UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20 549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Commission File
Ended March 31, 2000 Number 0-7445
DATRON SYSTEMS INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 95-2582922
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(State of Incorporation) (I.R.S. Employer Ident. No.)
3030 Enterprise Court, Vista, California 92083-8347
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (760) 734-5454
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01
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(Title of Class)
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 filings
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. ( X )
The aggregate market value of the voting stock (which consists
solely of shares of Common Stock) held by non-affiliates of the
registrant as of June 16, 2000 was $27.6 million, based on the
closing price on that date on the Nasdaq Stock Market.
The number of shares outstanding of each of the registrant's
classes of common stock as of June 16, 2000 was: Common Stock,
par value $0.01 -- 2,722,261 shares.
DOCUMENTS INCORPORATED BY REFERENCE
1. Certain portions of registrant's Annual Proxy Statement to
be filed pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended, in connection with the
Annual Meeting of Stockholders of the registrant to be
held August 4, 2000 are incorporated by reference into
Part III of this report.
2. Items contained in the above-referenced documents that are
not specifically incorporated by reference are not
included in this report.
<PAGE>
DATRON SYSTEMS INCORPORATED
FORM 10-K
FISCAL YEAR 2000
TABLE OF CONTENTS
PART I 1
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security
Holders 8
PART II 9
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 9
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 9
Item 8. Financial Statements and Supplementary Data 9
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure 9
PART III 10
Item 10. Directors and Executive Officers of the
Registrant 10
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial
Owners and Management 10
Item 13. Certain Relationships and Related
Transactions 10
PART IV 11
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 11
<PAGE>1
PART I
Item 1. Business.
Company Overview
Datron Systems Incorporated and its wholly owned
subsidiaries (the "Company") provide satellite communication
products and systems and high quality radio communication
products to worldwide commercial and governmental markets
and to several United States Government customers, including
the Department of Defense ("DoD"). The Company was founded
in 1969 and became an independent publicly held corporation
in 1985.
The Company operates its business through two subsidiaries.
In October 1985, the Company acquired its wholly owned
subsidiary, Datron World Communications Inc., formerly known
as Trans World Communications, Inc. ("DWC"). DWC conducts
the Company's Communication Products business. In June
1990, the Company acquired its wholly owned subsidiary,
Datron/Transco Inc., formerly known as Transco
Communications Inc. ("D/T"). D/T conducts the Company's
Antenna and Imaging Systems business. In September 1993,
the Company formed a wholly owned subsidiary, Datron
Telecommunications International Inc., to provide private
international telecommunication systems. Datron
Telecommunications was merged into DWC on March 31, 1995.
The Company discontinued its private international
telecommunications business in fiscal 1996. In March 1996,
D/T consolidated its image processing division in San Jose,
California, which was acquired in August 1994, with its
remote sensing earth station business in Simi Valley,
California.
Investment Considerations
This report contains certain forward-looking statements that
may be used in evaluating the opportunities and risks
associated with future Company performance. However, actual
results could differ materially from those described in the
forward-looking statements due to, among other things, the
following factors:
Dependence on Sales to Foreign Customers; Worldwide Economic
Downturns and Currency Devaluations
Sales to foreign customers accounted for 55% of consolidated
sales in each of fiscal 2000, 1999 and 1998. Sales of
Communication Products have been even more highly
concentrated with foreign customers: 89%, 93% and 88% in
fiscal 2000, 1999 and 1998, respectively. Sales to foreign
customers often involve risk because of political and
economic uncertainties in many foreign countries, which can
result in funding delays or inability of those customers to
obtain financing for anticipated purchases of Company
products. As a result, it is often more difficult to
predict order bookings from foreign customers than it is
from domestic customers. In addition, foreign political
unrest, war, economic downturns and currency devaluations
could have a significant negative impact on future Company
sales and income.
Reliance on Large Orders from a Small Number of Customers
A substantial percentage of sales may be heavily
concentrated with a small number of customers. Within the
Communication Products business segment, two customers
accounted for 44% and 11% of that segment's net sales in
fiscal 2000. In fiscal 1999 and 1998, a single customer
accounted for 13% and 24%, respectively, of that segment's
net sales. Although sales in the Antenna and Imaging
Systems business segment have not been so heavily
concentrated with one customer, it is common for a small
number of customers to each account for approximately 5% to
15% of that segment's net sales each year. Because it is
unusual to receive large orders from the same customer in
successive years, it is necessary to find new customers each
year to replace the previous year's sales. There can be no
assurance that the Company will be able to do so in the
future. In addition, reliance on large orders can result in
financial performance varying widely from quarter-to-
quarter, and also carries contract cancellation risk that
can more adversely affect Company performance than it would
if the Company depended on small orders from a large number
of customers.
