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 14, 1995
(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, 1995
File No. 1-7203
Gentlemen:
We are enclosing for filing Aydin Corporation's Form 10-Q for the Second
Quarter ending July 1, 1995.
Sincerely,
/s/ Robert A. Clancy
Robert A. Clancy
Secretary and
Corporate Counsel
RAC:cak
Enclosures
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 1, 1995_______________
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 11, 1995
5,057,204
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 "1995 Second Quarter Report" to
Stockholders. These condensed consolidated financial statements for the three
and six month periods ended July 1, 1995 have been subjected to a limited
review by Grant Thornton LLP, the Registrant's independent accountants, whose
report, set forth on page 6 of the "1995 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 six months ended July 1, 1995 and July 2, 1994 were 5,091,372
and 4,995,784, respectively, and for the six-month periods then ended
5,066,024 and 5,001, 563, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(1) Material Changes in Financial Condition (7/01/95 versus 12/31//94)
Unbilled revenue (net of advance payments and contract billings in excess of
recognized revenue) increased by $12.6 million because of revenue recognized
in excess of billings rendered primarily on the TMRC-C3 contract with the
Turkish Government. Primarily because of this, cash and short-term
investments decreased by $10.3 million.
Of the total of $17.6 million of cash and short-term investments at 7/1/95,
approximately $11.6 million represents interest bearing collateral required to
be maintained against letters of credit for foreign contracts. During the
second quarter, a $18.9 million bank line of credit was obtained of which $16
million has been used for letters of credit as of 7/1/95. This line of credit
is secured by mortgages against the Company's real estate.
The Company at 7/1/95 had short-term bank borrowings outstanding of $5.5
million. The banks are requesting reductions of these short-term borrowings.
The Company anticipates full payment of these bank loans in and a significant
reduction in unbilled revenue during the balance of 1995 from internal cash
flow on the TMRC-C3 contract.
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 1995
versus 1994)
Net sales decreased by 5.5% during the quarter as a result of a decrease in
sales at the Argentine subsidiary from an unusually high level in 1994. Net
sales for the six-month period were essentially flat. Backlog at 7/1/95 was
approximately $123 million compared to $158 million at 7/2/94 and $134 million
at 12/31/94. The backlog has decreased because no major new orders have been
booked over the past year to replace the TMRC-C3 backlog which is being worked
off and amounted to $47 million at 7/1/95. The trend in lower sales and
earnings will probably continue as a result of the significance of this
contract until new orders improve and benefits of R&D in telecommunications
start bearing fruit.
Cost of sales as a percentage of sales decreased to 73.0% from 74.0% for the
six months as a result of operating efficiencies and a more favorable sales
mix. Cost of sales as a percentage of sales remained essentially the same for
the second quarter.
Selling, general and administrative expenses decreased by $847,000 (12%)
during the quarter primarily because of lower expenses at the Argentine
subsidiary.
Research and development costs increased by $383,000 (28%) in the quarter and
$760 (31%) in the six months because of expanded development efforts in
telecommunication wireless and hybrid fiber-coax cable telephony systems.
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 3(i) - Restated Certificate of Incorporation (filed as
Exhibit 3(i) to Registrant's Annual Report on Form
10-K for the year ended December 31, 1994 and
incorporated herein by reference).
Exhibit 3(ii) - By-Laws (filed as Exhibit 3(ii) to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by
reference).
Exhibit 4 - None
Exhibit 10 - None
Exhibit 11 - None
Exhibit 15 - Letter re unaudited interim financial information
Exhibit 18 - None
Exhibit 19 - "1995 SECOND QUARTER REPORT" to Stockholders
Exhibit 22 - None
Exhibit 23 - None
Exhibit 24 - None
Exhibit 27 - Financial Data Schedule (electronic filing only)
Exhibit 99 - None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the Second Quarter 1995.
