AYDIN CORPORATION
Telephone 700 Dresher Road
(215) 657-7510 P.O. Box 349
FAX Horsham, PA 19044
(215) 657-3830 U.S.A.
August 13, 1996
(VIA EDGAR)
SECURITIES & EXCHANGE COMMISSION
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
Attn: Filing Desk, Stop 1-4
RE: Form 10-Q Second Quarter 1996
File No. 1-7203
Gentlemen:
We are enclosing for filing Aydin Corporation's Form 10-Q for the
Second Quarter ending June 29, 1996.
Sincerely,
/s/ Robert A. Clancy
Robert A. Clancy
Secretary and
Corporate Counsel
PAGE
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended _______June 29, 1995______________
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _________________
Commission file number ________1-7203_________________________________
AYDIN CORPORATION
______________________________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 23-1686808
______________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 DRESHER ROAD, HORSHAM, PA 19044
______________________________________________________________________
(Address of principal executive offices) (Zip Code)
(215) 657-7510
______________________________________________________________________
(Registrant's telephone number, including area code)
______________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been
subject to such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes
of common stock, as of the latest practicable date.
Shares of common stock, $1.00 par value, outstanding as of August 13,
1996
5,133,400
<PAGE>
AYDIN CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Attached are the Condensed Consolidated Financial Statements of Aydin
Corporation and the related Note. These condensed consolidated
financial statements for the three and six month periods ended June
29, 1996 have been subjected to a limited review by Grant Thornton
LLP, the Registrant's independent accountants, whose report is
attached.
Earnings per share are based on the weighted average number of common
shares outstanding plus shares issuable upon the assumed exercise of
dilutive common stock options except for loss periods where their
effect would be antidilutive. The number of shares used in the
computation of earnings per share for the three months ended June 29,
1996 and July 1, 1995 were 5,121,961 and 5,091,372, respectively, and
for the six-month periods then ended 5,118,671 and 5,001,563,
respectively.
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($000 omitted except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
6/29/96 7/01/95 6/29/96 7/01/95
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 26,706 $ 36,494 $ 62,989 $72,082
COST AND EXPENSES
Cost of sales 25,228 26,661 50,536 52,598
Selling, general
and administrative 8,289 6,221 15,389 12,745
Research and development 2,321 1,772 4,551 3,221
Interest expense, net 220 175 424 18
_______ _______ _______ _______
Total 36,058 34,829 70,900 68,582
_______ _______ _______ _______
INCOME (LOSS) BEFORE
INCOME TAXES (BENEFIT)
AND MINORITY INTEREST (9,352) 1,665 (7,911) 3,500
INCOME TAXES (BENEFIT) (2,232) 581 (1,760) 1,217
_______ _______ _______ _______
INCOME (LOSS) BEFORE
MINORITY INTEREST (7,120) 1,084 (6,151) 2,283
LESS MINORITY INTEREST (96) 11 (90) 19
_______ _______ _______ _______
NET INCOME (LOSS) (7,024) $ 1,073 $ (6,061) $ 2,264
_______ _______ _______ _______
_______ _______ _______ _______
EARNINGS (LOSS)
PER SHARE ($ 1.37) $ .21 ($ 1.18) $ .45
_______ _______ _______ _______
_______ _______ _______ _______
</TABLE>
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
ASSETS
<TABLE>
<CAPTION>
June 29, 1996 Dec. 31, 1995
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash, including cash equivalents-
1996, $1,180; 1995, $3,569 $ 2,099 $ 4,638
Restricted cash 7,721 11,672
Accounts receivable 34,532 53,216
Unbilled revenue, after 46,941 46,927
progress billings
Inventories:
Raw materials 11,295 11,581
Work-in-process 7,746 7,965
Finished product 3,595 3,234
Prepaid expenses 1,494 1,577
________ ________
Total current assets 115,423 140,810
PROPERTY, PLANT AND EQUIPMENT,
net of accumulated depreciation:
1996, $59,510; 1995, $59,055 24,902 25,624
OTHER ASSETS 426 426
________ ________
TOTAL ASSETS $140,751 $ 166,860
________ ________
________ ________
__________________________________________________________________
</TABLE>