<PAGE>2
Timely Development and Customer Acceptance of New Products
The Company's products are subject to obsolescence. To
prevent this from occurring, the Company has an ongoing new
product development program to keep the technologies
employed in its products current and to introduce new
products that meet changing market requirements. Lack of
timely development of new technologies and new products, or
lack of acceptance of new products by the Company's
customers could have a negative impact on future sales and
income.
U.S. Government Export Restrictions
Some of the Company's products are subject to export
licensing approval by agencies of the U.S. Government. U.S.
security concerns as well as foreign political instability
or unrest can affect the licensing process. Although the
requirement to obtain export licenses is not known to have
prevented any sales of Company products to date, it has on
occasion delayed shipments of some products and in some
cases has placed the Company at a competitive disadvantage.
There can be no assurances that future shipments may not
likewise be delayed or that U.S. security concerns may
result in the denial of export licenses or the loss of sales
opportunities for some Company products.
Fixed Price Development Contracts
The Company often accepts fixed-price contracts that require
custom engineering, custom software or the development of
new features and capabilities. Such contracts usually
include the sale of standard products and components, but
not always. Although engineering cost estimates are
prepared as a basis for quoting such contracts, there can be
no assurance the Company will be able to develop the
required features, capabilities or software within
established cost budgets. Should development costs exceed
established budgets, as they occasionally have in the past,
the result could have a material adverse effect on earnings.
Consumer Products and Markets
In November 1995, the Company introduced its first consumer
product, a mobile direct broadcast satellite ("DBS")
television reception system for recreational vehicles and
buses. This product represents a departure from the
Company's historical business that has focused on large
contracts, relatively small numbers of deliverables and
customers that are primarily government agencies or large
corporations. Several additional DBS antenna products have
subsequently been introduced, including a marine product
line and antenna systems for large business jets and
commercial jets. Selling a consumer product requires a
different approach than selling the Company's traditional
products. For its DBS products, the Company has established
a factory direct to dealer distribution system and also
sells directly to original equipment manufacturers. These
sales methods are currently effective, but there can be no
assurance they will continue to be so in the future or that
consumer demand for its DBS products will be as large as the
Company anticipates.
Changes in or Unavailability of Products and Services
Offered by Satellite Service Providers
All consumer products currently sold or under development by
the Company operate with programming or data transmission
services from satellite service providers or their related
suppliers. The Company is not affiliated with any satellite
service provider and is unable to control the content and
availability of the products and services they offer.
Although the Company has established good working
relationships with many satellite service providers to
ensure product compatibility, changes in or unavailability
of products and services offered by the satellite service
providers could have an adverse effect on the Company's
business. There can be no assurances that such changes will
not be made or that anticipated future services will be
offered.
<PAGE>3
Competitors
The Company has competitors for all the products it offers.
The level of competition varies by product line and ranges
from many competitors for its radio products to a few
competitors for its tracking antenna products. New
competition has recently emerged for its mobile DBS
products. The Company could be adversely affected by
competitors' development of new or different products that
may provide or be perceived as providing greater value than
the Company's products. The Company may or may not be
successful in developing competing products. Many of the
Company's competitors and potential competitors have
substantially greater resources than the Company and may be
more successful in developing, producing and marketing their
products. In such case, the Company may experience
substantial competition, which could have a material adverse
effect on the Company's business.
Declining Sales for the U.S. Department of Defense
In fiscal 1993, the Company restructured its operations in
response to declining DoD spending. Sales for the DoD have
declined from $31.9 million in fiscal 1993 to $13.3 million
in fiscal 2000, primarily due to completion of long-term DoD
contracts that have not been replaced with new orders.
Although fiscal 2000 sales for the DoD have increased 19%
since fiscal 1998, there can be no assurance that new DoD
orders will be received or that the orders received will be
sufficient to meet the Company's sales objectives.
General
The Company operates in two business segments: Antenna and
Imaging Systems, which are supplied by D/T, and
Communication Products, which are supplied by DWC.
Antenna and Imaging Systems
This business segment designs and manufactures satellite
communication terminals, telemetry tracking and control
systems, servo control products and high-quality microwave
antennas. Its major products are remote sensing satellite
earth stations and image processing software for worldwide
scientific, military and commercial customers, tracking
antennas and systems for U.S. and foreign governmental
agencies and commercial satellite service providers, and
mobile satellite television reception systems for
recreational vehicles, buses, boats and large business jets.
