AYDIN CORPORATION
Telephone 700 Dresher Road
(215) 657-7510 P.O. Box 349
FAX Horsham, PA 19044
(215) 657-3830 U.S.A.
November 13, 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 Third Quarter, 1995
File No. 1-7203
Gentlemen:
We are enclosing for filing Aydin Corporation's Form 10-Q for the Third
Quarter ending September 30, 1995.
Sincerely,
/s/ Robert A. Clancy
Robert A. Clancy
Secretary and
Corporate Counsel
RAC:sbk
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 _______September 30, 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 principal 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 10, 1995
5,122,075
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 Third Quarter Report" to
Stockholders. These condensed consolidated financial statements for the three
and nine month periods ended September 30, 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 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 dilutive common
stock options. The number of shares used in the computation of earnings per
share for the three months ended September 30, 1995 and October 1, 1994 were
5,152,238 and 4,990,762, respectively, and for the nine-month period then ended
5,094,763 and 4,997,963, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(1) Material Changes in Financial Condition (9/30/95 versus 12/31//94)
Unbilled revenue (net of advance payments and contract billings in excess of
recognized revenue) increased by $16.6 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 $12.0 million.
Of the total of $15.9 million of cash and short-term investments at 9/30/95,
approximately $11.7 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 $16.6
million has been used for letters of credit as of 9/30/95. This line of credit
is secured by mortgages against the Company's real estate.
The Company at 9/30/95 had short-term bank borrowings outstanding of $6.3
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 and early 1996 from
internal cash flow on the TMRC-C3 contract. Net unbilled revenue and accounts
receivable at 9/30/95 on the TMRC C3 contract amounted to $36.1 million and
$10.4 million, respectively. Realization of these amounts has been delayed
pending acceptance from the customer of the software component of the contract
which is expected during the fourth quarter.
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 1995
versus 1994)
Net sales decreased by 6.1% during the quarter as a result of a decrease in
sales at the Argentine subsidiary from an unusually high level in 1994 and a
decrease in TMRC C3 sales. Net sales for the nine-month period were
essentially flat. Backlog at 9/30/95 was approximately $116 million compared
to $148 million at 10/1/94 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 $43
million at 9/30/95. The trend in lower sales and earnings will probably
continue for a short while as a result of the significance of this contract
until new orders improve and benefits of R&D in telecommunications start
bearing fruit. The Company has recently signed several large memorandums of
understanding and letters of intent approximating $370 million which will
probably add to the backlog in the near term.
Cost of sales as a percentage of sales increased to 72.9% from 71.1% for the
quarter as a result of a less favorable sales mix. Cost of sales as a
percentage of sales remained essentially the same for the nine months.
Selling, general and administrative expenses decreased by $700 thousand for
both the quarter and nine months primarily because of lower expenses at the
Argentine subsidiary and a $435,000 reduction of the estimated liability for
environmental clean-up costs.
Research and development costs increased by $574 thousand (48%) in the quarter
and $1,334 thousand (36%) in the nine months because of expanded development
efforts in telecommunication systems.
The income tax provision as a percentage of pre-tax income decreased to 28.9%
from 39.6% for the quarter because of lower foreign and state income taxes.
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 THIRD 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 Third 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 __November 13, 1995____ /s/ Herbert Welber
Herbert Welber, Controller
DATE __November 13, 1995____ /s/ Robert A. Clancy
Robert A. Clancy, Secretary
PAGE
EXHIBIT 15
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have made a review of the condensed financial statements of Aydin
Corporation as of September 30, 1995 and for the three-month and nine-month
periods
ended September 30, 1995, in accordance with standards established by the
American
Institute of Certified Public Accountants, and issued our report thereon dated
October 26, 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 September 30, 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
November 6, 1995
Exhibit 19
Dear Stockholder:
The third quarter 1995 sales of $32,932,000, were a 6% decrease compared
to the $35,053,000 in sales in the same period last year. Net income for the
three month period was $774,000 as compared to $1,304,000 earned in last year's
third quarter. Earnings per share were $.15, versus $.26 in the 1994 third
quarter.
