-----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, DsrFetM2d4ANgL5aH34uI9FUTSCt5d376BX1B4WluVlCHe6Yv17Y6Y9CRjHykxul i36Dz2YKRL30rEb4El/Apg== 0000008919-97-000018.txt : 19971111 0000008919-97-000018.hdr.sgml : 19971111 ACCESSION NUMBER: 0000008919-97-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971110 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: SEC FILE NUMBER: 001-07203 FILM NUMBER: 97711431 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 __September 27, 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 November 7, 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 Third Quarter Report" to Stockholders. These condensed consolidated financial statements for the three month and nine month periods ended September 27, 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 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 27,1997 and September 28, 1996 were 5,210,984 and 5,125,900, respectively, and for the nine-month periods then ended were 5,149,461 and 5,121,081, respectively. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (1) Material Changes in Financial Condition (9/27/97 versus 12/31/96) Accounts receivable decreased by $5.3 million primarily because of lower billings during the quarter on the TMRC Contract with the Government of Turkey which is winding down, and from improved collections generally in other business areas. Unbilled revenue (after progress billings and advance payments and contract billings in excess of recognized revenue) increased by $4.9 million because of the excess of costs incurred and resulting revenue versus billings rendered on selected telemetry contracts. This build up is expected to be reversed during the fourth quarter. Prepaid expenses and other (current assets) increased by approximately $2.7 million and accrued and deferred income taxes (current liabilities) increased by approximately $2.4 million primarily because of the reclassification of refundable U.S. federal income taxes from the accrued to the prepaid caption in 1997. Accounts payable decreased by $6.6 million primarily because of lower payables at the Turkish subsidiary reflecting lower volume on the TMRC contract, and more current payments to vendors in other business areas. Other assets declined by $2.5 million because of the write-off during the first quarter of an anticipated insurance recovery of moneys 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 write-off resulted from an unfavorable court ruling in April 1997 involving the future collection of the insurance recovery. The Company plans to appeal this ruling. Property, plant and equipment (net of accumulated depreciation) decreased by $8.4 million primarily because of the sale of three company-owned facilities for $11.5 million pursuant to the previously announced restructuring plan. The $4.5 million of restricted cash is being held as collateral by a bank against a letter of credit on the TMRC contract. The decrease of $3.1 million from 12/31/96 resulted from negotiating more favorable letter of credit terms with a new bank and letter of credit reductions from performance under the contract. This decrease in restricted cash helped enable the Company to pay down short term bank debt to $200,000 from $2.8 million at 12/31/96. 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 future borrowings. (2) Material Changes in Operations (3rd Quarter 1997 vs. 1996) Cost of sales for the quarter as a percentage of sales improved to 74% from 81% primarily because of 1996 delays on the TMRC contract and a cost overrun in 1996 on another major contract. Cost of sales for the nine months improved to 76% from 80% for the same reasons. Selling, general and administrative and research and development costs decreased by $2.2 million (25%) in the quarter and by $6.9 million (24%) in the nine months reflecting cost reductions started in the third quarter 1996 pursuant to the Company's restructuring plans. Environmental remediation expense of $2.6 million in the first quarter 1997 is explained under Item 2(1) above. Gain on sale of facility relates to three company-owned buildings sold in the second and third quarters pursuant to the Company's previously announced restructuring plan. The operations housed in these facilities have been relocated to other company-owned buildings. Income taxes for 1997 reflect provisions for foreign income taxes against foreign income. There is no recovery recorded against the U.S. 1997 losses because the Company has exhausted its U.S. tax loss carrybacks. The 1996 income tax recoveries reflect the carryback of the net operating losses of 1996. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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. After agreement by both parties to proceed before a panel of two arbitrators, the postponed hearing on the cross-claims was held October 20, 1997 through October 29, 1997. The parties will now file post-hearing briefs, which are due by December 15,1997. The parties agreed to the request by the panel to waive the 30-day rule for the panel to render a decision due to the complex nature of the claims and the numerous documents admitted into evidence. ITEM 5. OTHER INFORMATION 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. The FASB has also recently issued SFAS No. 130, Reporting Comprehensive Income, and SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. SFAS No. 130 requires companies to include details of comprehensive income in their financial statements; the Statement is effective for years beginning after December 15, 1997. SFAS No. 131 requires companies to adopt a management approach to identifying segments, rather than the industry approach currently provided by SFAS No. 14. The Statement is effective for years beginning after December 15, 1997. Management is presently evaluating the impact of these Statements on the Company's financial statements; the impact is primarily disclosure oriented. 