-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BLLZ0i7K7YFNtoFsjBFNnZkxPrOHnaNJ9weETt4iA/iWZs8QW8X1VKZ8hRarhoGW yP3QUWD08+0P9FjedsZSaA== 0000008919-97-000012.txt : 19970513 0000008919-97-000012.hdr.sgml : 19970513 ACCESSION NUMBER: 0000008919-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970512 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: 97601167 BUSINESS ADDRESS: STREET 1: 700 DRESHER RD STREET 2: P O BOX 349 CITY: HORSHAM STATE: PA ZIP: 19044 BUSINESS PHONE: 2156577510 MAIL ADDRESS: STREET 1: 700 DRESHER RD STREET 2: P O BOX 349 CITY: HORSHAM STATE: PA ZIP: 19044 10-Q 1 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 March 29, 1997 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 May 12, 1997. ______5,173,400______ 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 3 through 6 of the "1997 First Quarter Report" to Stockholders. These condensed consolidated financial statements for the three month period ended March 29, 1997 have been subjected to a limited review by Grant Thornton LLP, the Registrant's independent accountants, whose report, set forth on page 7 of the "1997 First 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 March 29, 1997 and March 30, 1996 were 5,141,582 and 5,162,831, respectively. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (1) Material Changes in Financial Condition (3/29/97 versus 12/31/96) Accounts receivable decreased by $4.4 million because of lower balances and faster collections during the quarter by the Turkish subsidiary on the TMRC Contract with the Government of Turkey. Accounts payable decreased by $5.7 million because of lower payables at the Turkish subsidiary and more current payments generally to vendors. Other assets declined by $2.6 million (as more fully explained in Part II, Item 1(b) because of an unfavorable court ruling in April 1997 involving an anticipated insurance recovery of monies previously spent ($1.5 million) and to be spent ($1.1 million) over a 30 year period on an environmental clean-up at a site leased by Company prior to 1984. The $6.3 million of restricted cash is being held as collateral by a bank against a letter of credit on the TMRC contract. Although the Company's liquidity and financial condition continue to improve, the Company continues to seek new financing arrangements. Based on the present backlog and projected cash flows, the Company anticipates financing its capital needs from internal sources and additional borrowings. (2) Material Changes in Operations (1st Quarter 1997 vs. 1996) Net sales decreased to $26.9 million from $36.3 million (a 26% decline) because of the disposal at 12/31/96 of the majority interest in the Argentine subsidiary and lower sales in the communication systems business. The communications systems business involves large contracts with U.S. and foreign governments, and is inherently subject to variations in timing. Cost of sales as a percentage of sales increased to 75.2% from 70.0% primarily because of the absence in 1997 of a favorable change in a cost at completion estimate on a large contract in the 1996 quarter. Selling, general and administrative and research and development costs decreased by $2.2 million (18%) reflecting cost reductions started in the third quarter 1996 pursuant to the Company's restructuring plans. Environmental remediation expense of $2.6 million is explained under Item 2(1) above and more fully in Part II, Item 1(b). Income taxes reflects a 1997 provision for foreign income taxes against foreign income. There is no recovery recorded against the U.S. losses because the Company has exhausted its U.S. tax loss carrybacks. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS (a) Reference is made to Item 3, "Legal Proceedings", in Registrant's Annual Report on Form 10-K, Part I, for the year ended December 31, 1996, regarding the arbitration cross-claims of Loral Defense Systems - Eagan and Registrant. The parties have completed depositions and the exchange of documents is to be completed by June, 1997. Arbitration hearings are scheduled to start July 21, 1997. (b) Reference is made to Note J - "Commitments and Contingencies" in Registrant's Notes to Consolidated Financial Statements for the year ended December 31, 1996 set forth in Registrant's 1996 Annual Report to Stockholders, regarding an appeal by one of Registrant's insurance carriers from a declaratory judgment obtained by Registrant requiring that the insurance carrier pay clean-up costs in excess of the sum of $6.7 million that Registrant had received in settlement with its other three insurance carriers. The total amounts paid and to be paid by Registrant in excess of the $6.7 million recovered totaled $2.6 million, of which $1.5 million has been incurred and $1.1 million is to be incurred over a 30 year period. On April 21, 1997, the California Court of Appeal issued its decision in the case: Aydin Corporation, Respondent vs. First State Insurance Company, Appellant, No. A068910 (97 Daily Journal D.A.R. 