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
March 29, 1994
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, DC 20549
Re: Form 10-K
File No. 1-7203
Gentlemen:
We enclose for filing Aydin Corporation's Annual Report on Form 10-K
for the year ended December 31, 1993. The filing fee of $250.00 was paid
by Fedwire on March 25, 1994.
The financial statements in the Annual Report on Form 10-K do not reflect
any changes in accounting principles or practices or in the method of
applying any such principles or practices as compared with the financial
statements which appear in the Annual Report for 1992.
Sincerely,
/s/ Robert A. Clancy
Robert A. Clancy
Secretary and
Corporate Counsel
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993 .
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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, PENNSYLVANIA 19044
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 657-7510
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $1 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ___
The aggregate market value of 4,323,123 shares of Common Stock held by non-
affiliates, computed using the closing price as of March 24, 1994, was
$58,362,160.
Number of shares of Common Stock outstanding as of March 24, 1994 - 4,982,304.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by
reference:
. 1993 Annual Report to Stockholders of Aydin Corporation
(hereinafter, "Annual Report") - Parts I and II
. Proxy Statement of Aydin Corporation, dated March 18,
1994 (hereinafter, "Proxy Statement") - Parts II and III
<PAGE>
INDEX TO FORM 10-K
- --------------------------------------------------------------------------
This index lists the requirements of Form 10-K and the page
number in this Form 10-K (or in the Annual Report or the
Proxy Statement) where each item can be found.
PART I
Item 1 Business . . . . . . . . . . . . . . . . . .10-K, pp. 2-6
Item 2 Properties . . . . . . . . . . . . . . . . .10-K, p. 6
Item 3 Legal Proceedings. . . . . . . . . . . . . .10-K, pp. 6-7
Item 4 Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . .10-K, p. 7
Executive Officers of the Registrant . . . .10-K, pp. 7-8
PART II
Item 5 Market for the Registrant's Common Equity and
Related Stockholder Matters. . . . . . . . .Annual Report,
p. 27
Item 6 Selected Financial Data. . . . . . . . . . .Annual Report, p. 26
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operation . . . . .Annual Report, p. 25
Item 8 Financial Statements and Supplementary DataAnnual Report,
pp. 17-24, 26
Item 9 Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure. . . . .10-K, p. 9
PART III
Item 10 Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . .Proxy Statement,
pp. 3-5,
10-K, pp. 7-8
Item 11 Executive Compensation . . . . . . . . . . .Proxy Statement,
pp. 5-7, 9-10
Item 12 Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . .Proxy Statement,
p. 2-3
Item 13 Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . .10-K, p. 10
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K. . . . . . . . . . . . . . . . .10-K, pp. 10-12
Exhibits
<PAGE>
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Aydin Corporation (the "Company" or "Aydin") was incorporated under
the laws of the State of Delaware in September, 1967.
The Company consists of seven domestic operating divisions, organized
as seven profit centers each with engineering, manufacturing,
marketing and accounting functions, and three foreign subsidiaries.
(b) Financial Information About Industry Segments
The Company operates predominantly in the electronics manufacturing
industry. Therefore, no segment information is reported.
(c) Narrative Description of Business
The following table sets forth the percentage of the Company's total
revenue contributed by each of its three classes of products (among
which overlapping does occur) for each of the last three years:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C> <C>
(1) Communications 57% 54% 51%
(2) Computer Equipment and Systems 42% 40% 36%
(3) Radars, Radar Simulation &
Electronic Warfare (EW) 1% 6% 13%
Total 100% 100% 100%
</TABLE>
As stated above, the Company operates predominantly in the
electronics manufacturing industry, and all information set forth
below is with respect to the Company's business as a whole. The
Company designs, manufactures, and sells three classes of products
as set forth above and as described below:
(1) Communications
The Company engineers, manufactures and sells a broad range of
communications equipment and turnkey systems, offering three
types of microwave transmission equipment - satellite,
troposcatter and line-of-sight - in both analog and digital
form. The Company is planning to develop products for
wireless communications. The Company also offers telemetry,
airborne and ground-based data acquisition, transmission and
receiving equipment, data links, VHF and UHF transceivers, T-1
and E1 ADPCM 2:1 and 4:1 transcoders and echo cancellers, and
avionics equipment and systems, and thick and thin film
microcircuits. Aydin's products and systems are used in
military and industrial applications.
<PAGE>
(2) Computer Equipment and Systems
The Company designs and manufactures several lines of high
resolution color monitors, including SPECTRUM AUTOSYNC(R)
versions, Ranger monitors including table tops (in sizes
ranging from 14 through 21 inches), and color display
processors, and associated software for process control and
other industrial applications. Aydin has a line of
workstations, called the Model 7402, which integrates a
gateway and a high performance workstation into a single
package, with a RISC processor running at 61 MIPS. Aydin also
has an X-terminal available for use with the workstation.
Aydin offers computer systems, display processors, rugged
monitors, large screen display systems and writes software for
military ground or airborne environments and air traffic
control applications. In addition, Aydin supplies network
access equipment for cost effective access for voice data and
video to public telephone networks. The Company also
manufactures precision fabricated electronics cabinets, high
quality printed circuit boards including multi-layer, and
miscellaneous vinyl components.
With the help of its low cost subsidiary in Turkey the Company
is developing more standard software products and is bidding
many software programs to expand its software capability.
(3) Radars, Radar Simulation and EW
Aydin has developed a state-of-the-art 3-D tactical air
defense radar called ASTAR-3. For EW, Aydin manufactures
radar simulations systems and has capabilities in self-
protection ARM decoys, both ground and airborne. Aydin is
bidding opportunities combining radar and EW technologies.
One major contract under which Aydin is performing is the
Multiple Threat Emitter Simulator Systems (MUTES) for the U.S.
Air Force.
(4) Command, Control and Communications (C3)/Air Defense Systems
Aydin also offers complete, turnkey air defense/C3 systems,
both fixed and mobile, utilizing its own mobile air defense
3-D radar, communications equipment including radios and
multiplexers, air defense consoles, and air defense software.
The Company's products and systems are sold directly by Company
sales personnel and manufacturers' representatives. Sales personnel
for the Company are located in many cities across the United States
as well as at key major military bases, with corporate marketing
located in the Washington, D.C. area. With respect to exports,
sales efforts are conducted by its international subsidiaries, its
international sales network and manufacturers' representatives in
many countries.
The Company maintains standard product lines and systems sold by
catalogue, although it generally does not maintain an inventory of
finished goods. A significant portion of current sales is
attributable to such standard products, modifications thereof, and
turnkey communications systems using these products. Another
portion of sales is attributable to special, made-to-order equipment
based on customer's specific requirements.
The Company's customers include U.S. and foreign communications and
electronic and aerospace firms, electric utilities, regulated and
unregulated telephone organizations, major transportation
organizations, other industrial and financial concerns and process
control companies, research laboratories, universities, large
defense contractors, foreign governments, the U.S. Government
through various agencies of the Department of Defense, and the
National Aeronautics and Space Administration.
<PAGE>
A breakdown of sales for the last three years including sales to
major customers who accounted for 10% or more of sales is as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
U.S. Government Agencies
(direct and indirect),
principally Department
of Defense (1) $ 38,600,000 $ 39,347,000 $ 65,360,000
Export and foreign sales
including equipment sold
to other U.S. companies
for export (1) (2) (3) $ 78,532,000 $ 78,578,000 $ 67,534,000
U.S. commercial and
industrial business $ 24,343,000 $ 27,296,000 $ 25,650,000
TOTAL NET SALES $141,475,000 $145,221,000 $158,544,000
</TABLE>
(1) The U.S. Government and the Government of Turkey were the
only customers to whom sales exceeded 10% of consolidated
sales during any of the past three years. Sales to the
Government of Turkey amounted to $45,134,000 in 1993,
$48,738,000 in 1992 and $41,228,000 in 1991.
(2) Includes foreign sales of $22,958,000 for 1993,
$19,349,000 for 1992, and $17,850,000 for 1991.
(3) A breakdown of total export and foreign sales by
geographic area follows in section (d) below.
Raw materials for the Company's business consist of manufactured
components and parts. The Company's raw materials are presently
available in adequate supply on the open market.
The Company holds no material patents, trademarks, licenses,
franchises or concessions.
The Company's operations are not seasonal to any material extent.
As stated above, although the Company maintains standard product
lines and systems sold by catalogue, it generally does not maintain a
significant level of finished goods inventory. However, the Company
maintains an adequate level of raw materials inventory so that it
will be able to meet initial delivery requirements of customers. The
Company has had no material difficulty in obtaining goods from
suppliers. The Company does not provide rights to return its
products, and generally does not provide extended payment terms to
customers.
The backlog of unfilled orders at December 31, 1993 was $155 million
as compared to $175 million at December 31, 1992. The backlog
figures exclude probable production options of $58 million at the end
of 1993 and $75 million at the end of 1992. Approximately 40% of the
1993 backlog is not reasonably expected to be fulfilled within the
current year.
The backlog includes approximately $81 million for a command, control
and communications project for the Government of Turkey for which
most of the work is to be done over the next two years. This
contract was signed in June, 1990 and became effective in October,
1990.
<PAGE>
All contracts with the U.S. Government and some of the foreign
governments are subject to cancellation at the convenience of the
government. In the event a contract with the U.S. Government is so
terminated, the Armed Services Procurement Regulations provide that
the Company shall be reimbursed for expenses incurred and shall be
entitled to reasonable profits.