Descriptions of the major product areas follow:
Satellite Communication ("SATCOM") Terminals. The Company
is a supplier of satellite communication antenna systems and
subsystems used to receive defense-related data and data
transmitted through satellites of other government and
commercial organizations. The stabilizing and automatic
tracking capabilities of its antenna systems make them
particularly well suited for use on ships, motor vehicles
and other mobile platforms. Over the past two decades, the
Company has been a prime contractor and a subcontractor for
shipboard SATCOM antenna systems used by the U.S. Navy.
More recently, the Company has been developing airborne
SATCOM antenna systems for the U.S. Air Force.
Telemetry Tracking and Control ("TT&C") Systems. TT&C
systems monitor and control vehicles such as satellites,
missiles and aircraft. They receive radio telemetry signals
containing vehicle status information, engage in automatic
tracking of the vehicle so contact is maintained and
transmit command signals so vehicle control can be
established and maintained.
<PAGE>4
Servo Control Products. The Company's involvement with
SATCOM and TT&C markets has required a high capability in
radio frequency electronics, antenna engineering, servo
controls and large precision mechanical systems. The
Company has developed a line of pedestals and rotators,
servo power amplifiers and positioning control units that
are often used as building blocks for specific customer
requirements.
Microwave Products. The Company designs and manufactures
broad bandwidth microwave antennas for the aerospace
industry that are used on high performance aircraft,
missiles and space launch vehicles.
Remote Sensing Satellite ("RSS") Earth Stations. The RSS
market is a subset of the broader earth observation market.
It involves using several types of satellites containing
optical and radar sensors in conjunction with specific earth
acquisition and data processing equipment to produce images.
The images are in the form of hard copy and/or digital data
that allow the user to study changes on the earth's surface
or environment. Applications include locating minerals,
updating maps, forecasting weather, monitoring crops,
studying the environment, monitoring earth resources and
gathering economic or military intelligence.
The Company entered the commercial RSS market in fiscal 1994
and in fiscal 1995 acquired International Imaging Systems,
Inc. ("I2S"), a privately-held company in Milpitas,
California, to provide complete RSS earth stations for the
international marketplace. I2S's expertise was in the
fields of digital image processing and photogrammetry. The
Company now offers its customers complete RSS earth
stations, including image processing capability.
Mobile DBS Television Systems. The Company introduced its
first DBS antenna product in fiscal 1996. That product
allows a recreational vehicle owner to receive DBS
television from a parked vehicle at the touch of a button by
automatically locating the satellite. During fiscal 1997,
the Company introduced several additional DBS antenna
products including systems for boats at anchor, boats
underway, and RVs and buses on the open road. Also during
fiscal 1997, the Company was first to demonstrate live DBS
television on a commercial airliner, and in fiscal 1998, was
first to obtain Federal Aviation Administration
certification of an airborne DBS system designed for large
business jets. In fiscal 2000, the Company licensed the
manufacturing rights to its DBS-2100(tm) tail-mounted antenna
for business jets to Airshow Inc. and announced it intended
to concentrate its airborne DBS efforts on the commercial
airline market.
Customers and Marketing
Sales of Antenna and Imaging Systems' products have
historically been concentrated with the DoD, which accounted
for 32% of this business segment's fiscal 2000 sales and 28%
of its fiscal 1999 sales. Marketing and sales activities
for its DoD customers and other non-defense governmental
agencies are conducted by internal sales and engineering
personnel. Most customers for the RSS business are foreign
government space and communications agencies. Marketing and
sales activities for those products are usually conducted
through independent sales representatives in Europe, South
America and Asia.
Introduction of mobile DBS television systems required the
establishment of new distribution methods to sell these
consumer products. The Company's initial approach of using
exclusive national distributors was not effective and the
Company is now selling its DBS products direct to dealers
and original equipment manufacturers, as well as through
select distributors and agents. Company employees provide
sales and marketing support and installation training for
the dealers.
Manufacturing, Assembly and Sources of Supply
Products for the Company's Antenna and Imaging Systems
business segment are designed, manufactured and assembled at
facilities in Simi Valley, California. The Company
purchases certain components and subsystems from
subcontractors and vendors. Some of these items are
standard off-the-shelf components and others are fabricated
to Company specifications. The Company also fabricates
electronic assemblies from purchased electronic components
and circuit boards. A production line for DBS antenna
products was established in fiscal 1996 and expanded in
fiscal 1997.
<PAGE>5
The Company is rarely dependent on a single source of supply
for materials, parts or components. However, once a
subcontractor is selected to provide components built to
Company specifications, the Company is often dependent on
that subcontractor. Failure of the subcontractor to perform
could jeopardize the ability of the Company to meet its
required delivery schedules.