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 4.1- None Exhibit 4.2- None Exhibit 10 - None Exhibit 11 - None Exhibit 15 - Letter re unaudited interim financial information Exhibit 18 - None Exhibit 19 - "1997 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 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 10, 1997 /s/ James R. Henderson James R. Henderson, Vice President and Chief Financial Officer DATE November 10, 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 Third 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 September 27, 1997 and for the three-month and nine-month periods ended September 27, 1997, in accordance with standards established by the American Institute of Certified Public Accountants, and issued our report thereon dated October 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 September 27, 1997 are being incorporated by reference in the Registration Statement Nos. 333- 31263; 333-24591; 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 November 7, 1997 Exhibit 19 Dear Stockholder: One year ago, the current Aydin management team committed to restructuring Aydin s business to improve long term revenues and profitability. The goal was to operate at breakeven in the second half of 1997. Management believes that third quarter results demonstrate that the Company is on a course to meet this goal. Third quarter sales were $25,990,000. This represents an increase of 2.9% over third quarter 1996 sales of $25,249,000. The Company recorded net income of $1,894,000, or $0.37 per share, for the quarter. Included in this amount is profit of $1,800,000 from the sale of real estate in San Jose, California, pursuant to the previously announced restructuring plan. These results compare to a loss of $5,467,000, or $1.07 per share, in the third quarter of 1996. The third quarter 1996 loss included a $3,730,000 restructuring charge. Profit margins improved in the third quarter. Cost of sales were 74% compared to 78% in the second quarter of 1997 and 81% in the third quarter of 1996. The improvement in the third quarter of 1997 is the result of the Company's restructuring plan. The consolidation of the Company's manufacturing facilities improved efficiency in operations, marketing savings were realized through the combination of related product lines and there was improvement in contract management techniques. The Company's backlog, exclusive of the TMRC program, was constant for the quarter. The backlog exclusive of TMRC as of September 27, 1997 was $65,755,000 compared to $65,954,000 as of June 28, 1997. New bookings for the quarter included $2.2 million (page 1) in orders for TDMA Intelsat earth stations, and $1.6 million in orders for workstations to upgrade the US Navy Trident submarine fleet. Sales for the nine month period ended September 27, 1997 were $85,226,000. This represents a 3.4% decrease in sales of $88,238,000 in the corresponding period of 1996. For the nine month period ended September 27, 1997, a net loss of $2,115,000, or $0.41 per share, was incurred. This compares to a net loss of $11,528,000, or $2.25 per share, in the nine month period ended September 28, 1996. The Company's cash position declined $710,000 in the nine month period ended September 27, 1997. During this period, accounts payable were reduced by $6,600,000 or 44% and short term debt was reduced by $2,600,000. /s/ I. Gary Bard I. Gary Bard Chairman and Chief Executive Officer October 24, 1997 (page 2) AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except for per share amounts)
Three Months Ended Nine Months Ended 9/27/97 9/28/96 9/27/97 9/28/96 (Unaudited) (Unaudited) NET SALES $25,990 $25,249 $85,226 $ 88,238 COST AND EXPENSES Cost of sales 19,259 20,425 64,738 70,961 Selling, general and administrative 6,260 6,557 19,433 21,946 Environmental remediation -0- -0- 2,612 -0- Research and development 425 2,353 2,492 6,904 Gain on sale of facility (1,800) -0- (2,874) -0- Interest expense (income) net (195) (60) (375) 364 Restructuring Costs -0- 3,730 -0- 3,730 _______ _______ _______ ________ Total 23,949 33,005 86,026 103,905 _______ _______ _______ ________ INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST 2,041 (7,756) (800) (15,667) INCOME TAXES (RECOVERY) 147 (2,289) 1,315 (4,049) _______ _______ ________ ________ INCOME (LOSS) BEFORE MINORITY INTEREST 1,894 (5,467) (2,115) (11,618) LESS MINORITY INTEREST -0- -0- -0- (90) _______ _______ ________ ________ NET INCOME (LOSS) $ 1,894 $(5,467) $(2,115) $(11,528) _______ _______ _______ _______ _______ _______ _______ _______ EARNINGS (LOSS) PER SHARE $ .37 ($ 1.07) ($ .41) ($ 2.25) _______ _______ _______ _______ _______ _______ _______ _______
(page 3) AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ($000 Omitted) ASSETS
Sept. 27, 1997 Dec. 31, 1996 _____________ _____________ (Unaudited) CURRENT ASSETS: Cash, including cash equivalents- 1997, $7,022; 1996, $1,584 $ 7,856 $ 5,495 Restricted cash 4,500 7,571 Accounts receivable 19,841 25,156 Unbilled revenue, after progress billings 43,227 37,993 Inventories: Raw materials 9,506 7,938 Work-in-process 5,947 5,957 Finished product 2,271 2,520 Prepaid expenses and other 5,007 2,331 ________ ________ Total current assets 98,155 94,961 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation: 14,310 22,739 1997, $57,395; 1996, $59,261 OTHER ASSETS 78 2,622 ________ ________ TOTAL ASSETS $112,543 $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 First Quarter of 1997 of $2.6 million. Pretax results for the nine months include foreign currency translation gains or losses relating to the Turkish subsidiary of a $499,000 loss for 1997 and a $605,000 gain for 1996.
