AYDIN CORPORATION
Telephone 700 Dresher Road
(215) 657-7510 P.O. Box 349
FAX Horsham, PA 19044
(215) 657-3830 U.S.A.
Telex
685 1211 AYDIN UW
August 15, 1994
(VIA EDGAR)
SECURITIES & EXCHANGE COMMISSION
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
Attn: Filing Desk, Stop 1-4
RE: Form 10-Q Second Quarter, 1994
File No. 1-7203
Gentlemen:
We are enclosing for filing Aydin Corporation's Form 10-Q for the Second
Quarter ending July 2, 1994.
Very truly yours,
/s/ Robert A. Clancy
Robert A. Clancy
Secretary and
Corporate Counsel
RAC:cak
Enclosures
cc: John W. Kauffman, Esq.
Kenneth W. Banet, Grant Thornton
James W. Kay, Peat Marwick
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended _______July 2, 1994_______________
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 ________1-7203_________________________________
AYDIN CORPORATION
______________________________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 23-1686808
______________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 DRESHER ROAD, HORSHAM, PA 19044
______________________________________________________________________
(Address of principle executive offices) (Zip Code)
(215) 657-7510
______________________________________________________________________
(Registrant's telephone number, including area code)
______________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Shares of common stock, $1.00 par value, outstanding as of August 15, 1994
_____4,998,900_____
AYDIN CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Incorporated herein by reference are the Condensed Consolidated Financial
Statements of Aydin Corporation and the related Notes to Financial
Statements as set forth on pages 2 through 5 of the "1994 Second Quarter
Report" to Stockholders. These condensed consolidated financial
statements for the three and six-month periods ended July 2, 1994 have
been subjected to a limited review by Grant Thornton, the Registrant's
independent accountants, whose report, set forth on page 6 of the "1994
Second Quarter Report" to Stockholders, is incorporated herein by
reference.
Earnings per share are based on the weighted average number of common
shares outstanding plus shares issuable upon the assumed exercise of
dilutive common stock options. The number of shares used in the
computation of earnings per share for the three months ended July 2, 1994
and July 3, 1993 were 4,995,784 and 5,012,949, respectively, and for the
six-month periods then ended 5,001,563 and 5,017,930, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(1) Material Changes in Financial Condition (7/02/94 versus 12/31//93)
Accounts receivable increased by $10.5 million because of higher billings
this quarter compared to the fourth quarter of 1993 particularly on a
large contract with the Government of Turkey. Unbilled revenue decreased
by $15.6 million because of these higher billings and also because of the
lower level of percentage completion sales this quarter compared to the
fourth quarter of 1993.
Accrued liabilities decreased by $3.7 million primarily because of $2
million of payments made and other costs incurred in connection with the
terms of a settlement made with the Department of Justice on the AN/GRC-
222 microwave radio contract with the U.S. Army (see Note K of the
12/31/93 Annual Report).
Short-term bank debt was reduced by $6.5 million owing to the favorable
cash flow for the six months of 1994. Of the total of $20.6 million of
cash and short-term investments at July 2, 1994, approximately $14.9
million represents interest bearing collateral required to be maintained
against letters of credit for the Turkish Contract.
The Company at July 2, 1994 had short-term bank borrowings outstanding of
$15 million. The banks are requesting partial or full reductions of these
short-term borrowings. The Company anticipates full payment of these bank
loans within six months from internal cash flow. The Company expects to
make new banking arrangements within six months to cover its future
potential needs.
Based on the present backlog and projected cash flows, the company
anticipates financing its capital needs from internal sources and from
some short-term borrowings in the foreseeable future.
(2) Material Changes in Operations (Second Quarter and Six Months 1994
versus 1993)
Net sales declined by 26% in the quarter and 24% in the six months because
of delays in booking new foreign business and the continuing increasingly
competitive U.S. Government defense business environment.