5087), reversing the decision of the trial court that had entered a judgment of Declaratory Relief in favor of the Registrant regarding insurance coverage for the clean-up costs at a site formerly leased by Registrant. The Court of Appeal ruled that an "exception" to an exclusion in an insurance policy must be treated as part of the policy's coverage provision, and that the burden of proving the applicability of the exception be borne by the insured. It was therefore prejudicial error for the trial court to instruct the jury that it was the burden of the insurance company to prove the nonexistence of the policy coverage. The Registrant is reviewing the decision to determine whether a further appeal to the California Supreme Court will be made or allow the case to be returned to the trial court for a new trial. As a result of this decision, the Registrant has recorded a non-cash charge of $2.6 million for the First Quarter 1997. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS (a) The Registrant held its Annual Meeting of Stockholders on April 25, 1997. (b) Proxies for the meeting were solicited pursuant to Regulation 14A. There was no solicitation in opposition to management's nominees for directors as listed in the Proxy Statement. All such nominees were elected. (c) The matters voted upon and the results of the voting were as follows: (1) Election of Directors
Broker For Withheld Non-Votes I. Gary Bard 4,008,756 351,132 None Nev A. Gokcen 4,008,728 351,160 None Irwin L. Gross 4,008,756 351,132 None Gary Mozenter 4,008,756 351,132 None Harry D. Train II 4,008,726 351,160 None John F. Vanderslice 4,008,827 351.061 None
(2) To approve an amendment to the 1994 Incentive Stock Plan. For Against Abstain Broker Non-Votes* 2,045,087 955,017 20,656 1,339,128 (3) To approve the 1996 Equity Incentive Plan. For Against Abstain Broker Non-Votes* 2,107,734 687,639 21,936 1,542,579 (4) To approve an amendment to extend the expiration date of outstanding stock options five years. For Against Abstain Broker Non-Votes* 2,437,433 954,663 23,934 943,858 (5) To approve the stock Bonus Plan. For Against Abstain Broker Non-Votes* 2,146,732 1,040,954 24,893 1,147,309 (*) Broker non-votes are not considered shares present in person or represented by proxy and had no effect on these votes. ITEM 5. OTHER INFORMATION (a) The FASB has issued Statement of Financial Accounting Standards No. 128, Earnings Per Share, which is effective for financial statements issued after December 15, 1997. The new standard eliminates primary and fully diluted earnings per share and requires presentation of basic and diluted earnings per share together with disclosure of how the per share amounts were computed. The adoption of this new Standard is not expected to have a material impact on the disclosure of earnings per share in the financial statements. 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, 1996 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 - "1997 FIRST 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 First Quarter 1997. 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 May 12, 1997 /s/ James R. Henderson James R. Henderson, Vice President-Finance, Treasurer and Chief Financial Officer DATE May 12, 1997 /s/ Robert A. Clancy Robert A. Clancy, Secretary AYDIN CORPORATION FORM 10-Q QUARTERLY REPORT EXHIBIT INDEX N0. DESCRIPTION OF EXHIBIT 15 Letter re unaudited interim financial information 19 1997 First Quarter Report to Stockholders 27 Financial Data Schedule Exhibit 15 Securities and Exchange Commission Washington, D.C. 20549 We have made a review of the condensed consolidated financial statements of Aydin Corporation and subsidiaries as of March 29, 1997 and for the three-month periods ended March 29, 1997 and March 30, 1996, in accordance with standards established by the American Institute of Certified Public Accountants, and issued our report thereon dated April 23, 1997. 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 March 29, 1997 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; 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 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 May 12, 1997 Exhibit 19 Dear Stockholder: AYDIN's first quarter operating results were on target with management s restructuring plan. Performance of our divisions has improved and we are building backlog in most product groups. AYDIN incurred an unexpected charge in the first quarter, as a result of an appeals court s reversal of a prior favorable court ruling regarding insurance recoveries on an environmental issue initiated in 1986. A non-cash charge of $2.6 million was recorded for the quarter. First quarter sales were $26,914,000, a decrease of 26% versus the first quarter of 1996. The net loss for the quarter was $1,657,000 before the environmental charge and $4,269,000 ($.83 per share) including the environmental charge compared to net income of $963,000 ($.19 per share) in last year s first quarter. The decrease in sales resulted from the disposal of the