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 14, 1995____ /s/ Herbert Welber
Herbert Welber, Controller
DATE ____August 14, 1995____ /s/ Robert A. Clancy
Robert A. Clancy, Secretary
EXHIBIT 15
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Securities and Exchange Commission
Washington, D.C. 20549
We have made a review of the condensed financial statements of Aydin
Corporation as of July 1, 1995 and for the three-month and six-month periods
ended July 1, 1995, in accordance with standards established by the American
Institute of Certified Public Accountants, and issued our report thereon dated
July 27, 1995. 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 1, 1995 are being incorporated by reference in the
Registration Statement Nos. 33-61537; 33-53549; 33-34863; 33-22016; 33-14284;
2-97645; 2-93603; 2-77623; and 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 LLP
Philadelphia, Pennsylvania
July 27, 1995
Exhibit 19
Dear Stockholder:
The 1995 second quarter sales were $36,494,000, representing a 5.5%
decrease as compared to the $38,635,000 in sales during the same period in
1994. Net income for the second quarter was $1,073,000 or $.21 per share, as
compared to the $1,272,000 or $.25 per share earned in last year's second
quarter.
Sales for the 1995 first half were $72,082,000, being essentially flat
to the $72,610,000 in sales for the same period last year. Net income was
$2,264,000 or $.45 per share, representing an 8% decline from the $2,465,000
or $.49 per share earned in the same period in 1994.
The Company attributes the decline in earnings primarily to higher R&D
expenses, especially in Telecom wireless and hybrid fiber-coax cable telephony
systems. This trend will probably continue until new orders improve and
benefits of R&D in telecommunications start bearing fruit.
Backlog at the end of the first half was approximately $123 million, as
compared to $158 million at this time last year, and $137 million at the end
of the 1995 first quarter. Backlog figures do not include probable production
options.
During the second quarter, Aydin formed an alliance with COMSAT
Laboratories for the development and marketing of Enhanced TDMA based Wireless
Local Loop products. This is in addition to a previous alliance formed in
June of 1994 for the design, manufacturing, marketing, and installation of
Second Generation Time Division Multiple Access (TDMA) Satellite Terminals.
An agreement has also been formed with Audiocodes Ltd. (an Israeli based
company) who will provide a derivative of its low-bit rate MP-MLQTM vocoder
and fax/data modem for Aydin's DigiCallTM TDMA wireless Local Loop base
stations and subscriber units.
Most recently, Aydin announced that Oppenheimer & Co. has been hired as
a financial advisor to explore options available in maximizing shareholder
value which shall include potential sale of the Company's business.
Aydin is continuing to bid on basic industrial and military business as
well as stress its telecommunication business which includes digital wireless
telephony and digital telephony for video cable systems. The Company is also
stressing its Systems Integration business.
/s/ Ayhan Hakimoglu
July 28, 1995 Chairman of the Board
(page 1)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($000 omitted except for per share amounts)
Three Months Ended Six Months Ended
7/01/95 7/02/94 7/01/95 7/02/94
RESTATED RESTATED
(Unaudited) (Unaudited)
NET SALES $36,494 $38,635 $72,082 $72,610
COST AND EXPENSES
Cost of sales 26,661 28,283 52,598 53,738
Selling, general
and administrative 6,221 7,068 12,745 12,668
Research and development 1,772 1,389 3,221 2,461
Interest expense, net 175 209 18 190
_______ _______ _______ _______
Total 34,829 36,949 68,582 69,057
_______ _______ _______ _______
INCOME BEFORE INCOMES TAXES
AND MINORITY INTEREST 1,665 1,686 3,500 3,553
INCOME TAXES 581 414 1,217 1,088
_______ _______ _______ _______
INCOME BEFORE
MINORITY INTEREST 1,084 1,272 2,283 2,465
LESS MINORITY INTEREST 11 - 0 - 19 - 0 -
_______ _______ _______ _______
NET INCOME $ 1,073 $ 1,272 $ 2,264 $ 2,465
_______ _______ _______ _______
_______ _______ _______ _______
EARNINGS PER SHARE $ .21 $ .25 $ .45 $ .49
_______ _______ _______ _______
_______ _______ _______ _______
(page 2)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
ASSETS
July 1, 1995 Dec. 31, 1994
(Unaudited)
CURRENT ASSETS:
Cash, including cash equivalents-
1995, $5,128; 1994, $18,220 $ 5,728 $ 20,961
Short-term investments 11,914 6,980
Accounts receivable 34,330 35,351
Unbilled revenue, after
progress billings 65,554 54,909
Inventories:
Raw materials 8,962 9,440
Work-in-process 7,914 7,419
Finished product 3,965 3,705
Prepaid expenses 1,347 1,350
________ ________
Total current assets 139,714 140,115
PROPERTY, PLANT AND EQUIPMENT,
net of accumulated depreciation:
1995, $57,704; 1994, $56,103 25,256 25,486
OTHER ASSETS 476 477
________ ________
TOTAL ASSETS $165,446 $166,078
________ ________
________ ________
__________________________________________________________________
<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 1994 balance sheet has been derived from the audited
financial statements contained in the 1994 Annual Report to
Stockholders. The first half of 1994 reflects amounts which were previously
restated as a result of originally not including the results of a foreign
subsidiary. In periods prior to 1994, the results of this subsidiary were not
significant. 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 the second
quarter and first six months of 1995 include foreign currency translation
gains of $60,000 and $169,000, respectively, relating to the Turkish
subsidiary.
