SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No fee required]
For the fiscal year ended: March 31, 2000
[ ] 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: 0-8125
_____________________
DETECTION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
State of New York 16-0958589
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
130 Perinton Parkway, Fairport, New York 14450
(Address of principal executive offices) (Zip Code)
(716) 223-4060
(Registrant's telephone number, including area code)
_____________________
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 $.05 Per Share
(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
the 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. [x]
As of July 24, 2000, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $53,268,402. On this date
the aggregate market value of all voting stock was approximately $59,786,398.
As of July 24, 2000, 6,334,647 shares of the registrant's common stock, par
value $.05 per share were outstanding.
Documents incorporated by reference: None.
Detection Systems, Inc. hereby amends the Form 10-K for the fiscal year
ended March 31, 2000 filed with the Commission on June 29, 2000 by deleting
the text of Part III from such Form in its entirety and substituting the
following text.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors and Executive Officers
Following are the names, ages and business experience during the past 5
years of the Company's directors and executive officers. Except as described
in the sections entitled "Executive Agreements" and "Retirement Benefits"
under Item 11, no director or executive officer has entered into any
agreement or understanding with any person respecting any future employment
by the Company or its affiliates.
Donald R. Adair, age 56, has been a director of the Company since
1991. He is a principal of Adair Law Firm, which was established in 1988 and
focuses on serving businesses in Rochester, New York. Mr. Adair is also a
director of Stone Construction Equipment, Inc., in Honeoye, New York, and
Victor Insulators, Inc. in Victor, New York.
Mortimer B. Fuller III, age 58, has served as director of the Company
since 1990. Since 1977, Mr. Fuller, has been Chairman and CEO of Genessee &
Wyoming, Inc., which owns and operates shortline railroads and provides
related services to railroads and shippers.
Karl H. Kostusiak, age 61, is a founder of the Company and has served
as the Chief Executive Officer and President of the Company since its
establishment in 1968. He has been a director of the Company since 1968 and
also serves as Chairman of the Board.
David B. Lederer, age 60, is also a founder of the Company and served
as the Company's Executive Vice President from 1968 until April 1998. In
April 1998, he reduced his employment to half-time and served as Vice
President, Business Development until April 2000, when he returned to his
prior full-time position as Executive Vice President.
Edward C. McIrvine, age 66, has been a director of the Company since
1981. Since 1987, he has been a self-employed research and development
management consultant and, from 1987 through 1991, he served as Dean of the
College of Graphic Arts and Photography at the Rochester Institute of
Technology in Rochester, New York.
George E. Behlke, age 42, has been the Company's Vice President of
Operations since April 1998 and also assumed responsibilities as the
Company's General Manager, Asia in May 2000. Mr. Behlke was also Vice
President of Engineering from May 1995 to June 1999 and Engineering Manager
from 1984 to April 1995.
Christopher P. Gerace, age 32, has been the Company's Chief Accounting
Officer since 1997, and was also promoted to Vice President in 1999. Mr.
Gerace was employed by the accounting firm of Price Waterhouse, LLP from 1989
to 1997.
Frank J. Ryan, age 46, has been the Company's Vice President, Secretary
and Treasurer since 1988.
Jeffrey M. Swan, age 35, has been Vice President of Engineering since
June 1999. Mr. Swan has been employed by the Company in various engineering
positions since 1992.
Compliance with Section 16(a) of the Exchange Act
To the Company's knowledge, based solely on review of Forms 3, 4 and 5
filed pursuant to the Securities Exchange Act of 1934, as amended, and
amendments thereto, all Section 16(a) filing requirements applicable to the
officers, directors and other principal shareholders of the Company were
complied with during the fiscal year 2000.
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth information with respect to the
compensation of the Company's Chief Executive Officer and four other most
highly-compensated executive officers serving at the end of the fiscal year
2000 for services in all capacities to the Company for the fiscal years 1998,
1999 and 2000.
