement In Financial Results Well Under Way
We registered gratifying gains in the twelve months ended June 30, 1998.
Net income for the year totaled $1,102,000, excluding non-recurring expenses
of $609,000 related to the Jolt acquisition. After those one-time charges,
net income totaled $493,000, equal to two cents per share, compared to a net
loss of $868,000, or three cents per share, in the previous fiscal year.
Results for both years have been restated to reflect the acquisition of Jolt
Technology on June 30, 1998 which has been accounted for as a pooling-of-
interests.
Revenues for the year rose to $53,265,000 from $51,640,000 a year ago.
In evaluating revenues, it should be noted that relative to other EMS
providers, our revenues contain a higher percentage of value-added services,
which has greater potential for incremental profit improvement as we grow.
We have now registered six consecutive quarters of operating profits and
posted net income in five of those six quarters, excluding the previously
mentioned non-recurring acquisition expenses. This turnaround comes after
eight straight years of operating losses aggregating $67 million incurred
prior to 1997.
(Chart of EBITDA (excluding acquisition expenses) for last five years)
Excluding acquisition expenses in 1998, earnings before interest, taxes,
depreciation and amortization (EBITDA) climbed 28 percent to $5,176,000 from
$4,052,000 in fiscal 1997, and operating profit more than doubled to
$2,154,000 from $1,036,000 one year ago. Gross margin was higher than the
industry average. The Company's performance reflected the strength of our EMS
operations, including Jolt's contribution.
Improving Balance Sheet Underpins Growth Initiatives
SMTEK International's financial position has strengthened significantly,
giving us greater flexibility to execute our ambitious growth plan. At year-
end, long-term debt amounted to $7,186,000, down $2,259,000, or a substantial
24 percent, from $9,445,000 one year earlier, and a full 43 percent, or
$5,374,000 less than $12,560,000 at the close of fiscal 1996. Working
capital increased by more than $1 million year-over-year. Stockholders'
equity grew 34 percent to $7,556,000 at the end of fiscal 1998 from
$5,639,000 twelve months earlier.
(Charts of Gross Profit for last five years and Debt to Equity Ratio for last
three years)
Quality, Service And State-of-the-Art Facilities Characterize SMTEK
The Company's ongoing success will be based on providing total customer
satisfaction which means superior value through price, quality, service and
on-time delivery performance. Our state-of-the-art systems and technology are
designed to provide our customers with a seamless level of service and
support.
We have built a solid, sophisticated infrastructure capable of
supporting a much higher level of operations, and we will now focus on
further improving utilization and profitability by driving revenue growth.
Jolt Technology Fuels Progress, Signals Future Direction
The acquisition of Jolt Technology will be a major plus for SMTEK
International going forward and exemplifies our strategic growth
opportunities. Based in Fort Lauderdale, Florida, Jolt is a well-established,
well-regarded supplier of quick-turn high-end electronic assemblies for OEMs,
principally using surface mount technology. For five consecutive years, Jolt
has received the Service Excellence Award for Contract Electronic
Manufacturers, sponsored by Circuits Assembly magazine and Technology
Forecasters, Inc.
Growth Strategy Will Gain Momentum In the Coming Year
We differentiate ourselves from other EMS providers by a clear strategic
focus on the high-complexity, high-mix, small to medium lot segment of the
business. Fueled by pervasive OEM outsourcing, SMTEK International is
building key partnership engagements with growth-oriented customers such as
our recently announced multi-year, multi-million dollar contract with Haas
Automation, Inc. which we expect to ramp up to an annual run rate of more
than $10 million.
(Chart of Earnings (Loss) Per Share (excluding non-recurring items) for last
five years)
Our aggressive acquisition program focuses on creating a nationwide
network of quick-turn EMS companies to be known as SMTEK Express Services,
and as of this writing, we are actively working to complete a number of
transactions in key markets.
We expect to achieve synergies by putting the resources of a larger
company behind these operations which typically need capital, purchasing
power and computer resources to enhance their competitiveness and drive
growth.
As Jolt's success demonstrates, this can be a great business, and we see
tremendous opportunities in this niche. In a highly regionalized business
where speed and service are essential, we are targeting geographic areas with
a high concentration of OEMs, and plan to have several more SMTEK Express
Service companies on line by the close of this fiscal year. Our goal is to
differentiate our Company in the EMS industry through a strategy that
involves establishing small, highly efficient centers, located in close
proximity to customers, which provide phenomenal service and produce
attractive margins.
A Key Goal: Enhance Shareholder Value
Ironically, as our Company's operating performance has shown dramatic
improvement, our stock price has declined. This decline is consistent with
the roughly 60 percent decline experienced during the past year by the
overall EMS sector. As a stockholder, I find it unacceptable to allow the
stock price to languish at such a low price.
(Chart of EBITDA Per Common Share (excluding acquisition expenses) for last
five years)
Armed with our improving results and great confidence in our strategy
and outlook, we are launching a proactive, well-focused investment community
outreach program targeted at generating new investor interest, stronger
demand and broader support for SMTEK International's stock. To support this
initiative, we are planning to restructure the stock through a reverse split
in conjunction with the next acquisition, which will reduce the number of
shares outstanding and increase the stock price. Importantly, the stock will
again be marginable, and its marketability to potential institutional holders
enhanced.
The Company's listing on the New York Stock Exchange, the world's most
prestigious financial market, is a cornerstone of these efforts. We have a
longstanding relationship with the NYSE and anticipate a continued positive
association with the Exchange.
The Outlook for Fiscal 1999 And Beyond Is Highly Positive
With record backlog, important new partnership engagements, growing
capabilities, acquisition prospects and a well-conceived strategy, we look
forward to posting sustained growth in sales and earnings and to establishing
SMTEK International as a top performer in its industry. While first quarter
results will be somewhat soft due to an industry-wide downturn, we anticipate
earnings momentum to gather as the year progresses. Our demonstrated ability
to improve our operating results and balance sheet and to meld key
acquisitions into our established international infrastructure auger very
well for SMTEK's long-term future.
/s/ Gregory L. Horton
Gregory L. Horton
Chairman, President and CEO
(Photo of Gregory L. Horton)
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.
October 27, 1998 /s/ Richard K. Vitelle
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Date Richard K. Vitelle
Vice President - Finance
(Principal Financial Officer)