The greater portion of the Company's business is obtained by
competitive bidding, while some is obtained through sole source
negotiation. In the domestic marketplace, the Company competes with
some major U.S. companies from time to time; however, some of the
competition in the U.S. comes from companies which are similar in
size or smaller than Aydin. In the international marketplace, Aydin
competes with major European and Japanese companies in addition to
U.S. firms. A number of such competitors are larger than Aydin with
greater financial resources, while some are similar to or smaller
than Aydin.
Technical capability, reputation, price, ability to meet delivery
schedules and reliability are the principal competitive factors. No
single competitor offers the same range of products and systems as
Aydin. Depending on the particular product itself and the
requirements of the contract documents, the number of firms competing
with Aydin generally ranges from one to ten.
Estimated amounts spent during 1993, 1992, and 1991 on Company-
sponsored research and development activities, and customer-sponsored
research activities relating to the development of new products,
services or techniques or the improvement of existing products,
services or techniques are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Company-sponsored research
and development on direct
cost basis $4,782,000 $5,275,000 $4,887,000
Customer-sponsored research
and development activities $4,125,000 $5,943,000 $6,494,000
</TABLE>
The Company along with others is responsible for the cost of cleanup
at a site leased by the Company prior to 1984 under an order of the
State of California. The cost to date for the cleanup of the
California site over the past nine years has been approximately $5.4
million. Settlement has been reached with three of four insurance
carriers for approximately $6.7 million which was received during
1993 and applied to the cleanup costs previously incurred and cost to
go. The claim against the fourth insurance carrier is presently in
litigation. A jury has ruled in Aydin's favor; however, a final
decision by the court has not yet been rendered. Management believes
the ultimate resolution of this entire matter will not have a
materially adverse effect on the financial position or results of
operations.
The Company employs approximately 1,300 persons, with operations
concentrated principally in the Philadelphia and San Jose areas.
Employer-employee relations are considered to be satisfactory.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales
The Company had no significant foreign operations prior to 1991
although a $216 million contract from the Government of Turkey became
effective in October, 1990. Approximately 40% of this contract is
being performed by the Company's Turkish subsidiary. Foreign assets
included in the consolidated balance sheet amounted to $16.9 million,
$23.4 million, and $26.1 million at December 31, 1993, 1992, and 1991
respectively. Of these amounts, $13.7 million, $19.1 million, and
$21.1 million at December 31, 1993, 1992, and 1991 respectively, are
assets of the Company's Turkish subsidiary and consist mainly of U.S.
dollar denominated interest-bearing time deposits received as advance
payments that will be used to complete a portion of the Company's
contract with the Government of Turkey. Foreign sales and pretax
income for 1993 amounted to $23.0 million and $3.9 million,
respectively. Foreign sales and pretax income for 1992 amounted to
$19.3 million and $3.3
<PAGE>
million respectively. Foreign sales and pretax income for 1991
amounted to $17.8 million and $3.9 million respectively. The
Company's domestic operations include sales derived from customers or
projects located in areas of the world outside the United States.
Export and foreign sales for 1993, 1992, and 1991 by geographic area
are set forth below:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Asia $ 8,688,000 $ 2,553,000 $ 1,168,000
Africa 2,301,000 1,969,000 1,296,000
Europe 59,426,000 68,980,000 56,114,000
North America 528,000 869,000 2,317,000
South America 6,745,000 3,901,000 5,847,000
Other 844,000 306,000 792,000
Total export sales $ 78,532,000 $ 78,578,000 $ 67,534,000
</TABLE>
On a percentage basis, export and foreign sales (direct and indirect)
accounted for approximately 56% of total sales in 1993, 54% in 1992,
and 43% in 1991. A majority of such export and foreign sales were in
the telecommunications field. Licenses are required from U.S.
Government agencies for most of the Company's export products. The
Company and its foreign subsidiaries may be adversely affected by
certain risks generally associated with foreign contracts and
operations, including ownership and control limitations, currency
fluctuations, restrictions on repatriation of profits, difficulty in
the enforcement of judgments, late delivery penalties, potential
political or labor instability and general worldwide economic
conditions. However, such factors have not had a material effect on
the Company's operations to date, and management believes that the
risks involved in such foreign business are no greater than the
normal risks of any other portion of the Company's sales. The
Company has generally been able to protect itself against foreign
credit risks through contract provisions, advance payments and
irrevocable letters of credit in its favor. However, it should be
noted that foreign contracts are sometimes subject to foreign laws.
ITEM 2. PROPERTIES
The Company's total plant capacity is approximately 700,000 square feet of
administrative and production facilities, 540,000 of which it owns and the
balance of which it leases. Three owned properties totalling 192,000
square feet are subject to mortgages and six owned properties totalling
348,000 square feet are unencumbered. All major leased properties are held
under leases expiring between 1994 and 1997, most with renewal options.
The principal owned properties are two administrative/production facilities
in Fort Washington, Pennsylvania, and five more in the Greater Philadelphia
area, and one in the San Jose area. In addition, the Company maintains its
corporate headquarters in Horsham, Pennsylvania, and numerous sales offices
within and outside the U.S. The administrative and production facilities
occupied by the Company are well maintained and suitable for its
operations, and include plant area, warehouse space, and management,
engineering and clerical offices. The plants of each of the manufacturing
operations generally contain machine shops, assembly areas, testing
facilities and packing and shipping departments in addition to the
engineering and laboratory areas.
ITEM 3. LEGAL PROCEEDINGS
On January 6, 1994, pursuant to the terms of settlement with the Department
of Justice, the Company entered a plea of guilty to the falsification of
testing data, charges to which two of its low level employees previously
pled guilty to in March 1993, and the plea was accepted by the court (U.S.
District Court for the Northern District of California). The Company is
reinstated on its AN/GRC-222 microwave radio contract with all of its
previous terms and conditions. Further, the Company withdrew its contract
claims, is doing additional work for the Army at no additional cost, and
paid $2 million as an added consideration. The total impact on pretax
<PAGE>
income of this settlement was approximately $14,819,000, which has been
charged to the 1993 fourth quarter earnings. The additional work and the
related expenditures will be spread over a period of three years or longer.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
Fourth Quarter of 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, year first elected as officer or appointed as general
manager, positions and recent prior experience of all current executive
officers of the Company as of March 14, 1994, are as follows:
AYHAN HAKIMOGLU, CHAIRMAN AND PRESIDENT (1)
66. First elected 1967. Chairman of the Board of Directors;
President of the Company through February 1992, and since March
1994.
JOHN F. VANDERSLICE, SENIOR VICE PRESIDENT
52. 1983. Senior Vice President of the Company. President of the
Vector Division (manufactures airborne data communications products)
since November 1982. Previously, he was Manager of Engineering
(1969-1972), Operations Manager (1972-1973), and Vice President of
Operations (1973-1982) of the Vector Division.
GARY T. BOSWELL, VICE PRESIDENT
56. 1987. Vice President of the Company. President of the
Computer and Monitor Division (manufactures air defense, ground data
handling, computer communications equipment and systems) since
September 1988. Prior to that, he was President of Monitor Systems
Division (manufactures ground-based data communication products and
special telecom equipment and systems) from January 1987. Prior to
joining Aydin, he served from 1968 to 1986 with Texas Instruments
Inc. (a designer and manufacturer of electronic products).
DEMIRHAN HAKIMOGLU, VICE PRESIDENT (2)
54. 1992. Vice President of the Company. Chairman of the Board
and CEO of the Company's foreign subsidiary, Aydin Yazilim A.S.,
since July 1990. Prior to that, served in various engineering and
management positions with various divisions of the Company since
1968 (except for a two year period, 1978-1980).
MATS J. OFVERBERG, VICE PRESIDENT (3)
53. 1990. Vice President of the Company and President of Aydin
Corporation (West) Division from December 1990 to November 1993 and
from March 14, 1994. Prior to his election as an officer, he served
as Vice President of Engineering of the Company's Radar & EW
Division and Executive Vice President of the Company's Aydin(West)
group of divisions from February 1987. Prior to his joining Aydin,
he served (1976-1987) with ESL, a subsidiary of TRW, most recently
as manager of an engineering department.
JOHN C. WONG, VICE PRESIDENT
52. 1993, Vice President of the Company and President of the
Controls Division (manufacturer of display terminals) since March
1993. Prior to joining Aydin, he served (1985-1993) with Sun
Microsystems, Inc. (manufacturer of workstations), most recently as
an Engineering Director.
HERBERT WELBER, CONTROLLER AND ASSISTANT TREASURER
58. 1986. Controller and Assistant Treasurer of the Company since
August 1986. Previously, he was Controller and Vice President of
Controls Division (manufactures display terminals) since August
1981.
<PAGE>
Each of the above officers was elected at the Annual Meeting of the Board
of Directors on April 30, 1993. Dr. Ofverberg retired from the Company in
November, 1993, as was re-hired as Division President and re-elected as
Vice President of the Company on March 14, 1994. Officers are elected each
year after the Annual Meeting of Stockholders. Each serves subject to the
discretion of the Board of Directors until his successor shall be elected
and qualified or until his death, disqualification, resignation or removal
in the manner provided in the Company's By-Laws. There are no family
relationships among any executive officers of Aydin, except for Ayhan
Hakimoglu and Demirhan Hakimoglu who are brothers.
- -----------------------------------------------------------------------
(1) From July 1971 to May 1972 did not serve as an officer of the
Company, although he remained as a director.
(2) First elected Vice President in February 1991, and resigned that
position in July 1991. Re-elected Vice President in February
1992.