Communication Products
This business segment designs, manufactures and distributes
high frequency ("HF") radios and accessories for over-the-
horizon radio communications and very high frequency ("VHF")
radios and accessories for line-of-sight communications.
The Company's HF radios operate in the frequency range of
1.6 to 30 megahertz, where radio waves generated from the
transmitter reflect off the ionosphere back to the point of
receipt on earth. The Company's VHF radio products, which
operate in the frequency range of 30 to 88 megahertz,
provide users high-quality transmission for line-of-sight
communications.
In addition to its standard radios, the Company offers
frequency hopping and encryption options to its VHF product
line and automatic link establishment options to its HF
product line. Frequency hopping is a technique that
prevents interruption or interception of radio signals by
changing, at very high speeds, the frequency at which they
are transmitted. This technology utilizes advanced
synchronized mechanisms that ensure all radios in a network
are synchronized and frequency hop at the same time.
Automatic link establishment, when used in HF radio
equipment, automatically determines the best available
frequencies on which to communicate.
The Company offers a wide range of accessory products to
complement the HF and VHF product lines. These accessory
products include antennas and antenna tuners, power sources,
amplifiers, remote control systems, modems, data
communications equipment and audio accessories.
A substantial percentage of sales of Communication Products
are often concentrated with a small number of customers. In
fiscal 2000, an African customer accounted for 44% of this
business segment's sales and a European customer accounted
for 11% of its sales. In fiscal 1999, another African
customer accounted for 20% of this business segment's sales
and an Asian customer accounted for 13% of its sales. And,
in fiscal 1998, two Asian customers accounted for 24% and
10% of this business segment's sales and a South American
customer accounted for 12% of its sales. Because it is
unusual to receive large orders from the same customer in
successive years, it is often necessary to find new
customers each year to replace the previous year's sales.
To minimize the impact fluctuating sales may have on the
Company's operations, temporary employees are used when
practical.
Customers and Marketing
Sales to foreign customers accounted for 89% of this
business segment's fiscal 2000 sales and 93% of its fiscal
1999 sales. Most of its international customers are
agencies of foreign governments that perform civil defense,
paramilitary and military operations, and foreign
governmental agencies that perform civilian tasks unrelated
to military operations, such as civil aviation agencies,
drug interdiction agencies, embassies and disaster relief
organizations. Domestic customers are primarily various
agencies of the United States Government, including the Drug
Enforcement Administration and Department of State.
The Company's products are sold in over 80 countries by a
network of independent sales and service representatives,
most of whom are non exclusive sales agents of the Company.
These representatives provide both pre-sale and post-sale
support. Many of them operate service facilities that offer
both warranty and long-term maintenance of the Company's
products. Sales are denominated in U.S. Dollars.
<PAGE>6
In addition to direct sales, the Company sometimes sells its
radio products to international suppliers of complementary
equipment. It also sometimes licenses the local
manufacturing of its products to customers in certain
countries. The latter practice is usually followed where
local regulations discourage the importation of complete
units.
Manufacturing, Assembly and Sources of Supply
Communication products are designed and manufactured at
facilities in Vista, California. Company engineers work
closely with manufacturing and marketing personnel to
improve existing designs and to introduce new products that
meet the ever changing demands of the marketplace. A new
family of tactical VHF radios was introduced in fiscal 1998
and a new family of handheld radios was introduced in fiscal
1997. The Company purchases certain electronic components,
circuit boards and fabricated metal parts, and painting and
silk screening services. Other than when it licenses
overseas manufacturing for a particular local market, the
Company performs most other manufacturing functions
necessary for the production of its products.
The Company is rarely dependent on any single source of
supply for the manufacture of its communication products.
Although only one supplier may be used for certain parts,
the Company believes that multiple sources are usually
available.
Backlog
Order backlog at March 31 was as follows:
2000 1999
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Antenna and Imaging Systems $24,293,000 $20,484,000
Communication Products 1,702,000 2,211,000
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Total $25,995,000 $22,695,000
========== ==========
The 19% increase in Antenna and Imaging Systems' backlog at
March 31, 2000 compared with March 31, 1999 was primarily
due to strong fourth quarter bookings of antenna systems for
the DoD and other governmental agencies.
The 23% decrease in Communication Products' backlog at March
31, 2000 compared with March 31, 1999 was due to the
Company's ability to fill orders faster in fiscal 2000 than
in fiscal 1999. Order bookings in fiscal 2000 were 29%
higher than they were in fiscal 1999. Orders from this
customer base are subject to economic and political
instability in those markets and often are delayed. Future
anticipated orders may be delayed and some may never be
awarded. In addition, some procurements the Company had
previously identified as promising opportunities may be
canceled.