Annual Long-Term
Compensation Compensation
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Other Securities All
Name and Annual Underlying Other
Principal Fiscal Salary Bonus Compen- Underlying Compensa-
Position Year ($) ($) sation Options tion
($)(1) (#) ($)(3)
--------------------------------------------------------------------------------
Karl H. Kostusiak 2000 333,795 0 68,138 0 4,859
Chairman and CEO 1999 325,714 89,740 --(2) 0 5,816
1998 240,504 0 35,814 20,000 2,640
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George E. Behlke 2000 146,393 0 --(2) 5,000 2,686
Vice President, 1999 141,116 21,538 --(2) 15,000 2,554
Operations & 1998 114,324 0 --(2) 10,000 2,734
General Manager,
Asia
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David B. Lederer 2000 133,522 0 33,824 0 3,011
Executive Vice 1999 124,352 474 32,003 0 3,100
President 1998 192,418 0 32,865 10,000 2,525
--------------------------------------------------------------------------------
Frank J. Ryan 2000 130,702 0 --(2) 2,000 2,386
Vice President, 1999 130,701 14,358 --(2) 0 2,492
Secretary & 1998 113,788 0 13,874 5,000 2,616
Treasurer
--------------------------------------------------------------------------------
Christopher P. 2000 102,403 0 --(2) 10,000 1,913
Gerace, Vice 1999 88,615 7,179 --(2) 10,000 1,586
President & Chief 1998(4) 44,034 0 --(2) 10,000 333
Accounting Officer
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Footnotes:
(1) During the fiscal year 2000, $43,051 and $15,487 were paid toward life,
disability and long term care insurance premiums for the benefit of
Messrs. Kostusiak, Lederer, respectively. Mr. Lederer was reimbursed
$13,254 for car and gas expenses.
(2) Values are less than the minimum amount required to be reported.
(3) Represents contributions by the Company to accounts of the named
executive officers under the Company's 401(k) retirement savings plan.
(4) Mr. Gerace was hired by the Company on September 1, 1997 and thus was
only employed for part of the fiscal year 1998.
Option Grants in Last Fiscal Year
The following table provides information regarding the exercise of
stock options by named executive officers during the fiscal year 2000. Each
grant was for incentive stock options to purchase stock under the Company's
1992 or 1997 Stock Option Plans. These options are exercisable 40% after one
year, 60% after two years, 80% after three years and 100% after four years
and each is subject to full vesting upon a change of control of the Company.
The Company did not grant any stock appreciation rights during the fiscal
year ended March 31, 2000.
--------------------------------------------------------------------------------
Percent of Potential
Total Realizable Value
Number of Options at Assumed Annual
Securities Granted to Exercise Expira- Rates of Stock
Underlying Employees or Base tion Price Appreciation
Name Options in Price Date for Option Term
Granted (#) Fiscal Year ($/Sh) 5% ($) 10% ($)
K. Kostusiak 0 0 0 N/A N/A N/A
G. Behlke 5,000 5.74% $9.75 8/11/04 $13,469 $29,762
D. Lederer 0 0 0 N/A N/A N/A
F. Ryan 2,000 2.30% $9.75 8/11/04 $5,387 $11,905
C. Gerace 10,000 11.48% $9.75 8/11/04 $26,937 $59,525
Aggregated Option and Fiscal Year-End Option Values
The following table sets forth the options exercised during the fiscal
year 2000 and the unexercised options held as of March 31, 2000 by the
Company's named executive officers. The value of the underlying securities
was determined by subtracting the exercise price from the market value at
year-end. The market price of the Common Stock on March 31, 2000 was $9.688
per share. The Company has not granted any stock appreciation rights.
Value of
Shares Number of Securities Unexercised
Acquired Underlying Unexercised In-the-Money
on Value Options at Options on
Exercise Realized March 31, 2000 March 31, 2000
Name (#) ($) Exercisable / Exercisable/
Unexercisable (#) Unexercisable ($)
K. Kostusiak 0 0 12,000 / 8,000 N/A
G. Behlke 3,000 $10,815 19,720 / 19,930 $2,753 / $4,130
D. Lederer 0 0 6,000 / 4,000 N/A
F. Ryan 2,250 $6,845 4,752 / 4,438 N/A
C. Gerace 0 0 10,000 / 20,000 $2,001 / $3,002
Compensation of Directors
Each non-employee director was paid an annual fee of $12,000 and an
additional $1,000 plus travel expenses, if any, for each day on which he
attended a Board meeting. Such directors also received $500 for each Board
meeting held by teleconference. Messrs. Adair and McIrvine were each paid
annual fees of $8,000 for their services as Chairpersons of the Company's
Compensation and Audit Committees of the Board of Directors, respectively.