Cost of sales as a percentage of sales decreased in the quarter to 66.4%
from 74.0% and in the six months to 70.4% from 72.4% primarily as a result
of operating efficiencies achieved particularly on a large foreign
contract.
In spite of a higher percentage of selling expenses to sales, selling,
general and administrative expenses declined by $568,000 in the quarter
and $1,956,000 in the six months because of net foreign currency
translation gains of $307,000 in the quarter and $802,000 in the six
months, in addition to cost reductions necessitated by the decreases in
sales.
The income tax provision as a percentage of pre-tax income decreased to
19.2 % from 33.1% for the quarter and to 22.1% from 35.7% for the six
months, primarily because the foreign currency translation gains referred
to above are not subject to tax, and also because of lower foreign income
tax rates.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following is a list of Exhibits filed as part of this report:
Exhibit 2 - None
Exhibit 4 - None
Exhibit 10 - None
Exhibit 11 - None
Exhibit 15 - Letter re unaudited interim financial information
Exhibit 18 - None
Exhibit 19 - "1994 SECOND QUARTER REPORT" to Stockholders
Exhibit 22 - None
Exhibit 23 - None
Exhibit 24 - None
Exhibit 27 - None
Exhibit 99 - None
(b) Reports on Form 8-K
A report on Form 8-K, dated June 13, 1994, was filed by the
Registrant on June 15, 1994, covering Item 4 (Changes in
Registrant's Certifying Accountant).
SIGNATURES
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.
AYDIN CORPORATION
DATE ____August 15, 1994____ /s/ Herbert Welber
Herbert Welber, Controller
DATE ____August 15, 1994____ /s/ Robert A. Clancy
Robert A. Clancy, Secretary
EXHIBIT 15
Grant Thornton
2000 Market Street
Philadelphia, PA 19103-3290
215 561-4200
FAX 215 561-1066
Securities and Exchange Commission
Washington, D.C. 20549
We have made a review of the condensed financial statements of Aydin
Corporation as of July 2, 1994 and for the three-month and six-month
periods ended July 2, 1994, in accordance with standards established by
the American Institute of Certified Public Accountants, and issued our
report thereon dated July 29, 1994. We are aware that such financial
statements and our above-mentioned report appearing in the Form 10-Q of
Aydin Corporation for the quarter ended July 2, 1994 are being
incorporated by reference in the Registration Statement Nos. 33-53549;
33-34863; 33-22016; 33-14284; 2-97645; 2-93603; 2-77623; 2-64093 and that
such report pursuant to Rule 436(c) of the Securities Act of 1933 is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of Paragraphs 7 and 11 of that Act.
/s/ Grant Thornton
Grant Thornton
Philadelphia, Pennsylvania
August 12, 1994
Exhibit 19
Dear Stockholder:
The 1994 second quarter sales were $27,306,000, a decrease from the
$36,969,000 in sales during the same period in 1993. Net income for the
second three month period was $1,130,000 or $.22 per share, being
essentially flat as compared to $1,152,000 or $.23 per share earned in
last year's second quarter.
Sales for the 1994 first half were $56,751,000, a decrease from the
$74,403,000 in sales for the same period last year. Net income was
$2,157,000 or $.43 per share, representing a decline of 17% from the
$2,588,000 or $.52 per share earned in the same period in 1993.
The Company attributes the general decline in sales and earnings to,
among other things, the increasingly competitive U.S. Government business,
slow bookings, and higher percentage of selling and R&D expenses to sales.
This trend will probably continue until new orders in the industrial and
export markets improve.
Backlog at the end of the first half was approximately $158 million,
as compared to $150 million at this time last year, and $149 million at
the end of the 1994 first quarter. Backlog figures do not include
probable production options.
During the second quarter, Aydin received two contracts totalling $12
million to supply airborne miniature data communications systems,
including signal conditioners, for a U.S. military aircraft. Further, a
$3.5 million contract has been received to provide a Turnkey Communication
System for a major offshore oil platform project in Southeast Asia. Aydin
has also jointly received initial orders to design, manufacture, and
install "Second Generation" Time Division Multiple Access (TDMA) satellite
ground terminals for the International Telecommunications Satellite
Organization (INTELSAT) Network. These initial orders total over four
million dollars ($4M).