Competition
The Company competes in each of its business segments with
several companies. Depending on the specific product, these
companies may be similar in size to the Company or may be
large diversified companies which at times may also be
customers of the Company. The Company believes its major
competitive advantages are the quality of its products,
their cost effective designs, timeliness of delivery, ease
of use and easy serviceability.
<PAGE>7
Patents, Trademarks, Copyrights and Licenses
The Company has applied for several patents related to its
DBS products. However, the Company believes that patents
are not a significant factor in the Company's business and
that the success of the Company depends primarily on the
technical competence and managerial and marketing ability of
the Company's personnel.
DATRON(R) and design, TRANSWORLD(R), I2S(R), PRI2SM(R), OPEN 2000(R),
DBS-2000(R), DBS-3000(R), DBS-4000(R) and VI2STA(R) are registered
trademarks of the Company. DBS-2100(TM), DBS-2400(TM), CruiseTV(TM)
and We Cover the Global Spectrum(TM) are trademarks of the
Company by application for registration with the U.S. Patent
and Trademark Office.
The Company has obtained licenses for the VHF frequency
hopping technology and for the automatic link establishment
technology used in the Company's VHF and HF radio products,
respectively.
Employees
The Company employed approximately 334 employees at the end
of fiscal 2000 compared with approximately 331 employees at
the end of fiscal 1999. An increase in engineering
personnel at the Antenna and Imaging Systems business
segment was offset by a decrease in production personnel at
the Communications Products business segment.
None of the Company's employees are covered by a collective
bargaining agreement and the Company considers its employee
relations to be good.
Financial Information
Additional financial information concerning segment,
geographic and major customers is included in Note 8 of the
Notes to Consolidated Financial Statements. See Part II,
Item 8.
Item 2. Properties.
DWC leases approximately 70,000 square feet of office,
engineering and manufacturing space in Vista, California.
The lease commenced on March 26, 1999 and expires on April
30, 2009 and contains a renewal option of five years. DWC
and the Company's corporate headquarters operate from that
facility. The Company relocated from Escondido, California
to Vista, California in April 1999.
D/T owns through a subsidiary, Datron Resources Inc., a
110,000 square foot office, engineering and manufacturing
building located on a nine-acre site in Simi Valley,
California. D/T conducts operations from that facility.
Information with respect to obligations for lease rentals is
included in Note 7 of the Notes to Consolidated Financial
Statements. See Part II, Item 8. The Company considers its
properties to be suitable and adequate for its present
needs. The facilities in Vista and Simi Valley are being
fully utilized with the exception of approximately 5,000
square feet of manufacturing space in the Vista facility,
which is reserved for future growth.
<PAGE>8
Item 3. Legal Proceedings.
The Company is not involved in any litigation that is
expected to have a material effect on the Company's business
or consolidated financial position.
In August 1992, Trans World Communications, Inc. ("Trans
World"), a wholly owned subsidiary of the Company and which
was renamed Datron World Communications Inc. on March 31,
1995, was named as defendant in a lawsuit filed by ATACS
Corporation ("ATACS") and AIRTACS Corporation ("AIRTACS")
relating to a contract to provide radio communication
shelters. ATACS and AIRTACS contend that Trans World
entered into an agreement to team with them on the contract
and then wrongfully failed to use them as subcontractors.
They seek damages in excess of $2,000,000. In rulings on
May 28, 1997 and September 3, 1997, the court found Trans
World in breach of a teaming agreement and awarded ATACS and
AIRTACS one dollar ($1.00) in damages. On September 8,
1998, the appeal court affirmed the district court's
decision except as to the award of nominal damages, and
remanded the matter to the district court for further
hearing on damages. On June 14, 2000, the district court
issued an order awarding ATACS and AIRTACS damages of
$30,075.01 including prejudgment interest. The Company
believes that final resolution of this matter will not
materially affect the consolidated financial position of the
Company or its results of operations.
In February 2000, Datron/Transco Inc. ("D/T"), a wholly
owned subsidiary of the Company, was named as defendant in a
lawsuit filed by KVH Industries, Inc. ("KVH"). KVH alleges
that D/T breached a 1999 Settlement Agreement and, through
its DBS-4500 system, had infringed and continues to infringe
a KVH patent. KVH seeks unspecified compensatory damages
for breach of contract and alleged infringement; increased
damages, attorney's fees and costs for willful infringement;
and injunctive relief. D/T has denied all allegations of
breach of contract and infringement. In addition, D/T has
asserted defenses and counterclaims including patent
invalidity, noninfringement, patent misuse and antitrust
violations. The Company believes that final resolution of
this matter will not materially affect the consolidated
financial position of the Company or its results of
operations.