In addition, the non-employee directors were each awarded a 2,000 share stock
option under the Company's Non-Employee Director Stock Option Plan. No
additional compensation was paid to directors except as described herein.
Executive Agreements
The Company has employment agreements through July 2004 with two of its
executive officers, Messrs. Kostusiak and Lederer (the "Executive
Agreements'). In April 1998, Mr. Lederer's employment commitment was reduced
to half-time. In April 2000, Mr. Lederer resumed full-time employment as the
Company's Executive Vice President. The Company anticipates that it will
amend its agreement with Mr. Lederer accordingly.
The Executive Agreements provide for severance benefits under certain
circumstances. The terms "change in control," "cause" and "disability" are
used in the following description as defined in the Executive Agreements.
The Executive Agreements terminate the executive's employment upon his death
or permanent disability and provide for disability income to be paid during
disability and a retirement wage benefit to be paid during retirement years
and to any surviving spouse (see Retirement Benefits).
Under the Executive Agreements, if the Company terminates the
executive's employment without cause, the Company will continue compensation
and benefits to the executive for the then remaining balance of the term of
employment or for a period of three years from the date of termination,
whichever is longer. The continuation of compensation and benefits includes
the executive's base salary plus participation in all applicable executive
incentive compensation plans and fringe benefit packages. The Company
thereafter will pay non-competition fees as described below and retirement
benefits as described under Retirement Benefits.
If the Company terminates Mr. Kostusiak's or Mr. Lederer's employment
for cause, such person will receive compensation and benefits for the
remaining balance of the term of employment or for a period of three years
from the date of termination, whichever is longer, plus non-competition fees
and benefits, retirement benefits, and possible disability benefits, provided
that this compensation is reduced by any monetary damage suffered by the
Company due to the cause.
Mr. Kostusiak's agreement provides that he will not compete with the
Company so long as the Company either retains his full-time services or pays
him an annual non-competition fee of $154,500 (to be increased annually based
on the Consumer Price Index) plus benefits to the date of his retirement (now
set for the January 1 after his 69th birthday) and then pays the retirement
benefit.
If a "change in control" occurs, as defined in the Executive Agreements
and Mr. Kostusiak's or Mr. Lederer's employment is terminated by the Company
or the executive within six months after the Company or the executive has
given notice for the six-month period to start running, the executive would
be entitled to receive (a) the base salary through the termination date, as
in effect at the time of termination or at the time the change in control
occurs, whichever is higher, plus any bonus which has been earned but not yet
paid, (b) an amount equal to three times the highest total cash compensation
(including base salary and bonuses) paid to him in any of the Company's
preceding three fiscal years, (c) an amount equal to the total amounts that
would have been expended for benefits over the next three years if he had
continued as an employee, (d) an acceleration of the right to exercise all
rights or options he then holds to acquire the Company's Common Stock and he
may either exercise the rights and options or elect to receive cash for the
aggregate spread between the exercise price and the then market value for the
stock, (e) assignment of all rights in life insurance policies then held by
the Company on his life (after repayment by the Company of any loans thereon
taken by the Company), and (f) reimbursement for any amount of excise taxes
he might have to pay on his receipt of items (a) through (e) sufficient so
that the Company will bear all direct and indirect costs of any such excise
taxes. Upon termination, the executive becomes obligated to provide up to 8
days of consulting services per year to the Company and not to compete with
the Company, and the Company becomes obligated to pay a non-competition fee
of $154,500 per year (to be increased annually based on the Consumer Price
Index), $1500 per day of consulting services provided, and benefits until the
executive's retirement date. The Agreements also provide that, upon a change
in control, the initial retirement wage commitment will become 60% of the
base salary for the last year of full time employment and the Company shall
place in trust either cash or an annuity policy that will sufficiently fund
the retirement benefits called for by the Agreement.
