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
April 1, 1996
(VIA EDGAR)
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, 1995. The filing fee
of $250.00 was paid by Fedwire on March 22, 1996.
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 1994.
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, 1995__.
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. _X_
The aggregate market value of 4,497,482 shares of Common Stock
held by non-affiliates, computed using the closing price as of
March 19, 1996, was $67,462,230.
Number of shares of Common Stock outstanding as of March 19, 1996
- - 5,123,125.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by
reference:
- 1995 Annual Report to Stockholders of Aydin Corporation
(hereinafter, "Annual Report") - Parts I and II
- Proxy Statement of Aydin Corporation, dated March 28,
1996 (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, p. 6
Item 4 Submission of Matters to a Vote
of Security Holders . . . . . . 10-K, p. 6
Executive Officers of the
Registrant . . . . . . . . . . 10-K, pp. 6-7
PART II
Item 5 Market for the Registrant's
Common Equity and Related
Stockholder Matters . . . . . . Annual Report, p. 24
Item 6 Selected Financial Data . . . . Annual Report, p. 23
Item 7 Management's Discussion and
Analysis of Financial Condition
and Results of Operation . . . . Annual Report, p. 22
Item 8 Financial Statements and
Supplementary Data . . . . . . . Annual Report,
pp. 14-21, 23
Item 9 Changes In and Disagreements
With Accountants on Accounting
and Financial Disclosure . . . . Proxy Statement, p. 10
PART III
Item 10 Directors and Executive Officers
of the Registrant . . . . . . . Proxy Statement,
pp. 3-4, 8-9
10-K, pp. 6-7
Item 11 Executive Compensation . . . . . Proxy Statement,
pp. 5-6, 7
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. 9
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on
Form 8-K . . . . . . . . . . . . 10-K, pp. 9-10
Exhibits
(page 1)
<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 domestically of four major operating and
two smaller support divisions, and three foreign operating
subsidiaries. The divisions and subsidiaries are profit
centers each with engineering, manufacturing, marketing and
accounting functions.
(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 classes of products
(among which overlapping does occur) for each of the last three
years:
<TABLE>
<CAPTION>
1995 1994 1993
____ ____ ____
<S> <C> <C> <C> <C>
(1) Telecommunications 25 % 30 % 27 %
(2) Airborne & Ground Data
Acquisition and Avionics 34 29 22
(3) Computer Equipment and Software 23 22 22
(4) Radars, Radar Simulation,
Integration and Modernization 6 5 8
(5) Command, Control and
Communications Systems 12 14 21
____ ____ ____
Totals 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 five
classes of products as set forth above and as described below:
(1) Telecommunications
Aydin engineers, manufactures and sells microwave digital
and analog transmission equipment and systems for
commercial and military applications which include
wireless and hybrid fiber coax telephony communications
equipment, cellular range extender, line-of-site (LOS)
microwave radios, satellite earth stations, time division
multiple access (TDMA) terminals and high power
transmitters, portable communications terminals,
troposcatter networks and wired network access products.
Aydin also installs turnkey telecom systems.
(2) Airborne and Ground Data Acquisition and Avionics
Aydin provides airborne equipment and systems to gather
critical information and to process, format and transmit
to the ground through communication data links from a
communications satellite, spacecraft, aircraft and/or
missile. Aydin's terminals receive this data on the
ground and analyze it further for display to track and
control.
(3) Computer Equipment and Software
Aydin sells a line of commercial, high-resolution cathode
ray tube (CRT) monitors ranging in size from 10 inches to
29 inches. Workstations are also offered, mostly for the
process control industry. Aydin also offers ruggedized
and TEMPEST-qualified versions of the same for military
applications. Software is written by Aydin for commercial
and military purposes for specific applications such as
radar simulation, modernization and integration; command,
control and communications; and air traffic control
systems.
(page 2)
<PAGE>
(4) Radars, Radar Simulation, Integration and Modernization
Aydin has developed a modern 3-dimensional tactical air
defense radar and has completed and/or is working on
several projects in radar simulation, radar integration
and automation of manual radars. Modernization of
previously designed radars is also done by Aydin.
(5) Command, Control and Communications Systems
Aydin provides turnkey command, control and communications
(C3) systems with or without radars for defense systems,
both fixed and mobile.
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 upon a 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.
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>
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
U.S. Government Agencies (direct and indirect),
principally Department of Defense (1) $ 44,309,000 $ 42,015,000 $ 38,600,000
Export and foreign sales including equipment sold
to other U.S. companies for export (1) (2) (3) 58,059,000 75,166,000 78,532,000
U.S. commercial and industrial business 38,239,000 25,260,000 24,343,000
____________ ____________ ____________
TOTAL NET SALES $140,607,000 $142,441,000 $141,475,000
____________ ____________ ____________
____________ ____________ ____________
<FN>
(1) The U.S. Government, the Government of Turkey and CTI
(Argentina) 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 $16,549,000 in
1995, $24,888,000 in 1994, and $45,134,000 in 1993. Sales to
CTI (Argentina) amounted to $15,739,000 in 1994.
(2) Includes foreign sales of $28,943,000 for 1995, $37,167,000
for 1994, and $22,958,000 for 1993.
(3) A breakdown of total export and foreign sales by geographic
area follows in section (d) below.
</TABLE>
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.
(page 3)
<PAGE>
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, 1995 was $106
million as compared to $134 million at December 31, 1994.
Approximately 35% of the 1995 backlog is not reasonably expected
to be filled within the current year.
The backlog includes approximately $41 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 year.
This contract was signed in June, 1990 and became effective in
October, 1990.
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 1995, 1994, and 1993 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>
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
Company-sponsored research
and development on direct
cost basis $6,603,000 $5,159,000 $4,782,000
Customer-sponsored research
and development activities $2,873,000 $4,859,000 $4,125,000
</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 eleven years has
been approximately $7.4 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 remaining. A court has
granted a declaratory judgement requiring the fourth carrier to
pay all cleanup costs in excess of the $6.7 million already
received. This judgement is being appealed by the fourth
carrier. 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 1400 persons, with operations
concentrated principally in the Philadelphia and San Jose areas.
Employer-employee relations are considered to be satisfactory.
