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
November 14, 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 Third Quarter, 1994
File No. 1-7203
Gentlemen:
We are enclosing for filing Aydin Corporation's Form 10-Q for the
Third Quarter ending October 1, 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 _______October 1, 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 November
11, 1994
_____4,988,900_____
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
Third Quarter Report" to Stockholders. These condensed
consolidated financial statements for the nine month period ended
October 1, 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 Third 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 common stock options, if dilutive. The number of shares
used in the computation of earnings per share for the three months
ended October 1, 1994 and October 2, 1993 were 4,990,762 and
5,038,605, respectively, and for the nine-month periods then ended
4,997,963 and 5,024,822, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(1) Material Changes in Financial Condition (10/1/94 versus
12/31/93)
Unbilled revenue decreased by $11.5 million primarily because of
increased billings on a major contract.
Net inventories increased by $2.6 million primarily because of a
build-up of selected commercial standard product type inventories
in order to provide a faster response and boost sales to customers
in these product areas.
Accrued liabilities decreased by $4.9 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 $13.7 million during the nine
months owing to billings on a major contract and resulting favorable
cash flow. Of the total of $24.6 million of cash and short-term
investments at 10/1/94, approximately $18.1 million represents
interest bearing collateral required to be maintained against letters
of credit for foreign contracts.
The Company at October 1, 1994 had short-term bank borrowings
outstanding of $7.8 million. The banks are requesting partial or
full reductions of these short-term borrowings. The Company
anticipates making full payment of these bank loans within a few
months from internal cash flow. The Company is working to
make new banking arrangements 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 (Third Quarter and Nine Months
1994 versus 1993)
Net sales declined by 16% in the nine months primarily because of
low level of booking in defense business.
Cost of sales as a percentage of sales decreased in the quarter to
70.9% from 72.5% and in the nine months to 70.6% from 72.4%
primarily as a result of operating efficiencies achieved.
Selling, general and administrative expenses increased by $391,000
in the quarter because of the higher level of proposal activity and
resulting proposal costs. Selling, general and administrative
expenses decreased by $1,565,000 in the nine months because of net
foreign currency translation gains of $874,000 in addition to cost
reductions necessitated by the decrease in sales.
The income tax provision as a percentage of pre-tax income
decreased to 27.1% from 36.8% for the nine 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 THIRD QUARTER REPORT" to
Stockholders
Exhibit 22 None
Exhibit 23 None
Exhibit 24 None
Exhibit 27 Financial Data Schedule
Exhibit 99 None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the Third
Quarter of 1994.
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 November 4, 1994 /s/ Herbert Welber
Herbert Welber, Controller
DATE November 11, 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 October 1, 1994 and for the three-month and
six-month periods ended October 1, 1994, in accordance with
Statements on Standards for Accounting and Review Services issued
by the American Institute of Certified Public Accountants, and
issued our report thereon dated October 28, 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 October 1, 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 1993 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
Philadelphia, Pennsylvania
October 28, 1994
EXHIBIT 19
Dear Stockholder:
The third quarter 1994 sales of $31,918,000, were
essentially flat compared to the $31,577,000 in sales in the same
period last year. Net income for the three month period was
$1,096,000, as compared to $1,067,000 earned in last year's third
quarter. Earnings per share were $.22, versus $.21 in the 1993
third quarter.
Sales for the first nine months were $88,669,000,
representing a 16% decrease from last year's nine month sales of
$105,980,000. Net income earned through the third quarter of 1994
was $3,253,000, as compared to $3,655,000, for the same period in
1993. Earnings for the first nine months of 1994 were $.65 per
share versus $.73 reported during the same period last year.
Backlog at the end of the third quarter was approximately
$148 million, versus $156 million at this time last year, and $158
million at the end of the 1994 second quarter. The backlog
numbers do not include probable production options.
The Company is continuing to bid on large and small
programs. During the last quarter, the Company submitted
approximately $300 million worth of proposals.
The Company has formed a new division, "Aydin Telecom".
Mr. Thomas LoCasale is appointed Corporate Vice President and
President of this division and will report to Chief Executive
Officer of the company, Mr. Ayhan Hakimoglu.
This division will manufacture, market, and sell Digital
Wireless Telephony Equipment & Systems, Digital Telephony Networks
for Video Cable Systems, Network Access Equipment, Satellite
Modems, Satellite TDMA Next Generation Equipment, Transcoders and
certain types of Multiplexers.
In the telecommunications field, Aydin West will continue
as a separate division to market and sell Microwave Radios,
Microcell, High Power Amplifiers and other Satellite Earth Station
Equipment, Troposcatter Equipment, and Turnkey Telecom Systems.
Aydin plans to be a major factor in Digital Wireless
Telephony and Cable Video Systems Telephony Products and Network
Access Equipment. The Company expects long distance carriers as
well as cable TV companies to enter into competition with the Baby
Bells in local telephony business. Similarly, local telephone
companies will enter into long distance telephony. All of these
will be the result of deregulation which is at the proposal stage
at this time.
Digital wireless systems are competitive in providing
telephony networks for developing countries such as Russia, China,
etc., who wish to expand their telephone networks. At this stage,
it is not practical to hang or bury wires to bring a connection to
every house, especially in low population density areas.