Retirement Benefits
In April 1996, the Company approved the addition of a retirement
benefit plan for Messrs. Kostusiak and Lederer (each, an "Executive") in
their Executive Agreements. Under the terms of the current Executive
Agreements, the Company will pay each Executive retirement benefits for his
lifetime and for his spouse's lifetime, if his spouse survives him.
For each Executive, assuming he retires at the end of the calendar year
in which he turns 69 years of age, benefits would be as follows: (a) a
retirement wage benefit initially equal to 30% of his base salary for the
last year of his full time employment, increased each year thereafter by any
increase in the Consumer Price Index from the previous year to the current
year (except that the wage benefit for his spouse shall be 75% of that amount
after Executive's death); (b) continuation of Executive's full health
insurance or similar benefit for Executive and his spouse; and (c)
continuation of any other benefit programs that provide continuation pursuant
to their terms, limited in individual benefit cost to 60% of the maximum
annual cost of such benefit in any year prior to retirement, plus Consumer
Price Index increases.
Assuming a 5% compounded annual increase in the base compensation, and
assuming each Executive will retire at age 69, the estimated initial annual
benefit that would be payable to Messrs. Kostusiak and Lederer under the
pension plan provision in their Executive Agreements would be $148,000 and
$124,000, respectively.
The Executive Agreements further provide that: (a) the payment of
retirement benefits may be terminated if a court determines that the
Executive has violated the non-competition provisions of his Executive
Agreement and (b) the Company will purchase and maintain life insurance
sufficient to fund the estimated benefits for the spouse (any excess policy
proceeds to be available, if agreed, to purchase shares of the Company's
Common Stock held in Executive's estate) and the policy or policies of such
insurance shall be held in a trust designed for this purpose.
The Agreements also provide that, upon a change in control, the initial
retirement wage commitment will become 60% of the base salary for the last
year of full time employment and the Company shall place in trust either cash
or an annuity policy that will sufficiently fund the retirement benefits
called for by the Agreement.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of the Board of Directors are
Messrs. Adair, Fuller and McIrvine. None of these directors received any
compensation from the Company other than their fees and stock options as
directors of the Company.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Principal Holders of Common Stock
The following table lists all persons or groups of persons who, to the
Company's knowledge based on reports filed with the SEC, beneficially own
more than 5% of the Company's outstanding Common Stock as of July 28, 2000.
The address of Messrs. Lederer and Kostusiak is that of the Company.
Percent
Name and Address of Amount and Nature of
Beneficial Owner of Shares Common
Beneficially Owned Stock
Ultrak, Inc. 1,335,100(1) 21.0%
301 Waters Ridge Drive
Lewisville, TX 75057
Karl H. Kostusiak 575,561(2) 8.8%
Dimensional Fund Advisors, Inc. 388,872(3) 6.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
John G. Ullman & Associates, Inc. (4) 13,085 *
P.O. Box 1424
Corning, NY 14830
USGM Securities, Inc. 344,371(4) 5.6%
51 East Market Street
Corning, NY 14830
David B. Lederer 326,502(2)(5) 5.1%
Footnotes:
* Percentage of Common Stock owned is less than 1%.
(1) Ultrak's share holdings are as reported on the amended Schedule 13D it
filed on July 21, 2000.
(2) Messrs. Kostusiak and Lederer currently possess both sole voting and
investment power except with respect to 179,840 and 117,465 shares
respectively, which may be acquired upon retirement or resignation
pursuant to the Company's deferred compensation plans and 12,000 and
6,000 shares which may be acquired from the exercise of stock options.
(3) Dimensional's share holdings are as reported on the Schedule 13G it
filed on February 3, 2000.
(4) John G. Ullman & Associates and its subsidiary, USGM Securities, filed
a joint Schedule 13G on February 8, 2000, stating that such companies,
as a group, own 357,456 shares of Common Stock, constituting 5.66 % of
the Company's outstanding shares.
(5) Includes 40,000 shares owned by the Lederer Family Limited Partnership,
in which Mr. Lederer and his spouse share equal voting and investment
powers, and 20,000 shares owned by Mr. Lederer's spouse, with respect
to which such spouse owns sole voting and investment power.