(3) Retired November 3, 1993, and accepted re-employment effective
March 14, 1994.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Incorporated by reference is the information under the heading, "Common
Stock Prices" and "Stockholder and Dividend Information" on page 27 of the
Annual Report. The special cash dividend declared by the Company of $0.50
per share to stockholders of record as of the close of business on March 9,
1992, was paid on March 20, 1992. Future cash dividends, if any, will
depend on business conditions. There are no restrictions that prevent the
Company from paying future cash dividends, except that the Company's Board
of Directors had determined that no cash dividend will be declared or paid
through fiscal year 1993 and for the foreseeable future, and except for
maintaining compliance with certain covenants of a Credit Agreement for the
funding of a standby Letter of Credit, as described more fully in Note D to
the Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference is the information under the heading, "Selected
Financial Data" on page 26 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference is the information under the heading,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 25 of the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference are the Consolidated Financial Statements of
Aydin Corporation and the related Notes to Consolidated Financial
Statements, and Report of Independent Auditors on pages 17 to 24,
inclusive, and the data under the heading, "Quarterly Financial Data" on
page 26, of the Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference is the information under the heading, "Election
of Directors" on pages 3-5 of the Proxy Statement, the information under
the heading, "Compliance With Section 16(a) of the Exchange Act" on page 10
of the Proxy Statement, and the information under the heading, "Executive
Officers of the Registrant" on pages 7 and 8, Part I of this 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference is the information under the heading,
"Compensation of Executive Officers", "Option Grants in Last Fiscal,
"Aggregated Option Exercises and Fiscal Year-End Option Value Table", "Ten-
Year Option Repricing", "Employment Contracts and Termination of Employment
Arrangements", and "Compensation Committee Interlocks and Insider
Participation" on pages 5-7, 9 and 10 of the Proxy Statement.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference is the information under the headings,
"Beneficial Ownership of Common Stock" and "Beneficial Ownership by
Management" on pages 2 and 3 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The Company files as part of this report the following documents:
(a) 1. Financial Statements
The following is a list of the Consolidated Financial Statements
of Aydin Corporation and Subsidiaries which have been
incorporated by reference from the Annual Report as set forth in
Item 8 - "Financial Statements and Supplementary Data":
Consolidated Balance Sheets, as of
December 31, 1993 and 1992.
Consolidated Statements of Income for the years
ended December 31, 1993, 1992 and 1991.
Consolidated Statements of Cash Flows for the years
ended December 31, 1993, 1992 and 1991.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
2. Schedules
The following is a list of the Schedules of Aydin Corporation
and Subsidiaries filed as part of this report:
Schedule I - Short-term investments
Schedule VIII - Valuation and qualifying accounts
Schedule IX - Short-term borrowings
Report of Independent Auditors
All other schedules not listed above are omitted because they
are inapplicable or are not required.
3. Exhibits
The following is a list of Exhibits filed as part of this
report:
Exhibit 3(i) - Certificate of Incorporation (incorporated by
reference as filed as Exhibit 3 of the 1981 Annual Report on
Form 10-K and as amended and filed as Exhibit 20 on Form 10-Q
for the Second Quarter ended June 26, 1982, and as amended and
filed as Exhibit 4 on Form 10-Q for the First Quarter ended
April 2, 1983, and as amended and filed as Exhibit 4 on Form
10-Q for the First Quarter ended March 28, 1987).
<PAGE>
Exhibit 3(ii) - By-Laws (last amended March 2, 1994)
Exhibit 13 - 1993 Annual Report to Stockholders
Exhibit 21 - Subsidiaries of Registrant
Exhibit 23 - Consents of Independent Auditors
Exhibit 99 - Report of Independent Auditors
All other exhibits not listed above are omitted because they are
inapplicable.
(b) Reports on Form 8-K
A report on Form 8-K, dated November 24, 1993, was filed by the
Registrant on December 6, 1993, covering Item 5 (Other Events).
AYDIN CORPORATION
SCHEDULE I - SHORT-TERM INVESTMENTS
FOR THE YEARS 1993, 1992, 1991
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
NAME OF ISSUER AND PRINCIPAL MARKET BALANCE SHEET
YEAR TITLE OF EACH ISSUE AMOUNT COST VALUE AMOUNT
<S> <C> <C> <C> <C> <C>
1993 Chase Manhattan Bank,
certificates of deposit
and time deposits $11,117,000 $11,117,000 $11,117,000 $11,117,000
Emlak Bank (Turkey),
time deposits 1,902,000 1,902,000 1,902,000 1,902,000
Miscellaneous 39,000 39,000 39,000 39,000
Totals $13,058,000 $13,058,000 $13,058,000 $13,058,000
1992 Chase Manhattan Bank,
certificates of deposit
and time deposits $11,617,000 $11,617,000 $11,617,000 $11,617,000
Emlak Bank (Turkey),
time deposits 8,207,000 8,207,000 8,207,000 8,207,000
Miscellaneous 106,000 106,000 106,000 106,000
Totals $19,930,000 $19,930,000 $19,930,000 $19,930,000
1991 Chase Manhattan Bank,
certificates of deposit
and time deposits $22,017,000 $22,017,000 $22,017,000 $22,017,000
Emlak Bank (Turkey),
time deposits 9,293,000 9,293,000 9,293,000 9,293,000
Miscellaneous 278,000 278,000 278,000 278,000
Totals $31,588,000 $31,588,000 $31,588,000 $31,588,000
</TABLE>
<PAGE>
AYDIN CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS 1993, 1992, AND 1991
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
DESCRIPTION Balance at ADDITIONS Deductions- Balance at
Beginnning Charged to Charged to Describe End of Period
of Period Costs and Other Accounts-
Expenses Describe
<S> <C> <C> <C> <C> <C>
Year 1993
Deducted from asset accounts:
Allowance for doubtful accounts $ 118,000 $ 289,000 $ 76,000(1) $ 331,000
Raw materials inventory reserve 1,821,000 1,899,000 1,691,000(2) 2,029,000
Totals $1,939,000 $2,188,000 $1,767,000 $2,360,000
Year 1992
Deducted from asset accounts:
Allowance for doubtful accounts $ 126,000 $ 108,000 $ 116,000(1) $ 118,000
Raw materials inventory reserve 1,506,000 883,000 568,000(2) 1,821,000
Totals $1,632,000 $ 991,000 $ 684,000 $1,939,000
Year 1991
Deducted from asset accounts:
Allowance for doubtful accounts $ 121,000 $ 112,000 $ 107,000(1) $ 126,000
Raw materials inventory reserve 1,230,000 1,367,000 1,091,000(2) 1,506,000
Totals $1,351,000 $1,479,000 $1,198,000 $1,632,000
<FN>
(1) Uncollectible accounts written off, net of recoveries.
(2) Obsolete inventory written off.
</TABLE>
AYDIN CORPORATION
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEARS 1993, 1992, AND 1991
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Category of Balance at Weighted Maximum amount Average amount Weighted average
Aggregate short- end of Period average outstanding outstanding interest rate
term borrowings interest rate during the period during the period during the period
<S> <C> <C> <C> <C> <C> <C>
1993 Notes Payable- $21,525,000 5.90% $27,400,000 $20,474,384(2) 5.59%(1)
Banks
1992 Notes Payable- $22,000,000 5.54% $22,000,000 $ 8,389,315(2) 5.59%(1)
Banks
1991 Notes Payable- -0- N/A $ 500,000 $ 10,685(2) 8.80%(1)
Banks
<FN>
(1) Computed by dividing the interest expense by the average short-term borrowings.
(2) Computed by multiplying individual amount of borrowings by the number of days borrowings were outstanding and
divided by 365 days.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) 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
Dated: March 29, 1994 By: /s/ Robert A. Clancy
Robert A. Clancy
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Ayhan Hakimoglu Dated: March 29, 1994
Ayhan Hakimoglu
Chief Executive Officer, President
and Chairman of the Board of Directors
By: /s/ Herbert Welber Dated: March 29, 1994
Herbert Welber
Controller and Assistant Treasurer
Principal Accounting Officer
By: /s/ Jay L. Landis Dated: March 29, 1994
Jay L. Landis
Treasurer
Principal Financial Officer
By: /s/ Frederick G. Allen Dated: March 29, 1994
Frederick G. Allen
Director
By: /s/ Nev A. Gokcen Dated: March 29, 1994
Nev A. Gokcen
Director
By: /s/ Harry D. Train, II Dated: March 29, 1994
Harry D. Train, II
Director
<PAGE>
AYDIN CORPORATION
FORM 10-K ANNUAL REPORT
EXHIBIT INDEX
No. Description of Exhibit
3(i) Certificate of Incorporation (Filed as Exhibit 3 of the 1981 Annual
Report on Form 10-K and as amended and filed as Exhibit 20 on Form 10-Q
of the Second Quarter ended June 26, 1982, and as amended and filed as
Exhibit 4 on Form 10-Q for the First Quarter ended April 2, 1983, and
as amended and filed as Exhibit 4 on Form 10-Q for the First Quarter
ended March 28, 1987, and incorporated herein by reference.)
3(ii) By-Laws
13 Pages 17-27, 1993 Annual Report to Security Holders
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
99 Report of Independent Auditors
<PAGE>
Exhibit 3(ii)
AYDIN CORPORATION
BY-LAWS
(Last Amended March 2, 1994)
*******
ARTICLE I
OFFICERS
Section 1. The registered office shall be in the City of Dover,
County of Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
Directors shall be held in the City of Fort Washington, State of
Pennsylvania, at such place as may be fixed from time to time by the Board
of Directors, or at such other place either within or without the State of
Delaware as shall be designed from time to time by the Board of Directors
and stated in the notice of the meeting. Meetings of stockholders for any
other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on the third
Thursday of April if not a legal holiday, and if a legal holiday, then on
the next secular day following at 3:00 P.M. or at such other date and time
as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which they shall elect by a
plurality vote a board of Directors, and transact such other business as
may properly be brought before this meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than fifty days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the Chairman of the Board and shall be
called by the Chairman of the Board or Secretary at the request in writing
of a majority of the Board of Directors, or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
corporation issued and outstanding and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten nor more than fifty
days before the date of the meeting, to each stockholder entitled to vote
at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meeting of the stockholders for
the transaction of business except as otherwise provided by statute or by
the certificate of incorporation. If, however, such quorum shall not be
present or represented at any meeting of the stockholder, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall
have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present
or represented any business may be transaction which might have been
transacted at the meeting as originally notified. If the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holder of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes
or of the certificate of incorporation, a different vote is required in
which case such express provision shall govern and control the decision of
such question.