(page 4)
<PAGE>
(d) Financial Information About Foreign and Domestic Operations
and Export Sales
The Company had no significant foreign operations prior to 1991
although a $210 million contract from the Government of Turkey
became effective in October, 1990 with approximately 35% of this
contract being performed by the Company's Turkish subsidiary.
Foreign assets included in the consolidated balance sheet
amounted to $25.6 million, $25.2 million, and $22.9 million at
December 31, 1995, 1994, and 1993, respectively. Of these
amounts, $.4 million, $6.7 million, and $10.0 million at December
31, 1995, 1994, and 1993, respectively, are cash and short term
investments of the Company's Turkish subsidiary consisting mainly
of U.S. dollar denominated interest-bearing time deposits.
Foreign sales and pretax income for 1995 amounted to $28.9
million and $5.4 million, respectively. Foreign sales and pretax
income for 1994 amounted to $37.2 million and $6.7 million,
respectively. Foreign sales and pretax income for 1993 amounted
to $23.0 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 1995, 1994, and 1993 by geographic
area are set forth below:
<TABLE>
<CAPTION>
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
Asia $ 6,224,000 $ 6,788,000 $ 8,688,000
Africa 4,003,000 2,553,000 2,301,000
Europe 35,360,000 41,465,000 59,426,000
North America 1,605,000 1,852,000 528,000
South America 10,604,000 22,125,000 6,745,000
Other 263,000 383,000 844,000
___________ ___________ ___________
Total export and
foreign sales $58,059,000 $75,166,000 $78,532,000
___________ ___________ ___________
___________ ___________ ___________
</TABLE>
On a percentage basis, export and foreign sales (direct and
indirect) accounted for approximately 41% of total sales in 1995,
53% in 1994, and 56% in 1993. 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. Two owned
properties totalling 110,000 square feet are subject to mortgages
and seven owned properties totalling 430,000 square feet are
unencumbered. All major leased properties are held under leases
expiring between 1998 and 1999, 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 June 16, 1995, the Company filed a claim with Loral Defense
Systems-Eagan (formerly Unisys Corporation), a subcontractor to
the Company on the TMRC program with the Government of Turkey, in
the sum of $19.04 million
(page 5)
<PAGE>
for losses sustained as a result of Loral's breach of the
subcontract. On June 30, 1995, Loral filed a Demand For
Arbitration with the American Arbitration Association claiming
damages of $12.4 million for breach of contract by the Company.
On July 12, 1995, the Company filed a revised claim of $32.8
million against Loral. Both arbitration claims are on hold
pursuant to an interim settlement agreement between the parties.
The Company believes that it has meritorious defenses and
counterclaims and expects the outcome to have no material adverse
impact on the Company's financial position.
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 1995.
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 19, 1996,
are as follows:
AYHAN HAKIMOGLU, CHAIRMAN AND C.E.O. (1)
68. First elected 1967. Chairman of the Board of
Directors; President of the Company through February 1992
and from March 1994 through December 1994.
DONALD S. TAYLOR, PRESIDENT
52. 1995. President of the Company and President Aydin
Corporation (East) Division (systems integration,
manufactures military display processors, color display
terminals, workstations) since January 1995. From 1970
through 1994 held various positions with Computer Sciences
Corporation, the last 13 years as Vice President of its
Integrated Systems Division.
JOHN F. VANDERSLICE, EXECUTIVE VICE PRESIDENT
54. 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.
DEMIRHAN HAKIMOGLU, VICE PRESIDENT (2)
56. 1992. Vice President of the Company. Chairman of the
Board and CEO of the Company's foreign subsidiary,
Aydin Yazilim A.S. (software design, manufactures digital
microwave radios, telcom equipment and systems), 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)
55. 1990. Vice President of the Company and President of
Aydin Corporation (West) Division (manufactures digital and
analog microwave radios, satellite earth station equipment)
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 since February 1987.
THOMAS M. LOCASALE, VICE PRESIDENT
57. 1994. Vice President of the Company and President of
Aydin Telecom Division (manufactures digital wireless
telephony equipment and systems) since October 1994. From
September 1988 to October 1994, he was Executive Vice
President of Aydin's Computer and Monitor Division
(manufactures communication and air defense systems). Prior
to the merger of the Computer and Monitor divisions in
1988, he was Executive Vice President of Monitor Systems
Division (manufacturer of telemetry, data acquisition,
network and satellite communication products) from
May 1965.
HERBERT WELBER, CONTROLLER AND ASSISTANT TREASURER
60. 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.
Each of the above officers was elected at the Annual Meeting of
the Board of Directors on April 28, 1995. Officers are elected
each year after the Annual Meeting of Stockholders. Each serves
subject to the discretion of the Board
(page 6)
<PAGE>
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.
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 24 of the Annual Report. The Company has no present
plans to pay any cash dividends. 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 in
December 1992 that no cash dividend will be declared or paid 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 23 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 22 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 14 to 21, inclusive, and the data under the
heading, "Quarterly Financial Data" on page 23, of the Annual
Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
_________________________________________________________
Incorporated by reference is the information under the heading,
"Independent Auditors" on page 10 of the Proxy Statement.
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 3-4 of the Proxy Statement, the
information under the heading, "Compliance With Section 16(a) of
the Exchange Act" on pages 8 and 9 of the Proxy Statement, and
the information under the heading, "Executive Officers of the
Registrant" on pages 6 and 7, 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
Values", "Employment Contracts and Termination of Employment
Arrangements", and "Compensation Committee Interlocks and Insider
Participation" on pages 5-6 and 7 of the Proxy Statement.
(page 7)
<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, 1995
and 1994.
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.
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 II - Valuation and Qualifying Accounts
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:
3(i) Restated Certificate of Incorporation (filed as Exhibit
No. 3(i) to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 and incorporated herein
by reference).
3(ii) By-Laws (filed as Exhibit No. 3(ii) to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994
and incorporated herein by reference).
10.1 Restricted Stock Agreement (filed as Exhibit No. 10.1 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference).
10.2 Form of Individual Non-Qualified Stock Option (filed as
Exhibit No. 10.2 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.3 The 1981 Incentive Stock Option Plan (filed as Exhibit
No. 10.3 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 and incorporated herein
by reference).