Sales for the first nine months were $105,014,000, representing a slight
decrease from last year's nine month sales of $107,663,000. Net income earned
through the third quarter of 1995 was $3,038,000, as compared to $3,769,000,
for the same period in 1994. Earnings for the first nine months of 1995 were
$.60 per share versus $.75 reported during the same period last year.
Backlog at the end of the third quarter was approximately $116 million,
versus $148 million at this time last year, and $123 million at the end of the
1995 second quarter. The backlog numbers do not include probable production
options.
After the close of the quarter, Aydin received an award from a company
organized in the People's Republic of China for a flight test system for
civilian aviation. This order is valued at $20 million, and the system is to
be delivered in approximately two years. This order is subject to Aydin's
receipt of an appropriate U.S. export license as well as an import permit from
the Chinese Government.
Due to the many opportunities currently being pursued, management remains
optimistic that this downward trend will subside soon. For example, during the
third quarter, a Memorandum of Agreement was signed to provide wireless
communication devices for a far eastern country, pending approval of the
prototype. This contract would provide one million units over several years
amounting to approximately $150 million.
Aydin Telecom has signed a "Letter of Intent" with a major city in the
Ukraine and its Public Telephone Network to provide system engineering design,
equipment and technical support necessary to expand telephone exchanges of the
city and its vicinity and replace antiquated analog transmission facilities
with modern digital equipment as well as add new wired and fixed wireless lines
and replace existing analog lines. This contract has potential of being $200
million over the next six years. Financing alternatives are currently being
investigated; depending on the financing, the initial contract could be much
smaller.
The Turkish Government has renewed its interest in the Turkish Armed Forces
Integrated Communications System (known as the TAFICS program). Aydin is in
the process of working on its proposal to be submitted to the Turkish
Government in the middle of next month. This contract is valued at about $300
million. Another Turkish proposal Aydin will participate in is a Frequency
Management System valued at about $80 million.
(page 1)
All of the above are in addition to many proposals to U.S. Government and
foreign customers, each under $20 million.
TMRC systems software testing is in the final phase. Successful completion
of this testing will result in a substantial cash flow to Aydin Corporation.
Oppenheimer & Co. and Aydin Management have been meeting with parties who
have expressed interest in a possible merger or acquisition. Oppenheimer & Co.
will continue the process of exploring ways to maximize shareholder value.
/s/ Ayhan Hakimoglu
October 30, 1995 Chairman of the Board
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($000 omitted except for per share amounts)
3 Months Ended 9 Months Ended
9/30/95 10/1/94 9/30/95 10/1/94
Restated Restated
(Unaudited) (Unaudited)
NET SALES $ 32,932 $ 35,053 $ 105,014 $ 107,663
COST AND EXPENSES
Cost of sales 24,014 24,931 76,612 78,669
Selling, general and
administrative 5,954 6,671 18,699 19,339
Research and
development 1,777 1,203 4,998 3,664
Interest expense,
net 110 90 128 280
________ _________ ________ _________
Total 31,855 32,895 100,437 101,952
________ _________ ________ _________
INCOME BEFORE
INCOME TAXES AND
MINORITY INTEREST 1,077 2,158 4,577 5,711
INCOME TAXES 311 854 1,528 1,942
________ _________ ________ _________
INCOME BEFORE
MINORITY INTEREST 766 1,304 3,049 3,769
LESS MINORITY INTEREST (8) -0- 11 -0-
________ _________ ________ _________
NET INCOME $ 774 $ 1,304 $ 3,038 $ 3,769
________ _________ _________ _________
________ _________ _________ _________
EARNINGS PER SHARE $ .15 $ .26 $ .60 $ .75
________ _________ _________ _________
________ _________ _________ _________
(page 2)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
ASSETS
Sept. 30, 1995 Dec. 31, 1994
(Unaudited)
CURRENT ASSETS:
Cash, including cash equivalents-
1995, $9,989; 1994, $18,220 $ 10,328 $ 20,961
Short-term investments 5,590 6,980
Accounts receivable 31,429 35,351
Unbilled revenue, after
progress billings 70,522 54,909
Inventories:
Raw materials 9,630 9,440
Work-in-process 8,348 7,419
Finished product 3,798 3,705
Prepaid expenses 1,644 1,350
________ ________
Total current assets 141,289 140,115
PROPERTY, PLANT AND EQUIPMENT,
net of accumulated depreciation:
1995, $58,393; 1994, $56,103 25,364 25,486
OTHER ASSETS 476 477
________ ________
TOTAL ASSETS $167,129 $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 nine months 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 Note J of the 1994 Annual Report on contingency
disclosures except that settlement has been reached on previously disallowed
research and development tax credits with no material impact on results of
operations. Pretax income for the third quarter and first nine months of 1995
include foreign currency translation gains of $154,000 and $323,000,
respectively, relating to the Turkish subsidiary. The third quarter 1995 also
includes pretax income of $435,000 from the reduction of the estimated
liability for environmental clean-up costs.