Section 10. Each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share
of the capital stock having voting power held by such stockholder, but no
proxy shall be voted on after three years from its date, unless the proxy
provides for a longer period.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken for or in connection with any corporate
action, by any provision of the statutes, the meeting and vote of
stockholders may be dispensed with if all of the stockholder who would have
been entitled to vote upon the action if such meeting were held shall
consent in writing to such corporate action being taken; or if the
certificate of incorporation authorizes the action to be taken with the
written consent of the holders of less than all of the stock who would have
been entitled to vote upon the action if a meeting were held, then on the
written consent of the stockholders having not less than such percentage of
the total number of votes as may be authorized in the certificate of
incorporation; provided that in no case shall the written consent be by the
holders of stock having less than the minimum percentage of the total vote
required by statute for the proposed corporate action, and provided that
prompt notice must be given to all stockholders of the taking of corporate
action without a meeting and by less than unanimous written consent.
ARTICLE III
DIRECTORS
Section 1. The number of Directors which shall constitute the whole
Board shall be four (4). The Directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this
Article, and each Director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of Directors may be filled by a
majority of the Directors then in office, though less than a quorum, or by
a sole remaining director, and the Directors so chosen shall held office
until the next annual election and until their successors are duly elected
and shall qualify, unless sooner displaced. If their are no Directors in
office, then an election of Directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the Directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder
or stockholders holding at least ten percent of the total number of the
shares at the time outstanding having the right to vote for such Directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the Directors chosen by the Directors
then in office.
Section 3. The business of the corporation shall be managed by its
Board of Directors which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the
Certificate of Incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.
MEETING OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected Directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure
of the stockholders to fix the time or place of such first meeting of the
newly elected Board of Directors, or in the event such meeting is not held
at the time and place so fixed by the stockholders, the meeting may be held
at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors, or as
shall be specified in a written waiver signed by all of the Directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 7. Special meetings of the Board may be called by the
Chairman of the Board on one day's notice to each director, either
personally, by telephone, by mail or by telegram; special meetings shall be
called by the Chairman of the Board or Secretary in like manner and on like
notice on the written request of two directors.
Section 8. At all meetings of the Board, a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation.
If a quorum shall not be present at any meeting of the Board of Directors
the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall
be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee,
as the case may be, consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board or committee.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each
committee to consist of two or more of the directors of the corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee. Any such committee, to the extent provided in the
resolution, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers
which may require it; provided, however, that in the absence or
disqualification of any member of such committee or committees, the member
of members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place
of any such absent or disqualified member. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 12. The Directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a
stated salary as Director. No such payment shall preclude any Director
from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these by-laws, notice is required to be
given to any Director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail,
addressed to such Director or stockholder, at his address as it appears on
the records of the corporation, with postage thereon prepaid, and such
notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to Directors may also be given
by telegram, or by telephone.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of
these by-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a Chairman of the Board, a President, an
Executive Vice President, a Secretary and a Treasurer. The Board of
Directors may also choose additional Vice Presidents, and one or more
Assistant Secretaries and Assistant Treasurers. Any number of offices may
be held by the same person, unless the certificate of incorporation of
these by-laws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a Chairman of the Board, a
President, an Executive Vice President, a Secretary and a Treasurer, and
may choose additional Vice Presidents, and one or more Assistant
Secretaries and Assistant Treasurers.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy
occurring in any office of the corporation shall be filled by the Board of
Directors.
CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board shall be the chief executive
officer of the corporation and, subject to the control of the Board of
Directors, shall have the general direction and supervision over the
business and affairs of the corporation. He shall preside at all meetings
of the stockholders and of the Board of Directors and shall be an ex
officio member of all committees and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He shall
participate in determining the policies to be followed by the corporation
and shall perform such other duties as the Board of Directors shall from
time to time request.
THE PRESIDENT
Section 7. The President shall undertake such duties as may be
delegated to him by the Chairman of the Board and shall also have such
other powers and duties as the Board of Directors may from time to time
determine. In the absence of the Chairman of the Board or in the event of
his inability or refusal to act, the President shall perform the duties of
the Chairman of the Board, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the Chairman of the Board.
THE VICE PRESIDENTS
Section 8. In the absence of the President or in the event of his
inability or refusal to act, the Executive Vice President, (or in the event
of the absence or inability of or refusal to act by the Executive Vice
President and in the further event there be more than one Vice President,
the Vice Presidents in the order designated, or in the absence of any
designation, then in the order of their election) shall perform the duties
of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Such powers of and
restrictions upon the President shall include the performance of the duties
of the Chairman of the Board in the further event that the Chairman is
absent or is unable or refuses to act. Vice Presidents shall perform such
other duties and have such other powers as the Board or Directors may from
time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the Board of
Directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or cause
to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as
may be prescribed by the Board of Directors or Chairman of the Board, under
whose supervision he shall be. He shall have custody of the corporate seal
of the corporation and he, or an Assistant Secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed, it
may be attested by his signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by
his signature.
Section 10. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or
if there is no such determination, then in the order of their election),
shall, in the absence of the Secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Secretary
and shall perform such other duties and have such other powers as the Board
of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts if receipts
and disbursements in books belonging to the corporation and shall deposit
all moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chairman of the Board and the Board
of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all his transactions as Treasurer and of the
financial conditions of the corporation.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal form office, of all books, papers, vouchers, money
and other property of whatever kind in his possession or under his control
belonging to the corporation.
Section 14. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the
corporation by, the Chairman or Vice Chairman of the Board of Directors,
the President or a Vice President and the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the corporation,
certifying the number of shares owned by him in the corporation.
Section 2. Where a certificate is countersigned (1) by a transfer
agent other than the corporation or its employee, or, (2) by a registrar
other than the corporation or its employee, the signatures of the officers
of the corporation may be facsimiles. In case any officer who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such officer
at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the
same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may
be made against the corporation with respect to the certificate alleged to
have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the corporation to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty nor
less than ten days before the date of such meeting, nor more than sixty
days prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation, if any, may
be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares
of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as
the Directors from time to time, in their absolute discretion, think proper
as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation,
or for such other purpose as the Directors shall think conducive to the
interest of the corporation, and the Directors may notify or abolish any
such reserve in the manner in which it was created.
ANNUAL REPORT
Section 3. (a) The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by
vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
(b) On or before 120 days from the close of each fiscal year,
the Board of Directors shall cause to be delivered to each stockholder of
record an audited statement of financial condition of the corporation as at
the close of such fiscal year, together with a statement of operations,
including profit and loss for such fiscal year. For the purposes of
subsection (b), it will be sufficient if such report is mailed in the
ordinary course of business to those shareholder of record as at the date
on which the record of shareholders has been taken for the purpose of the
annual meeting, pursuant to Section 5 of ARTICLE VI of these by-laws.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time
designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. (a) Directors, Officers and Employees of the
Corporation. Every person now or hereafter serving as a Director, Officer
or Employee of the Corporation shall be indemnified and held harmless by
the corporation from and against any and all loss, cost, liability and
expense that may be imposed upon or incurred by him in connection with or
resulting from any claim, action, suit, or proceeding, civil or criminal,
in which he may become involved, as a party or otherwise, by reason of his
being or having been a director, officer or employee of the corporation,
whether or not he continues to be such at the time such loss, cost,
liability or expense shall have been imposed or incurred. As used herein,
the term "loss, cost, liability and expense" shall include, but shall not
be limited to, counsel fees and disbursements and amounts of judgments,
fines or penalties against, and amounts paid in settlement by, any such
director, officer or employee; provided, however that no such director,
officer or employee shall be entitled to claim such indemnity: (1) with
respect to any matter as to which there shall have been a final
adjudication that he has committed or allowed some act or omission, (a)
otherwise than in good faith in what he considers to be the best interests
of the corporation, and (b) without reasonable cause to believe that such
act or omission was proper and legal; or (2) in the event of a settlement
of such claim, action, suit, or proceeding unless (a) the court having
jurisdiction thereof shall have approved of such settlement with knowledge
of the indemnity provided herein, or (b) a written opinion of independent
legal counsel, selected by or in manner determined by the Board of
Directors, shall have been rendered substantially concurrently with such
settlement, to the effect that it was not probable that the matter as to
which indemnification is being made would have resulted in a final
adjudication as specified in clause (1) above and that the said loss, cost,
liability or expense may properly be borne by the corporation. A
conviction or judgment (whether based on a plea of guilty or nolo
contendere or its equivalent, or after trial) in a criminal action, suit or
proceeding shall not be deemed an adjudication that such director, officer
or employee has committed or allowed some act or omission as hereinabove
provided if independent legal counsel, selected as hereinabove set forth,
shall substantially concurrently with such conviction or judgement give to
the corporation a written opinion that such director, officer or employee
was acting in good faith in what he considered to be the best interests of
the corporation or was not without reasonable cause to believe that such
act or omission was proper and legal.