10.4 The 1983 Incentive Stock Option Plan (filed as Exhibit
No. 10.4 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 and incorporated herein
by reference).
10.5 The 1984 Non-Qualified Stock Option Plan (filed as Exhibit
No. 10.5 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 and incorporated herein
by reference).
(page 8)
<PAGE>
10.6 The 1994 Incentive Stock Option Plan (filed as Exhibit
No. 10.6 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 and incorporated herein
by reference).
13 Annual Report to Security Holders
21 Subsidiaries of Registrant
23.1 Consent of Independent Auditors, Grant Thornton LLP
23.2 Consent of Independent Auditors, KPMG Peat Marwick LLP
27 Financial Data Schedule (electronic filing only)
99.1 Independent Auditors' Report, Grant Thornton LLP
99.2 Independent Auditors' Report, KPMG Peat Marwick LLP
All other exhibits not listed above are omitted because they are
inapplicable.
(b) Reports on Form 8-K
___________________
No reports on Form 8-K were filed during the Fourth Quarter of 1995.
<TABLE>
<CAPTION>
AYDIN CORPORATION
SCHEDU LE II - VALUATION AND QUALIFYING ACCOUNTS
FOR TH E YEARS 1995, 1994, AND 1993
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
DESCRIPTION Balance at ADDITIONS Deductions - Balance at
Beginning Charged to Charged to Describe End of Period
of Period Costs and Other Accounts
Expenses - Describe
<S> <C> <C> <C> <C> <C>
Year 1995
_________
Deducted from asset accounts:
Allowance for doubtful accounts $ 323,000 $ 19,000 $ 53,000 (1) $ 289,000
Raw materials inventory reserve 2,450,000 1,120,000 2,314,000 (2) 1,256,000
__________ __________ __________ __________
Totals $2,773,000 $1,139,000 $2,367,000 $1,545,000
Year 1994
_________
Deducted from asset accounts:
Allowance for doubtful accounts $ 331,000 $ 43,000 $ 51,000 (1) $ 323,000
Raw materials inventory reserve 2,029,000 1,240,000 819,000 (2) 2,450,000
__________ __________ __________ __________
Totals $2,360,000 $1,283,000 $ 870,000 $2,773,000
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
<FN>
(1) Uncollectible accounts written off, net of recoveries.
(2) Obsolete inventory written off.
</TABLE>
(page 9)
<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 28, 1996 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 28, 1996
Ayhan Hakimoglu
Chief Executive Officer and
Chairman of the Board of Directors
By: /s/ Donald S. Taylor Dated: March 28, 1996
Donald S. Taylor
President and Director
By: /s/ John F. Vanderslice Dated: March 28, 1996
John F. Vanderslice
Vice President and Director
By: /s/ Herbert Welber Dated: March 28, 1996
Herbert Welber
Controller and Assistant Treasurer
Principal Accounting Officer
By: /s/ Jay L. Landis Dated: March 28, 1996
Jay L. Landis
Treasurer
Principal Financial Officer
By: /s/ I. Gary Bard Dated: March 28, 1996
I. Gary Bard
Director
By: /s/ Nev A. Gokcen Dated: March 28, 1996
Nev A. Gokcen
Director
By: /s/ Harry D. Train, II Dated: March 28, 1996
Harry D. Train, II
Director
(page 10)
<PAGE>
EXHIBIT INDEX
_____________
Exhibit Description
No. of Exhibit
_______ ____________
3(i) Restated Certificate of Incorporation (filed as Exhibit
No. 3(i) to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 and incorporated herein by
reference).
3(ii) By-Laws (filed as Exhibit No. 3(ii) to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.1 Restricted Stock Agreement (filed as Exhibit No. 10.1 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference).
10.2 Form of Individual Non-Qualified Stock Option (filed as Exhibit
No. 10.2 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by
reference).
10.3 The 1981 Incentive Stock Option Plan (filed as Exhibit No. 10.3
to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference).
10.4 The 1983 Incentive Stock Option Plan (filed as Exhibit No. 10.4
to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference).
10.5 The 1984 Non-Qualified Stock Option Plan (filed as Exhibit No.
10.5 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994 and incorporated herein by reference).
10.6 The 1994 Incentive Stock Option Plan (filed as Exhibit No. 10.6
to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference).
13 Annual Report to Security Holders
21 Subsidiaries of Registrant
23.1 Consent of Independent Auditors, Grant Thornton LLP
23.2 Consent of Independent Auditors, KPMG Peat Marwick LLP
27 Financial Data Schedule (electronic filing only)
99.1 Independent Auditors' Report, Grant Thornton LLP
99.2 Independent Auditors' Report, KPMG Peat Marwick LLP
<PAGE>
Exhibit 13
LETTER TO THE STOCKHOLDERS
Dear Stockholder:
The total sales for 1995 were $140,607,000, versus sales of
$142,441,000 in 1994. In 1995, the Company had a net income of
$3,930,000 or $.77 per share, as compared to a net income of
$5,047,000 or $1.01 per share in 1994.
Aydin's backlog at the end of 1995 was approximately $106
million, as compared to $134 million at this time last year;
however, there is an additional $150 million of backlog which is
subject to prototype approval and the receipt of production
quantity releases which are expected to be received over several
years. The Company has additional production options not included
in the above figures.
During 1995, several divisions were combined forming Aydin
Corporation (East), and new president, Dr. Donald Taylor, focused
on expanding Aydin's current military Systems Integration (SI)
business into the non-military and commercial/industrial
marketplace. Corporate Sales and Marketing was reorganized and
assigned to Dr. Donald Taylor. This was all done to strengthen
the Company and enable it to be more competitive in the
procurement of programs.
Although 1995 was a challenging year for Aydin, the Company
remains optimistic for new business opportunities in 1996. The
Company is continuing to bid on large multi-year and small
military and industrial programs, including several foreign
projects.
The Company growth strategy is to continue focusing on its
basic industrial, military, system integration and
telecommunication business.
The Aydin Telecom Division was formed in 1994 to develop,
market and sell digital wireless telephony equipment & systems,
digital telephony networks for video cable systems with a
DigiCall trademark, network access equipment, satellite modems,
satellite TDMA next generation equipment, transcoders and certain
types of multiplexers.