(page 3)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
LIABILITIES AND STOCKHOLDERS' EQUITY
Sept. 30, 1995 Dec. 31, 1994
(Unaudited)
CURRENT LIABILITIES:
Current maturities of
long-term debt $ 342 $ 402
Short-term bank debt 6,286 6,486
Accounts payable 27,823 27,055
Accrued liabilities 8,717 10,600
Advanced payments and
contract billings in
excess of recognized
revenue 3,167 4,169
Accrued and deferred
income taxes 10,748 9,617
________ _______
Total current liabilities 57,083 58,329
LONG-TERM DEBT,
less current maturities 801 1,549
DEFERRED INCOME TAXES 6,003 6,983
MINORITY INTEREST 114 - 0 -
STOCKHOLDERS' EQUITY:
Common stock, par value $1-
authorized 7,500,000
shares: issued 1995,
5,078,290 shares;
1994, 4,990,400 shares 5,078 4,990
Additional paid-in capital 1,701 787
Retained earnings 96,991 93,953
Less Treasury Stock at
cost: 1995, 5,128 shares;
1994, none. (78) - 0 -
Foreign currency
translation effects (564) (513)
________ _______
Stockholders' equity 103,128 99,217
________ _______
TOTAL LIABILITIES
AND EQUITY $167,129 $166,078
________ _______
________ _______
(page 4)
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
($000 omitted)
Nine Months Ended
Sept. 30, 1995 Oct. 1, 1994
Restated
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net Income $ 3,038 $ 3,769
Items not affecting cash:
Depreciation and amortization 2,325 3,132
Deferred income taxes 300 (19)
Minority Interest 11 -0-
Other (50) 180
Changes in certain working
capital items:
Accounts receivable 3,922 (2,993)
Unbilled revenue (15,613) 11,839
Advance payments and contract
billings in excess of
recognized revenue (1,022) 779
Inventories (1,212) (2,572)
Prepaid expenses (294) (434)
Accounts payable and accrued
liabilities (1,115) 1,395
Accrued income taxes (149) 3,740
__________ ___________
CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (9,839) 18,816
INVESTING ACTIVITIES
Net property, plant and
equipment additions (2,203) (3,134)
Short-term investments 1,390 4,630
__________ ___________
CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (813) 1,496
FINANCING ACTIVITIES
Principal payments on
long-term debt (808) (303)
Net repayments of
short-term borrowings (200) (13,719)
Purchase of treasury shares (78) -0-
Minority investment in
consolidated subsidiary 103 (105)
Proceeds from exercise of
stock options 1,002 81
__________ ___________
CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 19 (14,046)
__________ ___________
DECREASE IN CASH
AND CASH EQUIVALENTS (10,663) 6,266
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 20,961 11,822
__________ ___________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 10,328 $ 18,088
__________ ___________
__________ ___________
(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 September 30, 1995 and October 1, 1994, and the related
condensed consolidated statements of income and cash flows for the three and
nine 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 our 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.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
October 26, 1995
__________________________________________________________________________
A copy of Aydin Corporation's Form 10Q may be obtained without
charge, upon written request sent to Aydin Corporation.
(page 6)