(b) Directors, Officers and Employees of Subsidiaries. Every
person (including a director, officer or employee of the corporation) who
at the request of the corporation acts as a director, officer or employee
of any other corporation in which the corporation owns shares of stock or
of which it is a creditor shall be indemnified to the same extent and
subject to the same conditions that the directors, officers, and employees
of the corporation are indemnified under the preceding paragraph, except
that the amount of such loss, cost, liability or expense paid to any such
director, officer or employee shall be reduced by and to the extent of any
amounts which may be collected by him from such other corporation.
(c) Miscellaneous. The provisions of this section shall cover
claims, actions, suits and proceedings, civil or criminal, whether now
pending or hereafter commenced and shall be retroactive to cover acts or
omissions or alleged acts or omissions which heretofore have taken place.
In the event of death of any person having a right of indemnification under
the provisions of this section, such right shall inure to the benefit of
his heirs, executors, administrators and personal representatives. If any
part of this section should be found to be invalid or ineffective in any
proceeding, the validity and effect of the remaining provisions shall not
be affected.
(d) Indemnification Not Exclusive. The foregoing right of
indemnification shall not be deemed exclusive of any other right to which
those indemnified may be entitled, and the corporation may provide
additional indemnity and rights to its directors, officers or employees.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any regular
meeting of the stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration or repeal be contained in the notice of such special meeting.
<PAGE>
Exhibit 13
AYDIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Net sales $141,475,000 $145,221,000 $158,544,000
Costs and expenses:
Cost of sales
Department of
Justice settlement 14,819,000 -0- -0-
Other 103,735,000 101,452,000 113,329,000
Selling, general,
and administrative 25,178,000 27,390,000 26,781,000
Research and development 4,782,000 5,275,000 4,887,000
Interest expense (income),
net 273,000 ( 1,177,000) ( 3,648,000)
___________ ____________ ____________
148,787,000 132,940,000 141,349,000
___________ ____________ ____________
Income (loss) before
income taxes and
minority interest ( 7,312,000) 12,281,000 17,195,000
Income tax provision
(recovery) ( 2,466,000) 4,458,000 4,721,000
___________ ____________ ____________
Income (loss) before
minority interest ( 4,846,000) 7,823,000 12,474,000
Less minority interest 121,000 761,000 1,687,000
___________ ____________ ____________
Net income (loss) ($ 4,967,000) $ 7,062,000 $ 10,787,000
_____________ ___________ ____________
Earnings (loss) per common and
common equivalent share ($1.00) $1.40 $2.13
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AYDIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents:
1993--$10,908,000; 1992--$15,708,000 $ 11,822,000 $ 17,086,000
Short-term investments 13,058,000 19,930,000
Accounts receivable, including contract
retainage: 1993--$386,000;
1992-$2,943,000; 33,525,000 25,638,000
Unbilled revenue, after progress
billings: 1993--$46,718,000;
1992--$24,502,000 66,559,000 59,055,000
Inventories 17,597,000 20,918,000
Prepaid expenses 1,470,000 1,924,000
___________ ___________
TOTAL CURRENT ASSETS 144,031,000 144,551,000
PROPERTY, PLANT, AND EQUIPMENT, at cost
net of accumulated depreciation and
amortization: 1993--$53,623,000;
1992--$49,269,000; 25,182,000 27,225,000
OTHER ASSETS 508,000 556,000
___________ ___________
$169,721,000 $172,332,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 397,000 $ 393,000
Short-term bank debt 21,525,000 22,000,000
Accounts payable 21,731,000 23,398,000
Accrued liabilities:
Compensation 2,752,000 2,898,000
Department of Justice settlement 8,015,000 -0-
Other 4,528,000 2,064,000
Advance payments and contract billings
in excess of recognized revenue 1,563,000 1,120,000
Accrued and deferred income taxes 7,014,000 12,100,000
___________ ___________
TOTAL CURRENT LIABILITIES 67,525,000 63,973,000
LONG-TERM DEBT, less current maturities 1,902,000 2,295,000
DEFERRED INCOME TAXES 6,230,000 5,332,000
MINORITY INTEREST 105,000 2,311,000
STOCKHOLDERS' EQUITY
Common Stock, par value $1--
authorized, 7,500,000 shares; issued
and outstanding, 1993--4,981,273 shares;
1992--4,939,197 shares 4,981,000 4,939,000
Additional paid-in capital 697,000 237,000
Retained earnings 88,906,000 93,873,000
Foreign currency translation effects ( 625,000) ( 628,000)
___________ ___________
93,959,000 98,421,000
___________ ___________
$169,721,000 $172,332,000
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AYDIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ($ 4,967,000) $ 7,062,000 $10,787,000
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities:
Depreciation and amortization 4,473,000 4,213,000 4,280,000
Deferred income taxes ( 3,922,000) ( 456,000) ( 802,000)
Minority interest 121,000 761,000 1,687,000
Changes in other operating assets
and liabilities, net:
Accounts receivable ( 7,887,000) ( 5,930,000) 18,316,000
Unbilled revenue ( 7,504,000) (25,649,000) 5,479,000
Advance payments and contract
billings in excess of
recognized revenue 443,000 (15,729,000) (38,370,000)
Inventories 3,321,000 ( 1,910,000) ( 500,000)
Prepaid expenses 454,000 ( 537,000) ( 255,000)
Accounts payable ( 1,667,000) 8,791,000 3,296,000
Accrued liabilities 10,333,000 523,000 ( 1,072,000)
Accrued income taxes ( 266,000) ( 275,000) 1,003,000
Other 50,000 ( 513,000) 192,000
______________ ____________ ____________
CASH PROVIDED (USED) BY
OPERATING ACTIVITIES ( 7,018,000) (29,649,000) 4,041,000
INVESTING ACTIVITIES
Purchase of property, plant, and
equipment ( 2,381,000) ( 1,429,000) ( 4,502,000)
Short-term investments 6,872,000 11,658,000 13,322,000
______________ ____________ ____________
CASH PROVIDED
BY INVESTING ACTIVITIES 4,491,000 10,229,000 8,820,000
FINANCING ACTIVITIES
Payment of dividend -0- ( 2,484,000) ( 2,455,000)
Principal payments on long-term
debt ( 389,000) ( 389,000) ( 384,000)
Purchase of treasury stock -0- ( 750,000) ( 338,000)
Minority investment in consolidated
subsidiary ( 2,327,000) ( 1,101,000) 453,000
Proceeds from exercise of stock
options 454,000 390,000 653,000
Net short-term borrowings ( 475,000) 22,000,000 -0-
______________ ____________ ____________
CASH PROVIDED (USED)
BY FINANCING ACTIVITIES ( 2,737,000) 17,666,000 ( 2,071,000)
______________ ____________ ____________
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ( 5,264,000) ( 1,754,000) 10,790,000
Cash and cash equivalents at
beginning of year 17,086,000 18,840,000 8,050,000
______________ ____________ ____________
CASH AND CASH EQUIVALENTS
AT END OF YEAR $11,822,000 $17,086,000 $18,840,000
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AYDIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company, its wholly-owned subsidiaries, and its 99%-owned
Turkish subsidiary. All significant intercompany transactions and balances
are eliminated in consolidation. During 1992 $800,000 of cash was invested
in the Turkish subsidiary reflecting an ownership of 71% as of December 31, 1992
from 50% earlier. During 1993, $2.8 million of cash was invested to bring
the ownership to 99%.
Contract Accounting: Revenue on long-term type contracts in excess of
$100,000 is recorded on the percentage-of-completion method. For such
contracts, a portion of the total contract price is included in sales in the
proportion that costs incurred to date bear to total estimated costs at
completion. The impact of periodic revisions in costs and estimated profit
is reflected in the accounting period in which the facts become known.
For all other contracts, revenue is recognized upon completion of the
contract or upon shipment of identifiable units.
The entire amount of ultimate losses estimated to be incurred upon completion
of contracts is charged to income when such losses become known.
Contract progress billings are based upon contract provisions for customer
advance payments, contract costs incurred, and completion of specified
contract objectives. Contract billings for partial shipments where product
title passes to the customer are not considered progress billings. Contracts
may provide for customer retainage of a portion of amounts billed until
contract completion. All contract retainage at December 31, 1993 matures in
1994.
Claims from customers of approximately $1.0 million for work performed
outside the scope of certain contracts for which the Company anticipates
recovery are included in unbilled revenue at December 31, 1993. The
comparable amount at December 31, 1992 was $3.8 million.
Under the contract with the Government of Turkey, the Company received total
advance payments of $56 million in October 1990 which were to be applied
against future billings over the next six years. The contract provides for
price escalation based on U.S. and Turkish inflation rates.
Inventories: Inventories are valued at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) and average cost method which
approximates FIFO.
Depreciation and Amortization: Depreciation is provided by the straight-line
method over the estimated useful lives of the depreciable assets.
Amortization of leasehold improvements under operating leases is provided
over the terms of the related leases or the asset lives, if shorter.
Income Taxes: The Company accounts for income taxes on the liability method
in accordance with Statement of Financial Accounting Standards (FAS) No. 109
which it adopted in 1991. Previously, the Company accounted for income taxes
in accordance with FAS No. 96, which it adopted in 1987. The effect of the
adoption of FAS No. 109 was not material.
Foreign Currency Translation: In accordance with FAS No. 52, balance sheet
accounts of the Company's United Kingdom subsidiary are translated from the
local currency into U.S. dollars at year-end rates while income and expenses
are translated at the weighted average exchange rate for the year. The
resulting translation gains or losses are shown as a separate component of
stockholders' equity. The translation effects of all other non-U.S.
subsidiaries are reflected in the income statement.