In the telecommunications field, Aydin (West) is continuing as
a separate Division to market and sell microwave digital radios,
cell extender for cellular systems, high power amplifiers and
other satellite earth station equipment, troposcatter equipment
and turnkey telecom systems.
Aydin plans to be a major factor in digital wireless telephony
and cable video systems telephony products and network access
equipment. As a result of the new law, the Company expects
long-distance carriers as well as cable TV companies to enter
into competition with the Baby Bells in local telephony business.
Similarly, local telephone companies will enter into
long-distance telephony.
Digital wireless systems are competitive in providing telephony
networks for developing countries such as Russia, China, and
others who wish to expand their telephone networks.
Aydin expects that there will be a large market in telecom
equipment business of the type Aydin Telecom and Aydin (West)
will sell in the USA and worldwide.
Aydin continues spending significant amounts for the
development of a new series of microwave digital LOS radios and
DigiCallT equipment defined above.
Work and system software testing is in the final stages of the
Command, Control, and Communication program (Turkish Mobile Radar
Complexes), and is being done at Aydin's Turkish subsidiary.
This program, valued at approximately $210 million, was awarded
to Aydin by the Turkish Government in late 1990. Aydin expects
significant cash collections from this program starting in the
first quarter of 1996.
Ayhan Hakimoglu
Chairman of the Board
February 23, 1996
[PHOTO]
Mr. Ayhan Hakimoglu
[PHOTO]
Dr. Donald S. Taylor
(page 1)
<PAGE>
THE COMPANY
CAPABILITIES. Aydin's major business areas are described below:
Telecommunications-Aydin offers microwave digital and analog
transmission equipment and systems for commercial and military
applications which include wireless and hybrid fiber coax
telephony communications equipment, cellular range extender,
line-of-sight (LOS) microwave radios, satellite earth stations,
TDMA terminals and high power transmitters, portable
communications terminals, troposcatter networks and wired network
access products. Aydin also installs turnkey telecom systems.
Airborne and Ground Data Acquisition and Avionics-Aydin provides
airborne equipment and systems to gather critical information and
to process, format and transmit to the ground through
communication data links from a communications satellite,
spacecraft, aircraft and/or missile. Aydin's terminals receive
this data on the ground and analyze it further for display to
track and control. Computer Equipment and Software-Aydin sells a
line of commercial, high-resolution CRT monitors ranging in size
from 10 inches to 29 inches. Workstations are also offered,
mostly for the process control industry. Aydin also offers
ruggedized and TEMPEST-qualified versions of the same for
military applications. Software is written by Aydin for
commercial and military purposes for specific applications such
as radar simulation, modernization and integration; command,
control and communications; and air traffic control systems. Air
and Other Traffic Control-Aydin offers radar approach control
systems including appropriate radars. Aydin also manufactures VHF
and UHF radios for ground-to-air communication. Radars, Radar
Simulation, Integration and Modernization-Aydin has developed a
modern 3-dimensional tactical air defense radar and is continuing
work on several projects in radar simulation, radar integration
and automation of manual radars. Modernization of previously
designed radars is also done by Aydin. Command, Control and
Communications-Aydin provides turnkey command, control and
communications (C3) systems with or without radars for defense
systems, both fixed and mobile. Systems Integration-Some of the
capabilities described above consist of system integration. Aydin
has expanded its system integration business into
industrial/commercial systems as well as continuing with military
systems.
ORGANIZATION AND MANUFACTURING PLANTS Four major divisions, two
smaller support divisions and three operational subsidiaries,
form Aydin's organization. The divisions and subsidiaries are
profit centers, maintaining individual engineering,
manufacturing, marketing and accounting functions.
The manufacturing plants, concentrated outside of Philadelphia,
Pennsylvania, and in San Jose, California, have approximately
575,000 square feet of space. The Company's foreign subsidiaries,
with total plant space of an additional 110,000 square feet, are
situated in Ankara, Turkey; Buenos Aires, Argentina; and
Hertfordshire, England. An office is open in Belgium as well to
support the NATO RIS Programs.
The complementary nature of Aydin's divisions and product lines
enables the divisions to work together to develop and market
complete systems. Aydin engineers and computer software
specialists have the capability to design any communications,
information processing, air defense or air traffic control
network utilizing Aydin's various product lines. The Company
offers a broad range of products due to its ability to combine
analog microwave engineering methods with digital techniques and
software.
SALES AND MARKETING U.S. Corporate marketing, located in
suburban Washington, DC, supports the direct sales forces of the
divisions. Major cities and key military bases are covered by
Aydin sales personnel or manufacturers' representatives. For
exports, Aydin's sales efforts are conducted by its international
subsidiaries, its international sales network and representatives
in many countries.
Proprietary products and systems are available from Aydin,
although an inventory of finished goods is not generally
maintained. About one-half of the sales is attributable to
standard products and systems, including modifications thereof,
and the other half is for custom-designed and engineered
equipment based on customers' specific requirements.
Customers include domestic and foreign electronic and aerospace
firms, regulated and unregulated telephone organiza-
[PHOTO]
Troposcatter and LOS Communication Terminals
(page 2)
<PAGE>
tions, computer and aircraft manufacturers, large defense
contractors, industrial and financial concerns, process control
companies, research laboratories, foreign governments, and the
military branches and other agencies of the U.S. Government.
Industrial business was approximately 27% of the total revenues
in 1995, while 32% was comprised of sales in which Aydin was a
prime or subcontractor to the military branches and other
agencies of the U.S. Government. The remaining 41% of revenues
was from overseas sales including equipment sold to other U.S.
companies for export.
SUBSIDIARIES. Aydin has three operating international
subsidiaries, all 100%-owned except Aydin S.A., which is 80%
owned. Aydin Controls (U.K.) Ltd., located in Hertfordshire,
England, provides sales and service for color terminals, display
processors, high resolution color monitors and telecommunications
products. In Argentina, Aydin S.A. sells and installs wireless
and other telecommunications products and systems.
The Company's subsidiary in Turkey, Aydin Yazilim ve Elektronik
A.S., is located in Ankara. Aydin Yazilim ve Elektronik is
manufacturing the last portion of the Turkish Mobile Command,
Control and Communications (C3) system in Turkey. This subsidiary
manufactures most of Aydin's products and also writes software
for NATO and Turkish Programs in conjunction with Aydin. Aydin
Yazilim enhances Aydin's export business.