Item 4. Submission of Matters to a Vote of Security
Holders.
None.
Executive Officers of the Registrant
David A. Derby, 58, has been President and Chief Executive
Officer of the Company since May 1982, and Chairman of the
Board since April 1998.
William L. Stephan, 54, has been Vice President, Chief
Financial Officer and Treasurer of the Company since
November 1993.
Executive officers are elected by and serve at the
discretion of the Board of Directors. There are no family
relationships among directors or executive officers of the
Company.
<PAGE>9
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
Information required by Item 5 of Form 10-K is incorporated
herein by reference from the information contained in the
section captioned "Common Stock Activity" on the inside back
cover of the Annual Report, that portion of which is
attached hereto as Exhibit 13.
Item 6. Selected Financial Data.
Information required by Item 6 of Form 10-K is incorporated
herein by reference from the information contained in the
section captioned "Datron Systems Incorporated Selected
Financial Data" on the inside front cover of the Annual
Report, that portion of which is attached hereto as Exhibit
13.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Information required by Item 7 of Form 10-K is incorporated
herein by reference from the information contained in the
section captioned "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 8
through 11 of the Annual Report, that portion of which is
attached hereto as Exhibit 13.
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk.
The Company does not currently use derivative financial
instruments for speculative purposes that expose the Company
to market risk. The Company is exposed to cash flow and
fair value risk due to changes in interest rates with
respect to its long-term debt. Information with respect to
this item is set forth in Note 4 of the Notes to
Consolidated Financial Statements and is incorporated herein
by reference to that note. See Item 8 below.
Item 8. Financial Statements and Supplementary Data.
Information required by Item 8 of Form 10-K is incorporated
herein by reference from the consolidated financial
statements of the Company at March 31, 2000 and 1999 and for
each of the three years in the period ended March 31, 2000
and the Independent Auditors' Report appearing on pages 12
through 24 of the Annual Report, that portion of which is
attached hereto as Exhibit 13.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
During the two most recent fiscal years ended March 31,
2000, there has not been a change in accountants or a
reported disagreement with accountants on any matter of
accounting principles or practices or financial statement
disclosure.
<PAGE>10
PART III
Item 10. Directors and Executive Officers of the
Registrant.
Information required by Item 10 of Form 10-K with respect to
directors is incorporated herein by reference from the
information contained in the section captioned "Nomination
and Election of Directors" in the Company's Notice of Annual
Meeting of Stockholders to be Held Friday, August 4, 2000 at
11:00 A.M. and Proxy Statement ("Proxy Statement"), a copy
of which is to be filed as Exhibit 22 within 120 days of the
end of the Registrant's fiscal year.
Information required by Item 10 of Form 10-K with respect to
executive officers is set forth in Part I of this report
under the section captioned "Executive Officers of the
Registrant," pursuant to instruction 3 to paragraph (b) of
Item 401 of Regulation S-K.
Item 11. Executive Compensation.
Information required by Item 11 of Form 10-K is incorporated
herein by reference from the information contained in the
section captioned "Executive Compensation" in the Proxy
Statement, a copy of which is to be filed as Exhibit 22
within 120 days of the end of the Registrant's fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
Information required by Item 12 of Form 10-K is incorporated
herein by reference from the information contained in the
section captioned "Security Ownership of Certain Beneficial
Owners and Management" in the Proxy Statement, a copy of
which is to be filed as Exhibit 22 within 120 days of the
end of the Registrant's fiscal year.
Item 13. Certain Relationships and Related Transactions.
Information required by Item 13 of Form 10-K is incorporated
herein by reference from the information contained in the
section captioned "Executive Compensation" in the Proxy
Statement, a copy of which is to be filed as Exhibit 22
within 120 days of the end of the Registrant's fiscal year.
<PAGE>11
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.
(a) The following documents are filed as part of this
report:
Page in 2000
Annual Report
(1) Financial Statements:
Consolidated Balance Sheets at March 31, 2000 and 1999 12
Consolidated Statements of Operations for the Years
Ended March 31, 2000, 1999 and 1998 13
Consolidated Statements of Stockholders' Equity for
the Years Ended March 31, 2000, 1999 and 1998 14
Consolidated Statements of Cash Flows for the Years
Ended March 31, 2000, 1999 and 1998 15
Notes to Consolidated Financial Statements 16-23
Independent Auditors' Report 24
(2) Financial Statement Schedules: Page
Independent Auditors' Report on Financial Statement
Schedule S-1
Schedule II. Valuation and Qualifying Accounts S-2
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have
been omitted.