majority ownership in the Company s Argentine subsidiary on 12/31/96 and lower sales in the communication systems business. The communications systems business involves large contracts with US and foreign governments, and is inherently subject to variations in timing. Improvements due to our restructuring plan are evident. The first quarter loss excluding the environmental charge represents a 51% improvement over the 1996 fourth quarter loss. The Company is confident that further cost savings will follow. We sold two company owned buildings in Fort Washington after the end of the first quarter, consolidating business operations into our Horsham facility. The gain on this sale (approximately $1.2 million) will be reflected in second quarter results. There is also an agreement of sale on a third company owned facility. The consolidation of operations into fewer buildings allowed us to combine manufacturing operations and consolidate several product lines. These changes will also yield operating cost savings. We achieved milestones on two large programs in the first quarter. The fourth and fifth of thirteen TMRC sites were accepted (page 1) this quarter. We also resolved long standing contractual issues on the RIS NATO program. AYDIN's cash balance decreased during the first quarter, primarily due to a difference in timing between improving the Horsham facility to accommodate our Fort Washington production lines and completing the sale of our Fort Washington buildings. The cash balance decreased $842,000 since year end, with most of that cash spent upgrading the Horsham facility to accommodate the move. The proceeds from the Fort Washington sale, which will be included in the second quarter, are $2.4 million. Ending backlog for the first quarter was $82 million versus $95 million a year ago and $85 million at the end of 1996. The decline in backlog is primarily due to the wind down on the TMRC program in Turkey. Excluding the TMRC program from backlog, our backlog in the first quarter grew 5% over the first quarter of 1996 and 9% from year end. The company currently has several competitive bids outstanding on similar large programs, whose aggregate contract value exceeds $100 million. While the insurance ruling this quarter was an unexpected disappointment, overall results are consistent with management s plan for 1997. AYDIN management remains committed to making the company profitable and increasing backlog. We are continuing to execute our plan and expect to return to profitability in the second half of the year. /s/ I. Gary Bard I. Gary Bard Chairman and Chief Executive Officer April 28, 1997 (page 2) AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands except for per share amounts)
3 Months Ended March 29, 1997 March 30, 1996 (Unaudited) (Unaudited) NET SALES $ 26,914 $ 36,283 COST AND EXPENSES Cost of Sales 20,247 25,308 Selling, general and administrative 6,212 7,100 Research and development 1,395 2,230 Environmental remediation 2,612 -0- Interest expense (income), net (34) 204 _______ ______ Total 30,432 34,842 _______ ______ INCOME (LOSS) BEFORE INCOMES TAXES AND MINORITY INTEREST (3,518) 1,441 INCOME TAXES 751 472 _______ ______ INCOME (LOSS) BEFORE MINORITY INTEREST (4,269) 969 LESS MINORITY INTEREST 0 6 _______ ______ NET INCOME (LOSS) $ (4,269) $ 963 _______ ______ _______ ______ EARNINGS (LOSS) PER SHARE $ (.83) $ .19 _______ ______ _______ ______
(page 3) AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ($000 Omitted) ASSETS
March 29, 1997 Dec. 31, 1996 _____________ _____________ (Unaudited) CURRENT ASSETS: Cash, including cash equivalents- 1997, $3,278; 1996, $1,584 $ 4,653 $ 5,495 Restricted cash 6,311 7,571 Accounts receivable 20,723 25,156 Unbilled revenue, after progress billings 39,738 37,993 Inventories: Raw materials 8,690 7,938 Work-in-process 5,204 5,957 Finished product 2,472 2,520 Prepaid expenses 1,778 2,331 ________ ________ Total current assets 89,569 94,961 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation: 23,003 22,739 1997, $60,879; 1996, $59,261 OTHER ASSETS 10 2,622 ________ ________ TOTAL ASSETS $112,582 $120,322 ________ ________ ________ ________ _______________________________________________________________ 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 1996 balance sheet has been derived from the audited financial statements contained in the 1996 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. Reporting developments have been updated where appropriate. In this connection, there are no significant changes in contingency disclosures, except for the environmental clean-up matter where an unfavorable court ruling has been rendered, resulting in the write-off during the quarter of $2.6 million. Although the Company's liability and financial position have improved, the Company continues to seek new financing arrangements. Pretax results for the first quarter include foreign currency translation gains relating to the Turkish subsidiary of $147,000 for 1997 and $219,000 for 1996.