All of the above mentioned subsidiaries have extensive
technological capabilities.
See Note I to the financial statements for more information
concerning export sales.
RESEARCH AND NEW PRODUCT DEVELOPMENT. Product development
expenditures in 1995 were 7% of Aydin's revenues. About 30% of
new product development was done through customer contracts.
OFFICERS
_________________________________________________
Ayhan Hakimoglu *
Chairman of the Board, Chief Executive Officer
Dr. Donald S. Taylor *
President & President, Aydin Corp. (East)
John F. Vanderslice *
Exec. Vice President & President, Aydin Vector
Demirhan Hakimoglu *
Vice President & Chief Executive Officer,
Aydin Yazilim ve Elektronik A.S.
Dr. Mats J. Ofverberg *
Vice President & President, Aydin Corp. (West)
Thomas M. LoCasale *
Vice President & President, Aydin Telecom
Larry Radbill
General Manager, Controls Unit of Aydin Corp. (East)
Michael Moore
President, Aydin Electro Fab
Robert Kamin
General Manager, Raytor Unit of Aydin Corp. (East)
Gerald Slehofer
President, Aydin Molded Devices
Alexis Mozarovski
President, Aydin S.A.
Serdar Akkor
General Manager,
Aydin Yazilim ve Elektronik A.S.
George Isaacs
Chief Executive Officer, Aydin Controls (U.K.) Ltd.
Jay L. Landis
Treasurer & Assistant Secretary
Herbert Welber *
Controller & Assistant Treasurer
Robert A. Clancy
Secretary
Zeynep B. Hakimoglu
Assistant Secretary
BOARD OF DIRECTORS
___________________________________________________
Ayhan Hakimoglu
Chairman of the Board
Dr. Donald S. Taylor
President
Dr. Nev A. Gokcen **
Retired. former Thermodynamicist
Department of the Interior
Bureau of Mines, Albany, Oregon
Admiral Harry D. Train, II,
USN (Ret.) **
General Manager, Strategic Research and Management Services
Division of Science Applications
International Corporation, Norfolk, Virginia
I. Gary Bard **
Vice President & General Manager, Federal Systems Solutions
Integration Division
of Unisys Corporation
John F. Vanderslice
Exec. Vice President & President, Aydin Vector
* Executive Officer
** Member of the Audit Committee
[PHOTO]
Offshore Troposcatter Communication System;
On-Shore Terminal Shown
(page 3)
<PAGE>
TELECOMMUNICATIONS
Aydin offers microwave digital and analog transmission
equipment and systems for commercial and military applications,
which include wireless and hybrid fiber coax telephony
communications equipment, cellular range extender, line-of-sight
(LOS) microwave radios, satellite earth stations, TDMA terminals
and high power transmitters, portable communications terminals,
troposcatter communications and wired Network Access products.
Aydin also installs turnkey telecom systems.
WIRELESS AND HYBRID FIBER COAX TELEPHONY. Aydin is developing
its DigiCall(TM) product line which combines our microwave and
digital capabilities to provide voice, data and video
conferencing services over wireless and hybrid fiber coax
networks.
The Aydin DigiCall(TM) Series 6000 is a radio frequency-based
digital loop carrier system that uses enhanced TDMA/FDMA to
provide a cost effective wireless link between the telecom
service provider and service subscribers. Voice quality is far
superior to standard cellular telephone.
The Aydin DigiCall(TM) Series 7000 provides Telephony and high
speed data services via the hybrid fiber coax cable system owned
by the Cable TV companies.
Aydin's DigiCall(TM) systems interface with all standard
telephone infrastructure equipment and are transparent to the
cable TV, central office telephone plant and subscriber telephone
equipment.
The Aydin AyCell provides an inexpensive method of expanding
cellular telephone coverage to areas where calls cannot currently
be completed. Functioning as a user-transparent remote antenna
link, the AyCell will enable an existing cell to communicate with
areas that were previously "blacked out" due to geographical or
man-made obstructions. Applications include coverage inside
convention centers, shopping malls and sports arenas.
Aydin's subsidiary in Buenos Aires is continuing installation
of a cellular telephony network for a local cellular telephone
company in Argentina.
LINE-OF-SIGHT RADIOS. Many types of medium and light route
digital and analog microwave radios for commercial and military
use are manufactured by Aydin. These radios include light route
AMLD analog and AMLDD digital low density commercial radios, the
AMCD series of medium route fixed frequency high density digital
radios and a new synchronous family of radios, the AMSD series.
The AN/GRC-222 tactical digital radio, used by the U.S. Army in
Desert Storm, is manufactured by Aydin.
For commercial and military users requiring field tunable
digital radios, the AMD and TPR series is available for tactical,
strategic and emergency uses. These are radios available for use
with North American or CEPT European data rates from 1.5 to 45
Mbps, and cover tunable bands from 900 MHz to 15 GHz.
For medium and heavy route U.S. domestic and international
commercial markets, the AMCD and AMSD series of fixed frequency,
high density digital radios are offered. Both 64 quadrature
amplitude modulation (QAM) and 128 Trellis Coded Modulation (TCM)
techniques are used to satisfy the bandwidth requirements of
modern digital systems. E3 (34 Mbps), DS3 (45 Mbps), SONET and
SDH (51 and 155 Mbps) data rates and frequency options with 6, 7,
and 11 GHz versions are available in 19-inch EIA rack
configurations. These radios offer future proof technology
platforms allowing network operators to upgrade from asynchronous
to synchronous transport.
The low cost AMLD series of low density analog and digital
radios are intended for the light route commercial market. Sales
of analog microwave systems continue to be strong, particularly
in the Third World, as analog systems are still the most cost
effective solution for light route systems. The digital
variations are available with optional multiplexers in North
American or CEPT rates up to 8 Mbps. Aydin's radio products can
be combined with the Aydin multiplex products providing
significant Aydin content in turnkey systems.