(b) Reports on Form 8-K.
On March 2, 2000, the Registrant filed a Form 8-K reporting
that its board of directors adopted a Second Amendment to
the Registrant's Stockholder Rights Agreement on February
23, 2000.
(c) Exhibits. The following exhibits are filed as part
of this report:
Exhibit
Number Description
------ ------------------------------------------------
3.1 Certificate of Incorporation.(1)
3.2 Bylaws.(1)
4.15 Stockholder Rights Agreement dated August 21,
1990.(6)
<PAGE>12
4.16 First Amendment to Stockholder Rights Agreement
dated as of October 29, 1993.(7)
4.17 Second Amendment to Stockholder Rights
Agreement dated February 23, 2000.(16)
10.5 1988 Key Employee Stock Purchase Plan.(2)
10.8 Employment Agreement between the Registrant and
David A. Derby.(3)
10.31 Lease of Trans World Communications, Inc.
facilities at 298, 302 and 304 Enterprise
Street, Escondido, California.(4)
10.36 Amended and Restated 1985 Stock Option Plan.(5)
10.37 First Amendment to Trans World Communications,
Inc. Lease Agreement dated January 15, 1993.(8)
10.46 1995 Stock Option Plan.(9)
10.47 Second Amendment to Trans World Communications,
Inc. Lease Agreement dated February 8, 1995.(9)
10.48 Agreement and Plan of Merger between Datron
Telecommunications International Inc. and Trans
World Communications, Inc. dated as of March
14, 1995.(9)
10.53 Datron Systems Incorporated Supplemental
Executive Profit Sharing Plan (Effective as of
April 1, 1994).(10)
10.54 Third Amendment to Trans World Communications,
Inc. Lease Agreement dated May 1, 1995.(10)
10.58 Datron Systems Incorporated Employee Stock
Purchase Plan (Adopted Effective July 1,
1997).(11)
10.61 Datron World Communications Inc. Lease
Agreement dated as of February 13, 1998.(12)
10.62 Fourth Amendment to Trans World Communications,
Inc. Lease Agreement dated March 1, 1998.(12)
10.65 Loan Agreement between Datron Resources Inc.
and Jackson National Life Insurance Company
dated August 7, 1998.(13)
10.66 Datron Systems Incorporated Profit Sharing and
Savings Plan (Amended and Restated as of April
1, 1998).(13)
10.67 Credit Agreement between Datron World
Communications Inc., Datron/Transco Inc. and
Comerica Bank-California dated March 24,
1999.(14)
10.68 Borrower Agreement between Datron/Transco Inc.
and Comerica Bank-California dated March 24,
1999.(14)
10.69 Guaranty of Datron Systems Incorporated of the
indebtedness of Datron World Communications
Inc. and Datron/Transco Inc. to Comerica Bank-
California dated March 24, 1999.(14)
<PAGE>13
10.70 Severance Agreement between the Registrant and
William L. Stephan.(14)
10.71 Amended and Restated 1995 Stock Option
Plan.(15)
10.72 Amended and Restated Employment Agreement
between the Registrant and David A. Derby.(15)
10.74 First Amendment to Credit Agreement between
Datron World Communications Inc.,
Datron/Transco Inc. and Comerica Bank-
California dated April 12, 2000.
10.75 Borrower Agreement between Datron/Transco Inc.
and Comerica Bank-California dated April 12,
2000.
10.76 Amended and Restated Guaranty of Datron Systems
Incorporated of the indebtedness of Datron
World Communications Inc. and Datron/Transco
Inc. to Comerica Bank-California dated April
12, 2000.
13 Certain portions of Registrant's Annual Report
to Stockholders for the fiscal year ended March
31, 2000 containing information required by
Part I and Part II of this report.
21 Subsidiaries.
22 Proxy Statement, Notice of Annual Meeting of
Stockholders to be Held Friday, August 4, 2000
at 11:00 A.M. and Form of Proxy (to be deemed
filed only to the extent required by the
instructions to exhibits for reports on Form 10-
K) to be filed within 120 days of the end of
the Registrant's fiscal year.
23 Independent Auditors' Consent - Deloitte and
Touche.
24 Power of Attorney (on signature page 16).
27 Financial Data Schedule for the Twelve Months
Ended March 31, 2000.