Earnings (Loss) Per Share: Earnings (loss) 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 earnings (loss) per share calculations was 4,959,740 for 1993,
5,043,063 for 1992, and 5,071,978 for 1991.
Statement of Cash Flows: The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash
equivalents.
Short-Term Investments: Short-term investments are carried at cost which
approximates market. Short-term investments at December 31, 1993 consist of
interest-bearing certificates of deposit and time deposits with initial terms
of 3 to 12 months. The total includes $1.9 million held by the Company's
Turkish subsidiary, all denominated in U.S. dollars. Cash and short term
investments include $19.9 million held as collateral against outstanding
letters of credit.
NOTE B--INVENTORIES
Inventories at December 31, 1993 and 1992 consist of:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Raw materials $ 8,549,000 $ 9,450,000
Work in process 6,036,000 8,512,000
Finished product 3,012,000 2,956,000
___________ ___________
$17,597,000 $20,918,000
</TABLE>
NOTE C--PROPERTY, PLANT, AND EQUIPMENT
The Company's investment in property, plant, and equipment at December 31,
1993 and 1992 follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Land $ 5,264,000 $ 5,264,000
Buildings 20,459,000 20,442,000
Machinery and equipment 53,082,000 50,788,000
___________ ___________
78,805,000 76,494,000
Less accumulated depreciation
and amortization 53,623,000 49,269,000
___________ ___________
$25,182,000 $27,225,000
</TABLE>
NOTE D--SHORT- AND LONG-TERM FINANCING ARRANGEMENTS
The Company has annually renewable arrangements with certain banks whereby
lines of credit aggregating $70,856,000 are available for letters of credit,
including $14,000,000 which, alternatively, is available for short-term cash
borrowings. An additional $14,900,000 is available for short-term borrowings
only. These arrangements provide for interest on borrowings at rates ranging
from LIBOR-based rates (generally below prime) to the prime lending rate
(6.0% at December 31, 1993) plus 1/2%. These arrangements also require
informal compensating cash balances averaging (on an annual basis) $475,000
(or equivalent fees) plus an additional amount up to 5% (maximum $725,000) of
outstanding borrowings, and provide for commission rates on letters of credit
at 1/2% to 1 1/8%. As of December 31, 1993 and 1992 there were $21,525,000
and $22,000,000 of borrowings under these lines, respectively.
At December 31, 1993, $58,000,000 of letters of credit were outstanding under
these arrangements. These have been issued to foreign entities, principally
to guarantee either contract performance or the return of unearned advance
payments in the unlikely event that performance is not in accordance with the
contracts, or to foreign suppliers to guarantee payment to them of the amount
due. Of the total amount outstanding, $42.5 million pertains to the
Company's contract with the Government of Turkey. This letter of credit was
issued pursuant to a Credit Agreement with certain banks. The term extends
to October 4, 1996 or until the letter of credit is reduced to zero,
whichever occurs first. Cash or short-
<PAGE>
term investment collateral is required to be maintained equal to 1/3 of the
balance outstanding in the letter of credit which amounts to $14.2 million.
In addition to certain covenant requirements, the Credit Agreement contains
restrictions concerning the payment of dividends and purchase of treasury
stock which in the aggregate are limited to 50% of net income for the prior
four fiscal quarters.
An additional letter of credit of $5.7 million pertaining to the Turkish
contract has been issued by a Turkish bank for the Company's Turkish
subsidiary. This letter of credit is not part of the Company's line of
credit. Cash or short-term investment collateral is required to be
maintained by the Turkish subsidiary equal to 100% of the balance outstanding
on this letter of credit.
NOTE E--LONG-TERM DEBT
Long-term debt at December 31, 1993 and 1992 consists of the following:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Fixed-rate mortgage payable $8,000 monthly
through 2001, including interest at 8-1/4%. $ 557,000 $ 604,000
Variable-rate mortgage bearing interest
at 70% of the prime rate
(4.2% at December 31, 1993),
quarterly principal
payments of $55,000 plus interest through
November 30, 1997. 819,000 1,037,000
Variable-rate mortgage bearing interest at 70%
of the prime rate (4.2% at December 31, 1993),
quarterly principal payments of $31,000
plus interest through May 1, 2001. 923,000 1,047,000
__________ __________
2,299,000 2,688,000
Less current maturities 397,000 393,000
__________ __________
$ 1,902,000 $2,295,000
</TABLE>
Interest expense on long- and short-term debt for the years 1993, 1992, and
1991 amounted to $1,310,000, $639,000, and $243,000, respectively. Interest
paid for the years 1993, 1992, and 1991 amounted to $1,402,000, $409,000, and
$251,000, respectively.
Land and buildings having a net carrying value of $5,514,000 at December 31,
1993 have been pledged as collateral for the mortgages.
Aggregate maturities of long-term debt for each of the years 1994 through
1998 are as follows: 1994--$397,000; 1995--$402,000; 1996--$407,000;
1997--$358,000; and 1998--$201,000.
NOTE F -- STOCKHOLDERS' EQUITY
The changes in common stock, additional paid-in capital, treasury stock,
retained earnings, and foreign currency translation effects during the years
1991, 1992, and 1993 were as follows:
<TABLE>
<CAPTION>
Foreign
Common Additional Currency
Stock Paid-In Treasury Retained Translation
Par $1 Capital Stock Earnings Effects
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1991 $ 4,909,000 $ -0- $ -0- $80,963,000 $ -0-
(4,908,563 common shares)
Issuance of 54,684 shares 54,000 599,000
on exercise of stock options
Tax benefit related to shares 188,000
acquired by employees under
stock options
Acquisition of 15,064 shares ( 338,000)
of treasury stock received
from employees as payment
for stock option exercises
Retirement of 15,064 treasury ( 15,000) (323,000) 338,000
shares
Dividend declared ($.50 per ( 2,455,000)
share) in February 1991 and
paid in April 1991
Net income 10,787,000
_________ _______ _________ ___________ _________
Balance, December 31, 1991 4,948,000 464,000 -0- 89,295,000 -0-
(4,948,213 common shares)
Issuance of 34,536 shares 35,000 355,000
on exercise of stock options
Tax benefit related to shares 124,000
acquired by employees under
stock options
Acquisition of 37,450 shares ( 602,000)
of treasury stock in the
open market
Acquisition of 6,102 shares ( 148,000)
of treasury stock received
from employees as payment of
stock option exercises
Retirement of 43,552 treasury ( 44,000) (706,000) 750,000
shares
Dividend declared ($.50 per ( 2,484,000)
share) in March 1992 and
paid in March 1992
Foreign currency translation ( 628,000)
adjustment
Net income 7,062,000
_________ _______ _________ ___________ _________
Balance, December 31, 1992 4,939,000 237,000 -0- 93,873,000 ( 628,000)
(4,939,197 common shares)
<PAGE>
Issuance of 42,076 shares on 42,000 412,000
exercise of stock options
Tax benefit related to shares 48,000
acquired by employees under
stock options
Foreign currency translation 3,000
adjustment
Net loss ( 4,967,000)
_________ _______ _________ ___________ _________
Balance, December 31, 1993 $4,981,000 $ 697,000 $ -0- $88,906,000 ($625,000)
(4,981,273 common shares)
</TABLE>
NOTE G--STOCK OPTIONS
Pursuant to stock option plans, the Company has granted certain officers,
directors, and key employees options to purchase shares of its common stock.
Options granted under the plans must have an option price determined by the
Board of Directors, but in any event, not less than the fair market value of
the stock on the date of grant except for the 1984 plan of 187,500 shares
which permits the Board of Directors to set an option price up to 50% less
than the fair market value of the stock on the date of grant. Generally,
options become exercisable one-fourth annually beginning one year after
grant, on a cumulative basis, and expire five years after grant.
There is no charge to income with respect to stock options under the plans.
A summary of the changes in options during 1991, 1992, and 1993 follows:
<TABLE>
<CAPTION>
Shares
Shares Available
Under Option for Option
<S> <C> <C>
At January 1, 1991 332,336 54,488
Options granted 41,700 ( 41,700)
Option exercised (average price $11.96) ( 54,684) -0-
Options canceled ( 30,107) 30,107
__________ ___________
At December 31, 1991 289,245 42,895
Authorization of individual option -0- 215,000
Options granted:
Option plan 27,750 ( 27,750)
Individual options 215,000 ( 215,000)
Options exercised (average price $11.31) ( 34,536) -0-
Options canceled ( 19,896) 19,896
__________ ___________
At December 31, 1992 477,563 35,041
Options granted:
Option plan 42,450 ( 42,450)
Options exercised (average price $10.80) ( 42,076) -0-
Options canceled ( 154,644) 154,644
Cancellation of authorization -0- ( 100,000)
__________ ___________
At December 31, 1993 (128,969 exercisable) 323,293 47,235
</TABLE>
These options expire on various dates beginning February 1994 and ending
October 1998.
The average exercise price of options outstanding at December 31, 1993 is
$13.28.
On January 3, 1994, the Board of Directors adopted a new incentive stock
option plan to provide up to 50,000 shares for the grant of stock options to
employees. The authorized number of shares was increased to 100,000 on
February 25, 1994.