(page 4) AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ($000 Omitted) LIABILITIES AND STOCKHOLDERS' EQUITY
March 29, 1997 Dec. 31, 1996 _____________ _____________ (Unaudited) CURRENT LIABILITIES: Short-term bank debt $ 2,200 $ 2,800 Accounts payable 9,140 14,865 Accrued liabilities 6,563 5,827 Advanced payments and contract billings in excess of recognized revenue 3,864 2,278 Accrued and deferred income taxes 831 426 ________ _______ Total current liabilities 22,598 26,196 DEFERRED INCOME TAXES 2,666 2,665 OTHER LIABILITIES 1,134 1,134 STOCKHOLDERS' EQUITY: Common stock, par value $1- authorized 7,500,000 shares: issued 1997, 5,153,400 shares; 1996, 5,133,400 shares 5,153 5,133 Additional paid-in capital 2,639 2,436 Retained earnings 78,834 83,103 Foreign currency translation effects (442) (345) ________ _______ Stockholders' equity 86,184 90,327 ________ _______ TOTAL LIABILITIES AND EQUITY $112,582 $120,322 ________ _______ ________ _______
(page 5) AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($000 omitted)
Three Months Ended March 29, 1997 March 30, 1996 _____________ _____________ (Unaudited) (Unaudited) OPERATING ACTIVITIES Net Income (Loss) $ (4,269) $ 963 Items not affecting cash: Environmental remediation 2,612 -0- Depreciation and amortization 744 852 Deferred income taxes 0 150 Minority Interest 0 6 Gain on sale of facility 0 (216) Other (97) (66) Changes in certain working capital items: Accounts receivable 4,433 15,541 Unbilled revenue (1,745) (2,473) Advance payments and contract billings in excess of recognized revenue 1,586 (1,441) Inventories 49 (577) Prepaid expenses 553 110 Accounts payable and accrued liabilities (4,989) (10,188) Accrued income taxes 406 (2,671) ________ _________ CASH USED BY OPERATING ACTIVITIES (717) (10) INVESTING ACTIVITIES Net property, plant and equipment additions (1,008) (868) Proceeds from sale of facility 0 1,159 ________ _________ CASH PROVIDED (USED) BY INVESTING ACTIVITIES (1,008) 291 FINANCING ACTIVITIES Release of collateral on restricted cash 1,260 (121) Principal payments on long-term debt 0 (1,112) Net repayments of short-term borrowings (600) (300) Proceeds from Issuance of Stock 223 53 ________ _________ CASH PROVIDED (USED) BY FINANCING ACTIVITIES 883 (1,480) ________ _________ DECREASE IN CASH AND CASH EQUIVALENTS (842) (1,199) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,495 4,638 ________ _________ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,653 $ 3,439 ________ _________ ________ _________
(page 6) INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION Board of Directors and Stockholders Aydin Corporation We have reviewed the accompanying condensed consolidated balance sheet of Aydin Corporation and subsidiaries as of March 29, 1997, and the related condensed consolidated statements of operations and cash flows for the three month periods ended March 29, 1997 and March 30, 1996. All information included in these condensed consolidated financial statements is the representation of the management of Aydin Corporation and subsidiaries. We conducted the 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 conducted 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, 1996, and the related consolidated statements of operations and cash flows for the year then ended (not presented herein) and in our report dated March 7, 1997, 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, 1996 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 April 23, 1997 _________________________________________________________________ A copy of Aydin Corporation's Form 10Q may be obtained without charge, upon written request sent to Aydin Corporation (page 7) [logo] AYDIN CORPORATION Aydin Corporation designs, engineers, manufactures, markets, distributes, installs, and operates technologically advanced communication and information systems. The Company's capabilities include: telecommunications; airborne and ground data acquisition and avionics; computer equipment and software; air and other traffic control; radars, radar simulation, integration and modernization; command control and communications systems; and systems integration. Aydin is a world-class provider of products and services for the acquisition and distribution of information over electronic communications media. The Company has facilities in the United States, the United Kingdom, Turkey and South America. (page 8) EX-27 2 ARTICLE 5 FDS FOR 1ST QUARTER 10-Q
5 This schedule contains summary financial information extracted from First Quarter Report to Stockholders and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1997 MAR-29-1997 4,653 6,311 20,723 0 16,366 89,569 83,882 60,879 112,582 22,598 0 5,153 0 0 81,031 112,582 26,914 26,914 20,247 27,820 2,612 0 (34) (3,518) 751 (4,269) 0 0 0 (4,269) (.83) (.83)
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