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 29, 1996 Dec. 31, 1995
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of
long-term debt $ - 0 - $ 342
Short-term bank debt 5,414 5,486
Accounts payable 18,592 29,222
Accrued liabilities 7,512 7,370
Advanced payments and
contract billings in
excess of recognized
revenue 3,263 2,843
Accrued and deferred
income taxes 1,681 9,932
________ _______
Total current liabilities 36,462 55,195
LONG-TERM DEBT,
less current maturities -0- 770
DEFERRED INCOME TAXES 5,677 6,232
MINORITY INTEREST -0- 90
STOCKHOLDERS' EQUITY:
Common stock, par value $1-
authorized 7,500,000
shares: issued 1996,
5,125,900 shares;
1995, 5,112,127 shares 5,126 5,112
Additional paid-in capital 2,356 2,188
Retained earnings 91,822 97,883
Foreign currency
translation effects (692) (610)
________ _______
Stockholders' equity 98,612 104,573
________ _______
TOTAL LIABILITIES
AND EQUITY $140,751 $166,860
________ _______
________ _______
</TABLE>
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
($000 omitted)
<TABLE>
<CAPTION>
Six Months Ended
June 29, 1996 July 1, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ (6,061) $ 2,264
Items not affecting cash:
Depreciation and
amortization 1,603 1,608
Deferred income taxes 300 200
Minority Interest (90) 19
Gain on sale of facility (216) -0-
Other (82) 12
Changes in certain
working capital items:
Accounts receivable 18,684 1,021
Unbilled revenue (14) (10,645)
Advance payments and
contract billings in
excess of recognized
revenue 420 (1,960)
Inventories 144 (277)
Prepaid expenses 83 3
Accounts payable and
accrued liabilities (10,488) 347
Accrued income taxes (9,106) (226)
________ _________
Cash (Used) By
Operating Activities (4,823) (7,634)
INVESTING ACTIVITIES
Net property, plant and
equipment additions (1,824) (1,378)
Proceeds from sale of 1,159 -0-
facility
________ _________
Cash (Used) By
Investing Activities (665) (1,378)
FINANCING ACTIVITIES
Release of collateral on
restricted cash 3,951 7,220
Principal payments on
long-term debt (1,112) (723)
Net repayments of
short-term borrowings (72) (1,000)
Purchase of Treasury Shares -0- (58)
Minority investment in
consolidated subsidiary -0- 103
Proceeds from exercise of
stock options 182 391
________ _________
Cash Provided By
Financing Activities 2,949 5,933
________ _________
DECREASE IN CASH AND CASH
EQUIVALENTS (2,539) (3,079)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 4,638 9,771
________ _________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 2,099 $ 6,692
________ _________
________ _________
</TABLE>
NOTE TO FINANCIAL STATEMENTS:
Interim financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results
for the periods. The 1995 balance sheet has been derived from the
audited financial statements contained in the 1995 Annual Report to
Stockholders. These interim financial statements conform with the
requirements for interim financial statements and consequently do not
include all the disclosures normally required by generally accepted
accounting principles. Reporting developments have been updated where
appropriate. In this connection, there are changes in contingency
disclosures as disclosed in Part II, Item I, "Legal Proceedings." The
Company's liquidity and financial flexibility continues to be
adversely affected by amounts due from the Government of Turkey.
Pretax income for the six months includes foreign currency translation
gains relating to the Turkish subsidiary of $456,000 for 1996 and
$169,000 for 1995.
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF
INTERIM FINANCIAL INFORMATION
Board of Directors and Stockholders
Aydin Corporation
We have reviewed the condensed consolidated balance sheets of Aydin
Corporation and subsidiaries as of June 29, 1996, and the related
condensed consolidated statements of operations and cash flows for the
six month periods ended June 29, 1996 and July 1, 1995 in accordance
with Statements on Standards for Accounting and Review Services issued
by the American Institute of Certified Public Accountants. All
information included in these condensed consolidated financial
statements is the representation of the management of Aydin
Corporation and subsidiaries.