As announced earlier, management is pursuing the strategy of
aggressively bidding U.S. Government and export programs, as in the past.
A major effort is underway also to develop products to augment the
industrial business, particularly in the digital wireless communications
and computer equipment areas, for telecommunications applications.
The Company plans to utilize its experience in microwave and TDMA
(Time Division Multiple Access), which increases channel capacity in a
given frequency band, to develop digital cellular products and systems.
Also, the Company is developing a microcell, which provides cost effective
communications to inaccessible areas. To accelerate this activity, Aydin
has added to its staff a number of experienced wireless engineers.
Expansion of its network access products for voice, data and video
applications in public networks is also the Company's plan.
The Company has also strengthened its sales and marketing force.
/s/ Ayhan Hakimoglu
July 29, 1994 President
(page 1)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($000 omitted except for per share amounts)
Three Months Ended Six Months Ended
7/02/94 7/03/93 7/02/94 7/03/93
(Unaudited) (Unaudited)
NET SALES $27,306 $36,969 $56,751 $74,403
COST AND EXPENSES
Cost of sales 18,137 27,206 39,949 53,848
Selling, general
and administrative 6,173 6,741 11,382 13,338
Research and development 1,389 1,223 2,461 2,853
Interest expense, net 209 72 190 175
_______ _______ _______ _______
Total 25,908 35,242 53,982 70,214
_______ _______ _______ _______
INCOME BEFORE INCOMES TAXES
AND MINORITY INTEREST 1,398 1,727 2,769 4,189
INCOME TAXES 268 572 612 1,495
_______ _______ _______ _______
INCOME BEFORE
MINORITY INTEREST 1,398 1,155 2,157 2,694
LESS MINORITY INTEREST - 0 - 3 - 0 - 106
_______ _______ _______ _______
NET INCOME $ 1,130 $ 1,152 $ 2,157 $ 2,588
_______ _______ _______ _______
_______ _______ _______ _______
EARNINGS PER SHARE $ .22 $ .23 $ .43 $ .52
_______ _______ _______ _______
_______ _______ _______ _______
(page 2)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
ASSETS
July 2, 1994 Dec. 31, 1993
(Unaudited)
CURRENT ASSETS:
Cash, including cash equivalents-
1994, $7,744; 1993, $10,908 $ 8,991 $ 11,822
Short-term investments 11,655 13,058
Accounts receivable 44,071 33,525
Unbilled revenue, after
progress billings 50,950 66,559
Inventories:
Raw materials 8,249 8,549
Work-in-process 6,806 6,036
Finished product 3,489 3,012
Prepaid expenses 2,187 1,470
________ ________
Total current assets 136,398 144,031
PROPERTY, PLANT AND EQUIPMENT,
net of accumulated depreciation:
1994, $55,351; 1993, $53,623 24,959 25,182
OTHER ASSETS 491 508
________ ________
TOTAL ASSETS $161,848 $169,721
________ ________
________ ________
__________________________________________________________________
<FN>
NOTE TO FINANCIAL STATEMENTS:
Interim financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for
the periods. The 1993 balance sheet has been derived from the audited
financial statements contained in the 1993 Annual Report to
Stockholders. These interim financial statements conform with the
requirements for interim financial statements and consequently do not
include all the disclosures normally required by generally accepted
accounting principles. Disclosures are updated where appropriate.
There are no changes in contingency disclosures. Pretax income for 1994
includes foreign currency translation gains relating to the Turkish
subsidiary of $307,000 for the second quarter and $802,000 for the six
months.