<PAGE>
NOTE H--TAXES ON INCOME
The provision (recovery) for income taxes consists of the following:
<TABLE>
<CAPTION>
Federal State Foreign Total
<S> <C> <C> <C> <C>
1993:
Current ($ 339,000) $ 62,000 $1,685,000 $1,408,000
Deferred ( 3,110,000) ( 812,000) -0- ( 3,922,000)
Charge equivalent
to tax benefit
related to shares
acquired by
employees under
stock options 39,000 9,000 -0- 48,000
____________ ____________ __________ ____________
($3,410,000) ($ 741,000) $1,685,000 ($2,466,000)
1992:
Current $3,022,000 $ 358,000 $1,410,000 $4,790,000
Deferred ( 323,000) ( 133,000) -0- ( 456,000)
Charge equivalent
to tax benefit
related to shares
acquired by
employees under
stock options 99,000 25,000 -0- 124,000
__________ __________ __________ __________
$2,798,000 $ 250,000 $1,410,000 $4,458,000
1991:
Current $4,506,000 $ 311,000 $ 518,000 $5,335,000
Deferred ( 1,030,000) 228,000 -0- ( 802,000)
Charge equivalent
to tax benefit
related to shares
acquired by
employees under
stock options 150,000 38,000 -0- 188,000
__________ __________ __________ __________
$3,626,000 $ 577,000 $ 518,000 $4,721,000
</TABLE>
The components of deferred income tax balances follow. No valuation
allowances were required.
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Contract accounting $11,740,000 $14,953,000 $15,380,000
Excess tax over book
depreciation 2,825,000 3,229,000 3,267,000
Inventory valuation ( 1,599,000) ( 1,403,000) ( 1,226,000)
Alternative minimum tax ( 50,000) -0- ( 359,000)
State deferred taxes ( 786,000) ( 1,048,000) ( 1,072,000)
Other, net ( 348,000) ( 27,000) 169,000
___________ ___________ ___________
$11,782,000 $15,704,000 $16,159,000
</TABLE>
A reconciliation between the federal statutory rate and the effective income
tax rate (computed by dividing income taxes by income or loss before income
taxes and minority interest) is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Federal statutory rate (34.0%) 34.0% 34.0%
State income taxes net of federal tax
benefit ( 6.7) 1.4 2.2
Benefit from nontaxable FSC income ( 6.3) ( 2.3) ( 4.2)
Effects of higher (lower) foreign
income tax rates 5.6 2.3 ( 5.1)
Statutory federal rate increase to 35%
on income over $10 million 2.6 0.0 0.0
Non-deductible Department of Justice
settlement cost 4.3 0.0 0.0
Other, net .8 .9 .6
____ ____ ____
Effective income tax rate (33.7%) 36.3% 27.5%
</TABLE>
Income tax payments, net of refunds, amounted to $4,332,000 in 1991,
$5,066,000 in 1992, and $2,138,000 in 1993.
The Company has not provided deferred income taxes of approximately $600,000
on cumulative unremitted earnings of foreign subsidiaries, based on
management's intention to permanently invest such earnings in the foreign
jurisdictions.
NOTE I--EXPORT SALES, MAJOR CUSTOMERS, AND FOREIGN OPERATIONS
The Company operates predominantly in the electronics manufacturing industry.
Export sales by geographic area are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Asia $ 8,688,000 $ 2,553,000 $ 1,168,000
Africa 2,301,000 1,969,000 1,296,000
Europe 42,220,000 53,084,000 41,452,000
North America 528,000 869,000 2,317,000
South America 475,000 447,000 2,640,000
Other 844,000 306,000 791,000
____________ ____________ ___________
Total export sales $ 55,056,000 $ 59,228,000 $49,664,000
</TABLE>
<PAGE>
The U.S. Government and the Government of Turkey were the only customers to
whom sales exceeded 10% of consolidated sales during any of the past three
years. Sales to U.S. Government agencies, principally the Department of
Defense, amounted to $38,600,000, $39,347,000 and $65,360,000 in 1993, 1992
and 1991, respectively. Sales to the Government of Turkey amounted to
$45,134,000 in 1993, $48,738,000 in 1992 and $41,228,000 in 1991.
Foreign assets included in the consolidated balance sheet amounted to $16.9
million, $23.4 million and $26.1 million at December 31, 1993, 1992 and 1991,
respectively. Of these amounts, $13.7 million, $19.1 million and $21.1
million, at December 31, 1993, 1992 and 1991, respectively, are assets of the
Company's Turkish subsidiary and consist mainly of U.S. dollar denominated
interest-bearing time deposits that will be used to complete a portion of the
Company's contract with the Government of Turkey. Foreign sales and pretax
income for 1993 amounted to $23.0 million and $3.9 million, respectively.
Foreign sales and pretax income for 1992 amounted to $19.3 million and $3.3
million, respectively. Foreign sales and pretax income for 1991 amounted to
$17.8 million and $3.9 million, respectively.
NOTE J--CONTINGENCIES
The Company along with others is responsible for the cost of cleanup at a
site leased by the Company prior to 1984 under an order of the State of
California.
The cost to date for the cleanup of the California site over the past nine
years has been approximately $5.4 million. Settlement has been reached with
three of four insurance carriers for approximately $6.7 million which was
received during 1993 and applied to the cleanup costs previously incurred and
cost to go. The claim against the fourth insurance carrier is presently in
litigation. A jury has ruled in Aydin's favor, however, a final decision by
the court has not yet been rendered. Management believes the ultimate
resolution of this entire matter will not have a materially adverse effect on
the financial position or results of operations.
The IRS, as part of a field examination, has disallowed certain prior years
research and development tax credits taken by the Company amounting to
approximately $3.5 million plus related interest. The Company is challenging
this finding with the appeals office of the IRS. Management is of the
opinion that the ultimate resolution will not have a materially adverse
effect on the financial position or results of operations.
NOTE K - SETTLEMENT WITH THE DEPARTMENT OF JUSTICE
On January 5, 1994, the Company reached settlement agreements with the U.S.
Army and the Department of Justice ("DOJ") with reference to the AN/GRC-222
microwave radio contract. Under the terms of the agreement, the U.S. Army
will reinstate the radio contract by withdrawing its previous termination for
default issued November 30, 1993. Further, the investigation and all
possible charges against the Company by the DOJ are settled.
On January 6, 1994, pursuant to the terms of settlement with DOJ, the Company
entered a plea of guilty to the falsification of testing data, charges to
which two of its low level employees previously pled guilty to in March 1993,
and the plea was accepted by the court (U.S. District Court for the Northern
District of California). The Company is reinstated on its AN/GRC-222
microwave radio contract with all of its previous terms and conditions.
Further, the Company withdrew its contract claims, is doing additional work
for the Army at no additional cost, and paid $2 million as an added
consideration. The total impact on pretax income of this settlement was
approximately $14,819,000, which has been charged to the 1993 fourth quarter
earnings. The additional work and the related expenditures will be spread
over a period of three years or longer.
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Aydin Corporation
We have audited the accompanying consolidated balance sheets of Aydin
Corporation and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of operations and cash flows for each of the
years in the three-year period ended December 31, 1993. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Aydin
Corporation and subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick
Philadelphia, Pennsylvania
February 25, 1994
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Sources of Capital
Cash used by operations during 1993 was $7.0 million. The primary reasons
for the cash outflow included: (1) a $7.5 million increase in unbilled
revenue mainly because of costs incurred and resulting revenue recognized on
the TMRC-C3 contract with the Government of Turkey in excess of billings
rendered; and (2) a $7.9 million increase in accounts receivable primarily
because of the commencement in 1993 of billings on the TMRC-C3 contract
especially in the fourth quarter, offset partially by $4.0 million of cash
received in settlement of insurance litigation related to environmental
matters. Partially offsetting these cash outflows was a $3.3 million decline
in inventories and $4.5 million of depreciation.
Also during 1993, $2.4 million was spent for capital additions and $2.8
million was spent to increase the ownership in the Turkish subsidiary from
71% at December 31, 1992 to over 99% at December 31, 1993.
Of the $24.9 million balance of cash and short-term investments at December
31, 1993, approximately $19.9 million is required to be maintained as
collateral against letters of credit on the Turkish contract.
Cash used by operations during 1992 was $29.6 million and short-term
borrowings increased by $22.0 million primarily because of costs incurred on
the TMRC-C3 contract with the Government of Turkey. An advance payment of
$56.0 million was received in 1990 on this contract with further billings not
scheduled to commence until early 1993. The aforementioned costs incurred
and resulting revenue recognized are the reasons for the $41.4 million
increase from 1991 of unbilled revenue net of advance payments (received) and
contract billings in excess of recognized revenue. Accounts payable
increased by $8.8 million primarily because of subcontracts placed on the
TMRC-C3 contract.
Also during 1992, $1.4 million was spent for capital additions and a $2.5
million cash dividend was paid. Further cash dividends are not planned for
1993. Also, the aggregate of future cash dividends and stock repurchases are
limited to 50% of net income under the terms of the letters of credit
agreement against the Turkish contract advance payment.
Based on the present backlog and projected cash flows, the Company
anticipates financing its capital needs from internal sources and from
short-term borrowings in the foreseeable future. The backlog declined to
approximately $155.0 million at December 31, 1993 from $175.0 million at year
end 1992.
At December 31, 1993 the Company had short-term borrowing arrangements of
$29.0 million, of which $21.5 million had been used. These lines may be
reduced if the Company has to issue letters of credit for performance
guarantees in foreign countries.
Results of Operations
1993 versus 1992: Net sales of $141,475,000 for 1993 decreased by $3,746,000
from 1992, a decline of 3%. Industrial sales declined to 17% of total sales
from 19% last year due to continued market weakness in the Company's market
niches. U.S. Government sales declined slightly and were offset by a small
increase in export and foreign sales which now represent 56% of total sales
versus 54% last year.
The $14,819,000 1993 special settlement charge included in the cost of sales
caption is the result of the Company's decision to assume responsibility and
plead guilty to criminal charges of falsification of test data on a U.S.