Aydin expects that there will be a large market in equipment
business of the type Aydin Telecom and Aydin (West) will sell in
the USA and world-wide.
/s/ Ayhan Hakimoglu
Ayhan Hakimoglu
October 28, 1994 President
(page 1)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($000 OMITTED EXCEPT FOR PER SHARE AMOUNTS)
3 MONTHS ENDED 9 MONTHS ENDED
10/1/94 10/2/93 10/1/94 10/2/93
(UNAUDITED) (UNAUDITED)
NET SALES $ 31,918 $ 31,577 $ 88,669 $ 105,980
COST AND EXPENSES
Cost of sales 22,621 22,896 62,570 76,744
Selling, general and
administrative 6,313 5,922 17,695 19,260
Research and
development 1,203 1,028 3,664 3,881
________ _________ ________ _________
Interest expense,
(income) net 90 (49) 280 126
________ _________ ________ _________
Total 30,227 29,797 84,209 100,011
INCOME BEFORE
INCOME TAXES AND
MINORITY INTEREST 1,691 1,780 4,460 5,969
INCOME TAXES 595 704 1,207 2,199
________ _________ ________ _________
INCOME BEFORE
MINORITY INTEREST 1,096 1,076 3,253 3,770
LESS MINORITY INTEREST -0- 9 -0- 115
________ _________ ________ _________
NET INCOME $ 1,096 $ 1,067 $ 3,253 $ 3,655
________ _________ ________ _________
________ _________ ________ _________
EARNINGS PER SHARE $ .22 $ .21 $ .65 $ .73
________ _________ ________ _________
________ _________ ________ _________
(page 2)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
ASSETS
OCT. 1, 1994 Dec. 31, 1993
(UNAUDITED)
CURRENT ASSETS:
Cash, including cash equivalents-
1994, $11,951; 1993, $10,908 $ 16,188 $ 11,822
Short-term investments 8,428 13,058
Accounts receivable 31,694 33,525
Unbilled revenue, after
progress billings 55,025 66,559
Inventories:
Raw materials 9,519 8,549
Work-in-process 7,194 6,036
Finished product 3,456 3,012
Prepaid expenses 1,904 1,470
_________ _________
TOTAL CURRENT ASSETS 133,408 144,031
PROPERTY, PLANT AND EQUIPMENT,
net of accumulated depreciation:
1994, $56,181; 1993, $53,623 24,737 25,182
OTHER ASSETS 483 508
_________ _________
TOTAL ASSETS $ 158,628 $ 169,721
_________ _________
_________ _________
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 $72,000
for the third quarter and $874,000 for the nine months.
(page 3)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
LIABILITIES AND STOCKHOLDERS' EQUITY
Oct. 1, 1994 Dec. 31, 1993
(Unaudited)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 399 $ 397
Short-term bank debt 7,806 21,525
Accounts payable 23,622 21,731
Accrued liabilities 10,413 15,295
Advanced payments and contract
billings in excess of recognized
revenue 2,342 1,563
Accrued and deferred income taxes 8,002 7,014
_________ __________
TOTAL CURRENT LIABILITIES 52,584 67,525
LONG-TERM DEBT, less current maturities 1,597 1,902
DEFERRED INCOME TAXES 6,972 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 92,159 88,906
Foreign currency translation effects (443) (625)
_________ __________
STOCKHOLDERS' EQUITY 97,475 93,959
_________ __________
TOTAL LIABILITIES AND EQUITY $158,628 $169,721
_________ __________
_________ __________
(page 4)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
($000 OMITTED)
NINE MONTHS ENDED
OCT. 1, 1994 Oct. 2, 1993
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net Income $ 3,253 $ 3,655
Items not affecting cash:
Depreciation and amortization 2,647 3,488
Deferred income taxes (19) (478)
Minority Interest -0- 115
Other 185 81
Changes in certain working
capital items:
Accounts receivable 1,831 4,740
Unbilled revenue 11,534 (19,402)
Advance payments and contract
billings in excess of
recognized revenue 779 27
Inventories (2,572) 995
Prepaid expenses (434) 572
Accounts payable and accrued
liabilities (2,991) (752)
Accrued income taxes 1,749 597
__________ ___________
CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 15,962 (6,362)
INVESTING ACTIVITIES
Net property, plant and
equipment additions (2,180) (2,034)
Short-term investments 4,630 (546)
__________ ___________
CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 2,450 (2,580)
FINANCING ACTIVITIES
Payments on long-term debt (303) (295)
Proceeds from (repayment) of
short-term borrowings (13,719) (1,000)
Minority investment in
consolidated subsidiary (105) (2,310)
Proceeds from exercise of
stock options 81 263
__________ ___________
CASH (USED) BY
FINANCING ACTIVITIES (14,046) (3,342)
__________ ___________
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 4,366 (12,284)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 11,822 17,086
__________ ___________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 16,188 $ 4,802
__________ ___________
__________ ___________
(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 October 1, 1994, and the
related condensed consolidated statements of income and cash flows
for the three and nine month periods ended October 1, 1994. The
condensed consolidated statements of income and cash flows for the
three and nine-month periods ended October 2, 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
October 28, 1994
_______________________________________________________________
A copy of Aydin Corporation's Form 10Q may be obtained without
charge, upon written request sent to Aydin Corporation
(page 6)