A review of interim financial information consists principally of
inquiries of Company personnel and analytical procedures applied to
financial data. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial
statements as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed consolidated financial statements
for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December 31,
1995, and the related consolidated statements of operations and cash
flows for the year then ended (not presented herein) and in our report
dated February 26, 1996, except as to Note A for which the date is
March 22, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as
of December 31, 1995 is fairly stated, in all material respects in
relation to the consolidated balance sheet from which it has been
derived.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
August 7, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
(1) Material Changes in Financial Condition (6/29/96 versus
12/31/95)
Accounts receivable decreased by $18.7 million primarily because of
approximately $17 million of collections during the first half on the
TMRC Contract with the Government of Turkey. Most of these
collections were for the software on this contract, the acceptance for
which had been delayed in excess of one year as of 12/31/95.
Accounts payable decreased by $10.6 million primarily because of
payment of approximately $8 million to the TMRC software
subcontractor.
Current accrued and deferred income taxes decreased by $8.3 million
primarily because of $6.4 million of payments made to the IRS and the
income tax benefit resulting from the first six months pre-tax losses.
Long-term debt (including current maturities) consisting of mortgages
of $1.1 million was paid off during the first quarter, and the
properties involved were used as collateral against a $4.5 million
line of credit. As of 6/29/96, $4.0 million of this line of credit was
used. The Company is currently in negotiations to put in place
additional borrowing facilities.
The $7.7 million of restricted cash at 6/29/96 was being held as
collateral by a bank against the TMRC contract.
The Company's liquidity and financial flexibility continued to be
adversely affected during the first half by amounts still due from the
Government of Turkey. Based on recently concluded agreements
negotiated with the customer, the Company believes that most of the
payment delays have now been resolved.
Based on the present backlog and projected cash flows, the Company
anticipates financing its capital needs from internal sources and
additional borrowings.
(2) Material Changes in Operations (2nd Quarter and Six Months 1996
versus 1995)
Net sales for the quarter decreased to $26.7 million from $36.5
million a year ago, a 27% decline. The lower sales reflects the
decline in backlog from $123 million a year ago to $94 million at
6/29/96 in addition to sales reductions caused by a cost overrun on a
major contract and a contract value reduction because of delays in
completing the TMRC contract. Although additional cost overruns and
contract value reductions are not expected, the reduced sales level is
anticipated for the balance of the year as new management strives to
rebuild the backlog. The net sales decline for the six months results
almost entirely from the decreased sales of the second quarter.
Cost of sales for the quarter as a percentage of sales increased to
94.5%
from 73.1%, primarily because of the aforementioned cost overrun and
contract value reductions in addition to provisions for inventory
obsolesence and write downs of inventory to net realizable value. The
increase in cost of sales as a percentage of sales for the six months
results almost entirely from the increases of the second quarter.
Selling, general and administrative expenses increased by $2.1 million
(34%) in the second quarter and $2.6 million (21%) in the six months.
These increases resulted primarily from higher proposal costs,
increased
bad debts provisions and higher Argentine subsidiary S, G & A
expenses.
Research and development costs increased by $549 thousand (31%) in the
quarter and $1.3 million (41%) in the six months because of increased
new
product development in telecommunications and telemetry product lines.
Interest expense (net of interest income) increased by $406 thousand
for
the six months because of interest expense on taxes owed to the IRS
and
lower interest income at the Turkish subsidiary due to lower cash
balances during 1996.
The effective income tax rates for the second quarter were a benefit
of 23.9% for 1996 and a 34.9% rate for 1995. The effective rates for
the six months were a benefit of 22.2% for 1996 and a 34.8% income tax
rate for 1995. The lower rates for 1996 are primarily the result of
foreign income (taxed at a higher rate than US income) being a smaller
portion of 1996 pretax results than in 1995.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3, "Legal Proceedings," in Registrant's
Annual
Report on Form 10-K, Part I, for the year ended December 31, 1995,
regarding the arbitration cross claims of Loral Defense Systems-Eagan
("Loral") and Registrant. On June 13, 1996, Loral filed an Amended
Arbitration Demand, increasing its claim from $12.4 million to $18.4
million. On July 23, 1996, Registrant filed its Response to Loral's
Amended Demand denying all of Loral's claims and filed its own Amended
Arbitration Counterclaim Demand, seeking in excess of $65 million for
Loral's misconduct in the performance of the subcontract between
Registrant and Loral. The parties are in the process of selecting a
panel of three arbitrators. The Registrant believes that it has
meritorious defenses and counterclaims to Loral's claim.