[PHOTO]
DigiCall(TM) Wireless Equipment: Network Access Subsystem (left)
and Base Transceiver Station (right)
[PHOTO]
Wireless Single-User Subscriber Terminal
(page 4)
<PAGE>
SATELLITE COMMUNICATIONS. Aydin manufactures the major products
used in satellite earth stations, such as high power amplifiers
(transmitters), medium power and low noise GaAs amplifiers,
up/down converters, digital data buffers, modems featuring
forward error correction and integrated TDMA Terminals.
Aydin and COMSAT Laboratories are cooperating to market and
manufacture the Second Generation Satellite TDMA Terminals. These
terminals, which significantly reduce the size and cost over
first generation terminals, are easily reconfigurable to meet a
user's changing traffic needs.
Current Aydin satellite communication high speed modems can
operate up to 420 Mbps. Aydin modems are installed in major
government and commercial networks in North America and Europe.
These products are used for both primary links and as a back-up
to cable service. Customers include AT&T, KDD (Japan), British
Telecom, France Telecom, Telesat Canada, and Embratel (Brazil).
HIGH POWER TRANSMITTERS AND MAGNETICS. Aydin continues to
provide commercial high power transmitters (HPAs) for satellite
earth stations. Aydin's line of compact, intelligent,
microprocessor controlled TWT and Klystron microwave amplifiers
offers a distinct advantage over the competition. Aydin's latest
HPA product is an outdoor-mounted 400 Watt Tri-Band (C, X,
Ku-Band) TWTA suitable for mobile military SATCOM applications.
Aydin has also recently expanded its Klystron Power Amplifier
product line to include a 2.4 Kilowatt, 17.3 to 18.1 GHz HPA for
use in direct broadcast television uplink applications.
In addition to the HPA business, Aydin has maintained a steady
presence in magnetics products, supplying high power transformers
to the electronics industry. Aydin's high efficiency television
transmitter upgrade transformers are expected to show continuing
demand.
PORTABLE COMMUNICATION TERMINALS. Aydin is producing the AYCOM
portable line-of-sight communication terminal with two voice and
data PABX, capable of providing service for up to 96 subscribers.
The AYCOM terminal contains an Aydin Hot-Standby protected
microwave radio configured for terminal operation and an AT&T
Definity G3Vs digital automatic PABX with software selectable
line and station capabilities. The AYCOM terminal is the perfect
solution for short-haul (40-50 Km), low density remote subscriber
link requirements.
TROPOSCATTER COMMUNICATIONS. As one of the few manufacturers of
troposcatter equipment, Aydin has analog and digital versions of
this equipment for both transportable and fixed station use.
Aydin's digital troposcatter modem is the most modern dual or
quad diversity adaptively equalized modem. Troposcatter terminals
are used in air defense systems, command and control systems, on
offshore platforms and for military tactical communications.
Aydin's digital troposcatter terminals have been in production
for years and are being delivered to international customers.
Some customers are classified, but others include the U.S.
Armed Forces, Argentina, Australia, Chile, Egypt, Finland,
Malaysia, the Philippines, Saudi Arabia and South Korea. Aydin
provides ongoing support to these customers for maintenance and
upgrades.
[PHOTO]
Satellite TDMA Terminal (Second Generation)
[PHOTO]
8 Mb/s Troposcatter Equipment including Aydin's new Digital
Modems (2 terminals)
(page 5)
<PAGE>
NETWORK ACCESS EQUIPMENT. Aydin's network access unit (AYNACS
8000) provides cost effective access to public telephone networks
for today's voice, data and video applications. It integrates all
communications needs of the user of various bandwidths and
transmits them through public networks at T1 standard for
domestic market, and E1 standard for the rest of the world, to
form an integrated and coherent product family. A major
development effort is underway to expand this network access
product line to include standalone Digital Access and Cross
Connect Systems (DACS), E1/T1 conversion and HDSL products.
TRANSCODERS & MULTIPLEXERS. Aydin has a variety of T1 and E1
transcoders for voice and voiceband applications. Aydin's product
line includes T1 and E1 ADPCM 2:1 (Models 9100 and 9102) and 4:1
(Model 6441) T1 transcoders and echo cancellers for the domestic
and international marketplace. Customers include Regional Bell
Operating Companies and other service providers.
Model 9100 transcoder is equipped with unique features
including bundle cross connect and drop/insert capability,
automatic routing and protection switching and restoration. Aydin
transcoders are capable of handling Group III fax or 9600 bps
modem traffic.
The 9100 series transcoders are also offered in a single
19-inch rack mount multislot chassis for plugging in up to 11
modules.
The Aydin VDM-1000 E1 Channel Bank accepts up to 30 standard
telephone channels and combines them into E1 digital format. Both
voice and data requirements can be combined using the same
multiplexer, dependent on the channel card mix. A ruggedized
version is available for military applications.
TURNKEY TELECOMMUNICATIONS SYSTEMS. Aydin continues to respond
to the demands for highly reliable, turnkey systems which may
include line-of-sight radios, troposcatter links, satellite earth
stations, Wireless Local Loop, multiplexers, switches, fiber
optic cables, etc. Aydin has established a reputation in this
sector of the industry with turnkey systems supplied to countries
such as Argentina, Australia, Chile, Egypt, Ghana, Malaysia,
Saudi Arabia, Thailand, Turkey, Zambia and Finland.
THICK AND THIN FILM MICROCIRCUITS. Aydin's vertical integration
strategy enables the design and manufacture of small and highly
reliable RF and microwave microcircuits that operate over 100 MHz
and through 40 GHz. These hybrid devices are used in extreme
environments and meet special performance requirements and
applicable Federal-MIL Standards. Applications include high
performance telecommunications systems, satellite terminals and
microwave simulation, as well as test equipment.
[PHOTO]
Light Route, Low Cost LOS Digital Microwave Radio
[PHOTO]
Medium Route 34 or 45 Mb/s, E3 or DS3, 64 QAM, Digital Microwave
Radio
[PHOTO]
Low Density, Frequency-Tunable Microwave Radio
(page 6)
<PAGE>
DATA ACQUISITION & AVIONICS
GROUND-BASED DATA RECEIVE AND ACQUISITION SYSTEMS. Aydin
provides extensive capabilities in the reception, processing, and
analysis of data streams associated with spacecraft, aircraft and
missile systems or ground vehicles.