Security Ownership of Management
The following table reflects, for the Company's directors and executive
officers for whom compensation information is provided under Item 11, the
number of shares of Common Stock that such persons beneficially owned or had
the right to acquire beneficial ownership of as of, or within sixty days of,
July 28, 2000 and the percentage of the Company's outstanding shares that
such ownership constitutes.
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Amount and
Nature of Percent of
Name of Beneficial Owner Beneficial Common Stock
Ownership(1)
Donald R. Adair 2,749(2)(3) *
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George E. Behlke 62,894(3)(4) *
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Mortimer B. Fuller, III 4,845(3) *
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Christopher P. Gerace 17,000(3) *
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Karl H. Kostusiak 575,561(3)(4) 8.8%
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David B. Lederer 326,502(3)-(5) 5.1%
-----------------------------------------------------------------
Edward C. McIrvine 5,200(3) *
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Frank J. Ryan 77,514(3)(4)(6) 1.2%
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All Directors and Executive 1,077,716(2)-(6) 17.0%
Officers as a Group
(9 persons)
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Footnotes:
* Percentage of Common Stock owned is less than 1%.
(1) Owner possess both sole voting and investment powers for all shares
listed except as indicated in notes (2)-(6) below.
(2) Includes 1,173 shares held in custodianship for Mr. Adair's children
under the Uniform Gifts to Minors Act of New York, for which Mr. Adair
disclaims beneficial ownership.
(3) Includes 1200, 24,720, 1,200, 17,000, 12,000, 6,000, 1,200, 5,552 and
72,072 shares which may be acquired upon exercise of warrants and
options held by Messrs. Adair, Behlke, Fuller, Gerace, Kostusiak,
Lederer, McIrvine, Ryan and all directors and executive officers as a
group, respectively.
(4) Includes 9,234, 179,840, 117,465, 8,492 and 315,032 hypothetical shares
credited to the accounts of Messrs. Behlke, Kostusiak, Lederer and Ryan
and all directors and executive officers as a group, respectively,
pursuant to the Company's deferred compensation plans, which shares may
be acquired upon retirement or resignation.
(5) Includes 40,000 shares owned by the Lederer Family Limited Partnership,
in which Mr. Lederer and his spouse share equal voting and investment
powers, and 20,000 shares owned by Mr. Lederer's spouse, with respect
to which such spouse owns sole voting and investment power.
(6) Includes 810 shares held in trust for Mr. Ryan's son under the Uniform
Gifts to Minors Act of New York, for which Mr. Ryan disclaims
beneficial ownership.
Item 13. Certain Relationships and Related Transactions
Except as otherwise described in this Annual Report on Form 10-K, as
amended, the Company has not been party to any transaction or series of
transactions in the fiscal year 2000, and does not have knowledge of any
currently proposed transaction or series of transactions, in which: (i) the
amount involved exceeds $60,000, and (ii) any director, officer or principal
shareholder of the Company or any immediate family member or person or entity
associated or affiliated with any such person had, or will have, a direct or
indirect material interest. In addition, at any time since the beginning of
the fiscal year 2000, no director, officer, principal shareholder nor any
immediate family member or person or entity associated or affiliated with any
such person has been indebted to the Company or its affiliates in an amount
in excess of $60,000.
Signatures
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.
DETECTION SYSTEMS, INC.
(Registrant)
Date: July 31, 2000 By: /s/ Karl H. Kostusiak
Karl H. Kostusiak
President
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.
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Signature Title Date
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/s/ Karl H. Kostusiak CEO, President and Director July 31, 2000
Karl H. Kostusiak (Principal Executive
Officer
/s/ Frank J. Ryan Vice President July 31, 2000
Frank J. Ryan Secretary/Treasurer
(Principal Financial
Officer)
/s/ Christopher P. Gerace Vice President July 31, 2000
Christopher P. Gerace Chief Accounting Officer
(Principal Accounting
Officer)
Donald R. Adair Director
Mortimer B. Fuller, III Director
David B. Lederer Executive Vice President &
Director
Edward C. McIrvine Director
By: /s/ Karl H. Kostusiak Attorney-in-Fact July 31, 2000
Karl H. Kostusiak