(page 4) AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ($000 Omitted) LIABILITIES AND STOCKHOLDERS' EQUITY
Sept. 27, 1997 Dec. 31, 1996 _____________ _____________ (Unaudited) CURRENT LIABILITIES: Short-term bank debt $ 200 $ 2,800 Accounts payable 8,224 14,865 Accrued liabilities 6,772 5,827 Advanced payments and contract billings in excess of recognized revenue 2,608 2,278 Accrued and deferred income taxes 2,869 426 __________ _______ Total current liabilities 20,673 26,196 DEFERRED INCOME TAXES 2,666 2,665 OTHER LIABILITIES 974 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 80,988 83,103 Foreign currency translation effects (550) (345) _________ _______ Stockholders' equity 88,230 90,327 _________ _______ TOTAL LIABILITIES AND EQUITY $ 112,543 $120,322 _________ _______ _________ _______
(page 5) AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($000 omitted)
Nine Months Ended Sept. 27, 1997 Sept. 28, 1996 _____________ _____________ (Unaudited) (Unaudited) OPERATING ACTIVITIES Net Income (Loss) $ (2,115) $(11,528) Items not affecting cash: Environmental remediation 2,612 -0- Depreciation and amortization 2.037 2,215 Deferred income taxes 1,364 300 Minority Interest -0- (90) Gain on sale of facility (2,874) (216) Other (433) 374 Changes in certain working capital items: Accounts receivable 5,315 20,916 Unbilled revenue (5,234) 4,030 Advance payments and contract billings in excess of recognized revenue 330 (115) Inventories (1,309) 5,357 Prepaid expenses and other (2,676) (411) Accounts payable and accrued liabilities (5,696) (11,270) Accrued income taxes 1,080 (11,427) ________ __________ CASH (USED) BY OPERATING ACTIVITIES (7,599) (1,865) INVESTING ACTIVITIES Net property, plant and equipment additions (2,196) (1,769) Proceeds from sale of facility 11,462 1,159 ________ __________ CASH PROVIDED (USED) BY INVESTING ACTIVITIES 9,266 (610) FINANCING ACTIVITIES Release of collateral on restricted cash 3,071 5,049 Principal payments on long-term debt -0- (1,112) Net repayments of short-term borrowings (2,600) (1,688) Proceeds from exercise of stock options 223 182 ________ __________ CASH PROVIDED BY FINANCING ACTIVITIES 694 2,431 ________ __________ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,361 (44) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,495 4,638 ________ __________ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,856 $ 4,594 ________ __________ ________ __________
(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 September 27, 1997, and the related condensed consolidated statements of operations for the three month and nine month periods and cash flows for the nine month period ended September 27, 1997 and September 28, 1996. These financial statements are the responsibility of the management of Aydin Corporation and subsidiaries. We conducted our reviews 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 reviews, we are not aware of any material modifications that should be made to the accompanying 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 October 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 and Turkey. (page 8) EX-27 2 ARTICLE 5 FDS FOR 3RD QUARTER 10-Q
5 This schedule contains summary financial information extracted from Third Quarter Report to Stockholders and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1997 SEP-27-1997 7,856 4,500 19,841 0 17,724 98,155 71,705 57,395 112,543 20,673 0 5,153 0 0 83,077 112,543 25,990 25,990 19,259 25,749 0 0 (195) 2,041 147 1,894 0 0 0 1,894 0.37 0.37
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