Aydin's satellite Telemetry, Tracking, and Control (TT&C)
product line continues to expand in response to the proliferation
of international commercial communication satellites. Key
components of INTELSAT's global system, and many regional
systems, include Aydin Subsystems which collect and distribute
satellite data.
Major remote sensing systems like NASA's Earth Observing System
(EOS) program have principal components supplied by Aydin, such
as the Space Data Receiver and CCSDS communications components.
Aydin continues to expand its telemetry product line in support
of VME & Personal Computer-based applications. Aydin's PC Bit
Synchronizer has been accepted by NASA to support on-board
shuttle operations for the Hubble Space Telescope servicing
mission. Aydin also offers systems that support missile and
aircraft testing, using data-driven architectures with advanced
database management techniques.
The personal communication satellite systems and remote imaging
and sensing fields are all expanding and are attractive markets
for Aydin's products.
AIRBORNE DATA ACQUISITION AND TRANSMISSION. Aydin systems and
equipment gather critical information from spacecraft, aircraft,
missiles and guided weapons. The data is then processed,
formatted and transmitted to a fixed or mobile station on the
ground by VHF, UHF or microwave links. Aydin designs and
manufactures both the airborne and ground-based links for many
types of applications.
Aydin airborne data acquisition systems and subsystems are
compact, rugged and ideally suited for use in hostile
environments or where space is limited. The systems are
microprocessor based, computer programmable, and utilize the
latest microcircuit technology. Aydin airborne hardware is
located on most military aircraft and missiles, and most space
programs including the Space Shuttle. Applications include flight
certification for commercial and military aircraft. Aydin
Micro-miniature Data Acquisition Units (MDAU) are approved by the
DOD for the Common Airborne Instrumentation System (CAIS)
required for use by Prime Contractors and Government Test Ranges
on major flight test programs.
The transmission equipment manufactured by Aydin includes solid
state transmitters, receivers and high power amplifiers.
Transmission power of up to 2 kilowatts is available in either
continuous or pulsed power operation. Aydin high power UHF
transmission communication links are currently being used by NASA
to relay satellite and Space Shuttle information from various
sites around the world. Advanced airborne RF processors,
modulators, power amplifiers and receivers are used in the latest
technology missile guidance systems.
For remotely piloted vehicles and precision guided weapons,
Aydin manufactures command/control data links, video
communications links and telemetry systems.
AVIONICS. Aydin offers a series of MIL-STD-1553 and ARINC 429
avionic bus systems, tape recorders, and transponders. This
equipment provides on board processing of data and communicates
with other avionic systems.
These avionic products include a small, ruggedized digital tape
recorder designed to meet the demands of commercial, industrial
and military users. The tape recorder is used in applications
which require high capacity data storage. An Aydin companion
playback unit with analytical software is used for data reduction
and analysis. A compatible digital multiplexer/interleaver
(Mini-ARMOR) has been designed to merge multiple high data
streams into a single output up to 240 MBIT/second for recording.
[PHOTO]
PC Bit Synchronizer used in NASA's Hubble Space Telescope
Servicing Mission
[PHOTO]
UHF Telemetry/Control Data Link for scientific satellites
[PHOTO]
Programmable Master Controller for airborne digital data
acquisition
[PHOTO]
Micro-miniature Data Acquisition Units for the Common Airborne
Instrumentation System (CAIS)
(page 7)
<PAGE>
COMPUTER EQUIPMENT & SOFTWARE
COLOR CRT MONITORS. Aydin provides a complete line of commercial
color monitor products ranging in size from 10" to 28". The
products support applications from TV to 1600 x 1280 resolutions
and may integrate with a wide variety of touch screen
technologies. With this wide range of sizes and options, Aydin
offers customers a single monitor supplier solution.
To reinforce our commitment to customer satisfaction, Aydin has
a "Specials" department to supply customized solutions.
Aydin continues its research in CRT and flat panel display
technologies. The company's new products in 1996 include 29"
CRT's, and 13" and 16" color flat panel displays at resolutions
up to 1280 x 1024. The products will include stand alone displays
and terminals.
COLOR DISPLAYS & WORKSTATIONS. Aydin specializes in providing
display solutions for the critical man-machine interface between
operators and their processes. Applications include financial,
petro-chemical, oil, gas, pulp and paper, transportation, power
generation, and power distribution utilities, as well as most
other industries.
Aydin has developed and offers software packages which emulate
the installed base of Aydin 5215 display processors in process
control industries, especially by electric utilities. These
emulators, which facilitate upgrades for existing customers, are
available for a number of platforms including UNIX/X-Windows,
MS-DOS, MS Windows, and Windows NT. The system-based solutions
are being offered to allow the user to maintain the investment in
installed system software, upgrade hardware to current
state-of-the-art, and expand capabilities beyond the boundaries
of the initial installation.
The Aydin Model 7402 Industrial Workstation functions as the
equivalent of eight individual workstations, each with
state-of-the-art computing power. UNIX, X-Windows and Ethernet
ensure open architecture compliance, along with industry standard
VME and SCSI busses.
Aydin also has a complete line of high performance X-Terminals
to address network solutions in a client-server environment.
These are available in a number of configurations, including
color (24 bit), greyscale and monochrome. A 13" color LCD
version is available, as well as other LCD and CRT versions.
[PHOTO]
Spectrum Autosyncr 20" Console and Rackmount Monitors for the
Process Industries
[PHOTO]
Accelerated Graphics Controller for 13" High Resolution (1280 x
1024) Liquid Crystal Display (LCD) Panel
[PHOTO]
Spectrum Autosyncr 28" Large Screen Monitor utilized in the
exchanges of Wall Street
(page 8)
<PAGE>
RUGGEDIZED WORKSTATIONS. Aydin's ruggedized Sun SPARCstation 10
color workstations have been supplied to the Australian Army for
use in a shelter, mobile resource and communications management
system. Also, Aydin is under contract to the Australian Army to
supply ruggedized Sun SPARCstation 10 servers as line control
units for this same project. All of these units have been tested
to ground mobile shock and vibration requirements, EMI and
TEMPEST, and for operation at temperatures down to -15 degrees C.
Aydin also has a ruggedized portable "briefcase" style workstation
utilizing color LCD displays and a variety of CPUs.