The American Arbitration Association has established dates for the
exchange of documents, completion of depositions and exchange of Pre-
Hearing Briefs. The American Arbitration Association anticipates that
hearings could be held in December 1996.
ITEM 5. OTHER INFORMATION
On July 25, 1996, the Registrant's Board of Directors approved,
subject to stockholder approval, the 1996 Equity Incentive Plan for
the grant of incentive and nonqualified stock options to employees of
the Registrant and established a reserve of 500,000 for issuance under
the plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following is a list of Exhibits filed as part of this
report:
Exhibit 2 - None
Exhibit 3(i) - Restated Certificate of Incorporation (filed
as Exhibit 3(i) to Registrant's Annual Report
on Form 10-K for the year ended
December 31, 1994 and incorporated herein by
reference).
Exhibit 3(ii) - By-Laws (filed as Exhibit 3(ii) to
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 and
incorporated herein by reference).
Exhibit 4 - None
Exhibit 10 - None
Exhibit 11 - None
Exhibit 15 - Letter re unaudited interim financial
information
Exhibit 18 - None
Exhibit 19 - None
Exhibit 22 - None
Exhibit 23 - None
Exhibit 24 - None
Exhibit 27 - Financial Data Schedule (electronic filing
only)
Exhibit 99 - None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the Second Quarter of
1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the
registrant has duly caused this report to be signed on its behalf by
the
undersigned thereunto duly authorized.
AYDIN CORPORATION
DATE August 13, 1996 /s/ Herbert Welber
Herbert Welber, Controller
DATE August 13, 1996 /s/ Robert A. Clancy
Robert A. Clancy, Secretary
<PAGE>
EXHIBIT 15
Securities and Exchange Commission
Washington, D.C. 20549
We have made a review of the condensed financial statements of Aydin
Corporation and subsidiaries as of June 29, 1996, and for the
three-month
and six-month periods ended June 29, 1996 in accordance with standards
established by the American Institute of Certified Public Accountants,
and issued our report thereon dated August 7, 1996. We are aware that
such financial statements and our above-mentioned report appearing in
the
Form 10-Q of Aydin Corporation for the quarter ended June 29, 1996 are
being incorporated by reference in the Registration Statement Nos.
33-61537; 33-53549; 33-34863; 33-22016; 33-14284; 2-97645; 2-93603;
2-77623; 2-64093 and that such report pursuant to Rule 436(c) of the
Securities Act of 1933 is not considered a part of a registration
statement prepared or certified by an accountant or a report prepared
or
certified by an accountant within the meaning of Sections 7 and 11 of
that Act.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
August 7, 1996<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Second Quarter Report to Stockholders and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-29-1996
<CASH> 2,099
<SECURITIES> 7,721
<RECEIVABLES> 34,532
<ALLOWANCES> 0
<INVENTORY> 22,636
<CURRENT-ASSETS> 115,423
<PP&E> 84,412
<DEPRECIATION> 59,510
<TOTAL-ASSETS> 140,751
<CURRENT-LIABILITIES> 36,462
<BONDS> 0
<COMMON> 5,126
0
0
<OTHER-SE> 93,486
<TOTAL-LIABILITY-AND-EQUITY> 140,751
<SALES> 26,706
<TOTAL-REVENUES> 26,706
<CGS> 25,228
<TOTAL-COSTS> 36,058
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 220
<INCOME-PRETAX> (9,352)
<INCOME-TAX> (2,232)
<INCOME-CONTINUING> (7,120)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,024)
<EPS-PRIMARY> (1.37)
<EPS-DILUTED> (1.37)
</TABLE>