99.1 Annual Report of the Datron Systems
Incorporated Employee Stock Purchase Plan.
_____________________
(1) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registration Statement
on Form 8-B of the Registrant on November 13, 1987.
(2) Incorporated by this reference to the Registration
Statement on Form S-8 of the Registrant filed March 22,
1988.
(3) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31,
1988.
(4) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31,
1989.
(5) Incorporated by this reference to the Registration
Statement on Form S-8 of the Registrant filed April 16,
1993.
<PAGE>14
(6) Incorporated by this reference to Exhibit I to the
Registrant's Registration Statement on Form 8-A filed
November 5, 1990.
(7) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended December 31,
1993.
(8) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31,
1994.
(9) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31,
1995.
(10) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31,
1996.
(11) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31,
1997.
(12) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31,
1998.
(13) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1998.
(14) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31,
1999.
(15) Incorporated by this reference to the Exhibit bearing
the same number filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999.
(16) Incorporated by this reference to Exhibit 10.73 filed
with the Registrant's Report on Form 8-K dated February
23, 2000.
Supplemental Information
Copies of the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held August 4, 2000 and copies
of the form of proxy to be used for such Annual Meeting will
be furnished to the Securities and Exchange Commission prior
to the time they will be distributed to Stockholders.
<PAGE>15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: June 21, 2000 DATRON SYSTEMS INCORPORATED
By: /s/ David A. Derby
David A. Derby
Chairman of the Board,
President, Chief Executive
Officer and Director
<PAGE>16
P0WER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below appoints David A. Derby and William
L. Stephan, jointly and severally, as his true and lawful
attorney-in-fact, each with full power of substitution and
re-substitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all amendments to
this Annual Report on Form 10-K, and to file the same, with
all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact, jointly and severally,
full power and authority to do and perform each and every
act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact, jointly and
severally, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
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:
Signature Title Date
Chairman of the
Board, President,
Chief Executive
By: /s/ David A. Derby Officer and Director
David A. Derby (Principal Executive
Officer) June 21, 2000
Vice President,
Chief Financial Officer
By: /s/ William L. Stephan (Principal Financial and
William L. Stephan Accounting Officer) June 21, 2000
By: /s/ Kent P. Ainsworth Director June 14, 2000
Kent P. Ainsworth
By: /s/ Michael F. Bigham Director June 12, 2000
Michael F. Bigham
By: Director June __, 2000
Don M. Lyle
By: /s/ William A. Preston Director June 12, 2000
William A. Preston
By: /s/ Robert D. Sherer Director June 8, 2000
Robert D. Sherer
<PAGE>S-1
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
Datron Systems Incorporated
Vista, California
We have audited the consolidated financial statements of
Datron Systems Incorporated (the "Company") as of March 31,
2000 and 1999, and for each of the three years in the period
ended March 31, 2000, and have issued our report thereon
dated May 12, 2000; such financial statements and report are
included in your 2000 Annual Report to Stockholders and are
incorporated herein by reference. Our audits also included
the financial statement schedule of the Company listed in
Item 14(a)(2). This financial statement schedule is the
responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
San Diego, California
May 12, 2000
<TABLE>
<PAGE>S-2
DATRON SYSTEMS INCORPORATED
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 2000, 1999 AND 1998
Balance at Balance at
Beginning End
Description of Year Addititions Write-offs of Year
------------------------- --------- ----------- ---------- ----------
Year ended March 31, 1998
-------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts $226,000 $166,000 $202,000 $190,000
Allowance for inventory
obsolescence 1,350,000 477,000 171,000 1,656,000
Allowance for warranties 707,000 829,000 603,000 933,000
--------- --------- ------- ---------
$2,283,000 $1,472,000 $976,000 $2,779,000
========= ========= ======= =========
Year ended March 31, 1999
-------------------------
Allowance for doubtful
accounts $190,000 $63,000 $66,000 $187,000
Allowance for inventory
obsolescence 1,656,000 432,000 708,000 1,380,000
Allowance for warranties 933,000 810,000 890,000 853,000
--------- --------- --------- ---------
$2,779,000 $1,305,000 $1,664,000 $2,420,000
========= ========= ========= =========
Year ended March 31, 2000
-------------------------
Allowance for doubtful
accounts $187,000 $(22,000) $56,000 $109,000
Allowance for inventory
obsolescence 1,380,000 340,000 193,000 1,527,000
Allowance for warranties 853,000 1,233,000 1,001,000 1,085,000
--------- --------- --------- ---------
$2,420,000 $1,551,000 $1,250,000 $2,721,000
========= ========= ========= =========
</TABLE>