Government contract (GRC-222), actions to which two low level employees had
previously pled guilty. Of this charge, $2.0 million were cash payments made
after December 31, 1993. The balance represents additional work and to
upgrade the GRC-222 microwave radios for the U.S. Army and Aydin's dropping
of claims it had filed against the Army.
Other cost of sales as a percentage of sales increased to 73.3% from 69.9%
last year as a result of a more competitive U.S. Government business
environment in 1993, a more favorable sales mix in 1992 and cost overruns on
certain contracts in 1993.
Selling, general and administrative expenses declined by $2,212,000 from 1992
because of cost reductions necessitated by the declines in sales and backlog.
Net interest expense was $273,000 in 1993 compared to last year's net
interest income of $1,177,000. The unfavorable swing reflects the higher
level of this year's short-term borrowings and a decreased level of cash
available for investment this year.
The effective income tax rate decreased to 34% for 1993 from 36% last year.
The primary reason for the lower 1993 income tax rate is a function of a
pretax loss in the U.S. in 1993 which means that the following elements of
tax reduced the effective rate: foreign income tax provisions,
non-deductible costs in connection with the Department of Justice settlement,
and the impact on deferred taxes of the increased U.S. statutory rate
effective January 1, 1994. Partially offsetting these effects was the tax
benefit from non-taxable Foreign Sales Corporation income and a higher state
income tax recovery on the 1993 U.S. pretax loss than the 1992 state income
tax provision. See Note H for the impact of each of these items.
1992 versus 1991: Net sales of $145,221,000 for 1992 decreased by
$13,323,000 from 1991, a decline of 8%. U.S. Government sales declined to
27% of total sales from 41% last year as a result of lower U.S. Government
military spending. Export and foreign sales rose to 54% of total sales from
43% last year, and industrial sales rose slightly from last year.
Cost of sales as a percentage of sales improved to 69.9% from 70.2% last year
as a result of a more favorable sales mix in 1992.
Interest income, net of interest expense, declined by $2,471,000 from 1991
because of a lower level of short-term investments, lower interest rates, and
a higher level of short-term borrowings.
The income tax provision as a percentage of pretax income increased to 36%
for 1992 from 27% in 1991 primarily as a result of higher foreign income tax
rates during 1992 than in 1991.
Minority interest was $761,000 in 1992 as compared to $1,687,000 last year.
The decrease reflects lower net income of the Turkish subsidiary which
resulted primarily from the aforementioned higher foreign income taxes, and
also an increased investment in the ownership of the Turkish subsidiary as
explained in Note A.
<PAGE>
Selected Financial Data
($000 omitted except for per share amounts)
<TABLE>
<CAPTION>
For the Year: 1993* 1992 1991* 1990 1989
<S> <C> <C> <C> <C> <C>
Net sales. . . . . . $141,475 $145,221 $158,544 $142,269 $157,486
Cost of sales. . . . 118,554* 101,452 113,329 99,873 108,665
Income (loss) before
income taxes and
minority interest . ( 7,312)* 12,281 17,195 10,065 13,490
Net income (loss). . ( 4,967)* 7,062 10,787 7,465 9,190
Earnings (loss)
per share. . . ( 1.00)* 1.40 2.13 1.51 1.81
Cash dividend
per share. . . . -0- .50 .50 -0- 1.00
Return on average
stockholders equity .( 5%) 7% 12% 9% 12%
At Year End:
Total Assets . . . . $169,721 $172,332 $154,493 $179,847 $144,345
Working Capital. . . 76,506 80,578 82,287 73,352 79,043
Long-term debt . . . 1,902 2,295 2,688 3,076 9,255
Stockholders' equity . 93,959 98,421 94,707 85,872 79,983
Stockholders' equity
per share . . . . . 18.86 19.93 19.14 17.49 15.97
<FN>
* Cost of sales includes a fourth quarter 1993 charge or $14,819,000 in
connection with a settlement reached with the Department of Justice. After
tax, this charge amounted to $9,430,000 or $1.90 per share.
**In the fourth quarter of 1991, the Company adopted Statement of Financial
Accounting Standard (FAS) No. 109. The effect of adoption of FAS No. 109
was not material.
</TABLE>
Quarterly Financial Data
($000 omitted except per share amounts)
<TABLE>
<CAPTION>
1993: 1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C>
Net sales . . . $37,434 $36,969 $31,577 $35,495 $141,475
Cost of sales . 26,642 27,206 22,896 41,810* 118,554*
Income (loss) before income
taxes and minority
interest . . . 2,462 1,727 1,780 (13,281)* ( 7,312)*
Net income (loss) . . . . 1,436 1,152 1,067 ( 8,622)* ( 4,967)*
Earnings (loss)
per share. . . .29 .23 .21 ( 1.73)* ( 1.00)*
<FN>
* Cost of sales includes a fourth quarter 1993 charge or $14,819,000 in
connection with a settlement reached with the Department of Justice. After
tax, this charge amounted to $9,430,000 or $1.90 per share.
</TABLE>
<TABLE>
<CAPTION>
1992:
<S> <C> <C> <C> <C> <C>
Net sales . . . $37,663 $35,663 $36,991 $34,904 $145,221
Cost of sales . 25,919 24,513 26,713 24,307 101,452
Income before income
taxes and minority
interest . . . 4,023 2,954 2,917 2,387 12,281
Net income. . . 2,306 1,836 1,664 1,256 7,062
Earnings per share. . . . .45 .37 .33 .25 1.40
</TABLE>
<PAGE>
Common Stock Prices
Aydin Corporation is listed on the New York Stock Exchange, symbol AYD.
<TABLE>
<CAPTION>
1993: High Low:
<S> <C> <C>
Fourth Q . . . . . . . . 16 1/2 11 3/4
Third Q. . . . . . . . . 18 3/8 15 1/2
Second Q . . . . . . . . 16 3/8 13 3/8
First Q. . . . . . . . . 17 7/8 14 1/2
1992: High Low
Fourth Q . . . . . . . . 17 7/8 13 1/8
Third Q. . . . . . . . . 16 7/8 13
Second Q . . . . . . . . 20 5/8 15
First Q. . . . . . . . . 28 7/8 19 1/2
</TABLE>
Audit Committee
The Audit Committee of the Board of Directors is comprised of non-management
directors who have no business dealings with or material equity interest in
the Company. The Committee has the following powers and duties: (1) to
appoint and retain or dismiss the independent auditors and the internal
auditor; (2) consult with the independent auditors on a quarterly basis (a)
on any disagreements with management and (b) concerning the auditors' limited
review of interim financial information; (3) review the management letters
issued by the independent auditors and consult with them annually as to means
by which internal accounting controls can be improved; (4) receive and
review quarterly reports by the independent auditors on any internal
accounting control deficiencies; (5) receive quarterly reports from the
internal auditors; (6) review and approve all monthly corporate and division
financial statements disseminated to the stockholders or filed with the
Securities and Exchange Commission; (7) consult with the chief accounting
officer concerning the implementation of recommendations of the independent
auditors and internal auditors; (8) review the chief executive officer's
expenses; and (9) review and approve the professional services rendered by
the independent auditors.
Stockholder and Dividend Information
Aydin has approximately 6,000 stockholders of record and individual
participants in security position listings. A special cash dividend of $.50
per share to stockholders of record as of the close of business on March 16,
1992, was paid on March 31, 1992. Aydin has no present plans to pay any
special cash dividends.
Annual Meeting
The Company's Annual Meeting of Stockholders will be held on Friday, April
29, 1994, at 3:00 p.m., in the Corporate Office at 700 Dresher Road, Horsham,
Pennsylvania. Stockholders are cordially invited to attend the Annual
Meeting.
Form 10K
A copy of Aydin Corporation's Annual Report on Form 10-K may be obtained
without charge by writing to Aydin Corporation, 700 Dresher Road, P.O. Box
349, Horsham, PA 19044, Attn: Investor Relations.
<PAGE>
Exhibit 21
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
NAME (and name under which JURISDICTION PERCENTAGE
they do business-same) OF INCORPORATION OWNED
<S> <C> <C>
Aydin Controls (U.K.) Limited United Kingdom 100%
Aydin, S.A. Argentina 100%
Aydin Foreign Sales Limited Guam 100%
Aydin Investments, Inc. Delaware 100%
Aydin Yazilim ve Elektronik
Sanayi A.S. Turkey 99% (1)
<FN>
(1) Ninety eight (98%) percent of the 99% is owned by registrant's wholly
owned subsidiary, Aydin Investments, Inc.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Aydin Corporation:
We consent to incorporation by reference in Registration Statement Numbers:
33-34863, 33-22016, 33-14284, 2-97645, 2-93603, 2-77623, and 2-64093 on Form
S-8 of Aydin Corporation of our reports dated February 25, 1994, relating to
the consolidated balance sheets of Aydin Corporation and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of
operations and cash flows, and related schedules for each of the years in the
three-year period ended December 31, 1993, which reports appear in or
incorporated by reference in the 1993 annual report on Form 10-K of Aydin
Corporation.
/s/ KPMG Peat Marwick
Philadelphia, Pennsylvania
March 25, 1994
<PAGE>
Exhibit 99
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Aydin Corporation:
Under date of February 25, 1994, we reported on the consolidated balance
sheets of Aydin Corporation and subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of operations and cash flows
for and each of the years in the three-year period ended December 31, 1993,
as contained in the 1993 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in
the annual report on Form 10-K for the year 1993. In connection with our
audit of the aforementioned consolidated financial statements, we also have
audited the related financial statement schedules as listed in the
accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick
Philadelphia, Pennsylvania
February 25, 1994
</TABLE>