(page 3)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
LIABILITIES AND STOCKHOLDERS' EQUITY
July 1, 1995 Dec. 31, 1994
(Unaudited)
CURRENT LIABILITIES:
Current maturities of
long-term debt $ 342 $ 402
Short-term bank debt 5,486 6,486
Accounts payable 27,354 27,055
Accrued liabilities 10,648 10,600
Advanced payments and
contract billings in
excess of recognized
revenue 2,209 4,169
Accrued and deferred
income taxes 9,246 9,617
________ _______
Total current liabilities 55,285 58,329
LONG-TERM DEBT,
less current maturities 886 1,549
DEFERRED INCOME TAXES 7,328 6,983
MINORITY INTEREST 122 - 0 -
STOCKHOLDERS' EQUITY:
Common stock, par value $1-
authorized 7,500,000
shares: issued 1995,
5,026,460 shares;
1994, 4,990,400 shares 5,026 4,990
Additional paid-in capital 1,142 787
Retained earnings 96,217 93,953
Less Treasury Stock at
cost: 1995, 3,997 shares;
1994, none. (58) - 0 -
Foreign currency
translation effects (502) (513)
________ _______
Stockholders' equity 101,825 99,217
________ _______
TOTAL LIABILITIES
AND EQUITY $165,446 $166,078
________ _______
________ _______
(page 4)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
($000 omitted)
Six Months Ended
July 1, 1995 July 2, 1994
RESTATED
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net Income $ 2,264 $ 2,465
Items not affecting cash:
Depreciation and
amortization 1,608 2,244
Deferred income taxes 200 (100)
Minority Interest 19 - 0 -
Other 12 30
Changes in certain
working capital items:
Accounts receivable 1,021 (18,340)
Unbilled revenue (10,645) 15,914
Advance payments and
contract billings in
excess of recognized
revenue (1,960) 9
Inventories (277) (1,240)
Prepaid expenses 3 (717)
Accounts payable and
accrued liabilities 347 1,164
Accrued income taxes (226) 3,732
________ _________
Cash Provided (Used) By
Operating Activities (7,634) 5,161
INVESTING ACTIVITIES
Net property, plant and
equipment additions (1,378) (2,472)
Short-term investments (4,934) 1,403
________ _________
Cash Provided (Used) By
Investing Activities (6,312) (1,069)
FINANCING ACTIVITIES
Principal payments on
long-term debt (723) (202)
Net repayments of
short-term borrowings (1,000) (6,500)
Purchase of Treasury Shares (58) - 0 -
Minority investment in
consolidated subsidiary 103 (105)
Proceeds from exercise of
stock options 391 81
________ _________
Cash (Used) By
Financing Activities (1,287) (6,726)
________ _________
DECREASE IN CASH AND CASH
EQUIVALENTS (15,233) (2,634)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 20,961 11,822
________ _________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 5,728 $ 9,188
________ _________
________ _________
(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 sheets of Aydin
Corporation and subsidiaries as of July 1, 1995 and July 2, 1994, and the
related condensed consolidated statements of income and cash flows for the
three and six month periods then ended. These condensed consolidated
financial statements are the responsibility of the Company's management.
We conducted our review 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 as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1994, and the
related consolidated statements of operations and cash flows for the year then
ended (not presented herein) and in our report dated February 20, 1995 we
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, 1994 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 LLP
July 27, 1995
__________________________________________________________________________
A copy of Aydin Corporation's Form 10Q may be obtained without
charge, upon written request sent to Aydin Corporation.
(page 6)