(page 3)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
LIABILITIES AND STOCKHOLDERS' EQUITY
July 2, 1994 Dec. 31, 1993
(Unaudited)
CURRENT LIABILITIES:
Current maturities of
long-term debt $ 399 $ 397
Short-term bank debt 15,025 21,525
Accounts payable 20,594 21,731
Accrued liabilities 11,615 15,295
Advanced payments and
contract billings in
excess of recognized
revenue 1,572 1,563
Accrued and deferred
income taxes 8,630 7,014
________ _______
Total current liabilities 57,835 67,525
LONG-TERM DEBT,
less current maturities 1,698 1,902
DEFERRED INCOME TAXES 6,087 6,230
MINORITY INTEREST - 0 - 105
STOCKHOLDERS' EQUITY:
Common stock, par value $1-
authorized 7,500,000
shares: issued 1994,
4,988,900 shares;
1993, 4,981,273 shares 4,989 4,981
Additional paid-in capital 770 697
Retained earnings 91,063 88,906
Foreign currency
translation effects (594) (625)
________ _______
Stockholders' equity 96,228 93,959
________ _______
TOTAL LIABILITIES
AND EQUITY $161,848 $169,721
________ _______
________ _______
(page 4)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
($000 omitted)
Six Months Ended
July 2, 1994 July 3, 1993
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net Income $ 2,157 $ 2,588
Items not affecting cash:
Depreciation and
amortization 1,796 2,411
Deferred income taxes (100) 41
Minority Interest 0 106
Other 35 59
Changes in certain
working capital items:
Accounts receivable (10,546) 8,612
Unbilled revenue 15,609 (18,197)
Advance payments and
contract billings in
excess of recognized
revenue 9 727
Inventories (947) 519
Prepaid expenses (717) 468
Accounts payable and
accrued liabilities (4,817) 607
Accrued income taxes 1,573 (440)
________ _________
Cash Provided (Used) By
Operating Activities 4,052 (2,499)
INVESTING ACTIVITIES
Net property, plant and
equipment additions (1,560) (1,134)
Short-term investments 1,403 (3,469)
________ _________
Cash Provided (Used) By
Investing Activities (157) (4,603)
FINANCING ACTIVITIES
Principal payments on
long-term debt (202) (197)
Net repayments of
short-term borrowings (6,500) (4,200)
Minority investment in
consolidated subsidiary (105) (2,316)
Proceeds from exercise of
stock options 81 186
________ _________
Cash (Used) By
Financing Activities (6,726) (6,527)
________ _________
DECREASE IN CASH AND CASH
EQUIVALENTS (2,831) (13,629)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 11,822 17,086
________ _________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 8,991 $ 3,457
________ _________
________ _________
(page 5)
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF
INTERIM FINANCIAL INFORMATION
Board of Directors and Stockholders
Aydin Corporation
We have reviewed the condensed consolidated balance sheet of Aydin
Corporation and subsidiaries as of July 2, 1994, and the related condensed
consolidated statements of income and cash flows for the three and six
month periods ended July 2, 1994. The condensed consolidated statements
of income and cash flows for the three and six-month periods ended
July 3, 1993 were reviewed by other accountants. These condensed
consolidated financial statements are the responsibility of the Company's
management.
Our review and that of the prior accountants was conducted in accordance
with standards established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit in accordance with generally
accepted auditing standards, the objective of which is the expression of
an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, and that of the prior accountants, we are not aware
of any material modifications that should be made to the condensed
consolidated financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
The consolidated balance sheet of Aydin Corporation and subsidiaries as of
December 31, 1993, and the related consolidated statements of operations
and cash flows for the year then ended (not presented herein), were
audited by other accountants in accordance with generally accepted
auditing standards. In their report dated February 25, 1994, they
expressed an unqualified opinion on those consolidated financial
statements. In their opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1993
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
Philadelphia, Pennsylvania /s/ Grant Thornton
July 29, 1994
__________________________________________________________________________
A copy of Aydin Corporation's Form 10Q may be obtained without
charge, upon written request sent to Aydin Corporation.
(page 6)