0000008919-95-000008.txt : 19950815 0000008919-95-000008.hdr.sgml : 19950815 ACCESSION NUMBER: 0000008919-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AYDIN CORP CENTRAL INDEX KEY: 0000008919 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 231686808 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07203 FILM NUMBER: 95562614 BUSINESS ADDRESS: STREET 1: 700 DRESHER RD CITY: HORSHAM STATE: PA ZIP: 19044 BUSINESS PHONE: 2156577510 10-Q 1 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 ________ ________ ________ ________ __________________________________________________________________ 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) EX-27 2 ARTICLE 5 FDS FOR 2ND QUARTER 10-Q WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 This schedule contains summary financial information extracted from Second Quarter Report to Stockholders and is qualified in its entirety by reference to such financial statements. 1,000 QTR-2 DEC-31-1994 JUL-01-1995 5,728 11,914 34,330 0 20,841 139,714 82,960 57,704 165,446 55,285 886 5,026 0 0 96,799 165,446 36,494 36,494 26,661 34,829 0 0 175 1,665 581 1,084 0 0 0 1,073 .21 .21