RUGGEDIZED MONITORS. Aydin's ruggedized product line of color
video monitors now includes a 19" auto-scanning RGB monitor
(Model 9010R/20). This high resolution, ruggedized auto-scanning
monitor is also offered with a newly developed Active Magnetic
Cancellation System (AMCS). The AMCS enables the color monitor to
maintain full performance under a high magnetic field used by a
warship, including submarines, to eliminate its magnetic
signature.
Aydin completed the qualification testing and delivery of
ruggedized 19" color monitors (Model 8943R/19) for use in severe
ground mobile environments including operation at low temperature
down to -35 degrees C encountered in the Swiss Alps.
Color air defense consoles and color radar displays for airspace
management, aircraft simulation for operator training, shipboard
combat information centers and air defense centers are
manufactured for a variety of programs.
Aydin's air defense console, the field-proven ADC-22, is
operating effectively in many current Air Defense and Radar Sites
in numerous countries. Aydin manufactures rugged EMI/TEMPEST flat
panel tactical terminals, TEMPEST monitors, and radar displays,
in addion to air defense consoles.
SOFTWARE. Software is written by Aydin for commercial and
military purposes for specific applications such as Command,
Control, Communications systems, for radar simulation, and for
traffic control.
Aydin has combined several new software technologies into an
integrated tool set. In the development of software for both
real-time and nonreal-time applications, Aydin uses
platform-independent software environments such as Ada, C/C++,
FORTRAN and 4th Generation compilers and SQLs. These are used in
conjunction with various functional and application dependent
libraries, language linkers, popular relational databases,
symbolic debuggers and automatic software configuration/
documentation tools.
Aydin is experienced in developing its software in accordance
with DOD-STD-2167A, SEI Capability Maturity Model and ISO 9000,
to produce highly reliable, easily maintainable and portable
application software and documentation.
Also, Aydin uses automated "look and feel" applications
generators like Visual BasicTM to quickly generate Human-Machine
Interfaces that are essential in its systems products.
[PHOTO]
Ruggedized Portable VME Color Workstation
[PHOTO]
Ruggedized Rack-Mount SPARC Color Workstaton
[PHOTO]
Rugged Color X-Terminal
(page 9)
<PAGE>
AIR & OTHER TRAFFIC CONTROL
RADAR APPROACH CONTROL (RAPCON). Aydin has developed an advanced
Mobile Radar Approach Control Operations System which uses
extensive multi-processor air traffic and air space management
software, large flat panel (plasma) displays, local area
networking and highly automated voice and data communications.
The system can be configured for both military fixed site and
commercial air traffic control applications.
Aydin also offers complete RAPCON systems with surveillance and
precision approach radar.
UHF AND VHF RADIOS. Aydin's UHF and VHF transmitters, receivers
and power amplifiers are used in ground-to-air communications for
air traffic operations, control and reporting centers, airport
towers and ground control approach applications. These radios are
configured for either collocated transceiver applications or
split site and can be controlled either locally or from a remote
position. For UHF operation, Have Quick II anti-jam capability is
provided.
VESSEL & OTHER TRAFFIC CONTROL. Aydin offers vessel and other
traffic control systems similar to RAPCON described above with
appropriate communication equipment. These systems include
coastal and marine radars, communication via digital microwave
radios, UHF and VHF radios and central control centers. Aydin
offers complete turnkey solutions from sensors to displays,
including all software, hardware, integration and maintenance.
Aydin's software provides strong data fusion capabilities from
multiple sensors.
RADAR UPGRADE. Aydin has completed the upgrade of the Data
Processor Group of the Belgian Air Force's GE592 Radar. The five
rack DEC-based processor system has been replaced with a modern,
high-speed, hot-standby processor. During this program, Aydin
also added state-of-the-art Human-Machine interfaces and a
realistic Data Environment Simulator to the system.
[PHOTO]
GCA-3000 Series Transceiver for commercial Air Traffic Control
applications
[PHOTO]
Belgium Radar Upgrade System
(page 10)
<PAGE>
RADARS, RADARS SIMULATION, INTEGRATION & MODERNIZATION
RADARS. Aydin has developed a modern three-dimensional (3-D)
tactical air defense radar system, ASTAR-3. This C-band radar
offers the latest technology, microprocessor-based processing,
sophisticated ECCM, high system availability, low cost and
advanced clutter rejection. A key feature of ASTAR-3 is its
mobility; it can be transported on a single truck. The ASTAR-3
development effort included the design of a sophisticated phased
array antenna.
RADAR SIMULATION AND EW. A contract for the production of eleven
Multiple Threat Emitter Simulators (MUTES) was won by Aydin
several years ago. The last system was delivered in 1994. MUTES,
nomenclature AN/MST/T1A, is a ground-based radar simulator used
for evaluation of airborne radar warning and electronic
countermeasures systems and pilot training. Operating under
computer control, MUTES controls the radiation characteristics of
a bank of transmitters in order to simulate the electronic
environment created by a wide range of surveillance, tracking and
guidance systems.
RADAR INTEGRATION. Aydin is the prime contractor for NATO's
Radar Integration System (RIS). Aydin's RIS integrated all
elements of a NATO Air Defense Ground Environment (NADGE) and a
Control and Reporting Center (CRC) using an expandable Open
Systems Architecture. Specifically, it integrated the Air
Defense display subsystems, the Hughes 5118 Central Computer, and
multiple NATO radars including the Radars for the Southern Region
and Portugal (RSRP), 2D, 3D and Coastal radars. All RIS
application software is being designed and developed by Aydin in
Ada.
In June, 1995, Aydin successfully passed the RIS Phase I
demonstration tests at the NATO Programming Center in Glons,
Belgium. During the second half of 1995, Aydin also successfully
installed and passed the RIS Initial Operational Capability (IOC)
requirements for four sites in Turkey and one site in Greece.
Additional Phase I site installations are continuing through the
first quarter of 1996. The initial Phase II fully operational
RIS systems are currently planned for later in 1996.
RADAR MODERNIZATION. The Automation of Manual Radars and
integration into the NATO Air Defense Ground Environment (NADGE)
system, ordered by the Turkish Ministry of Defense in late 1992,
has been delivered to the customer. This system contains radar
video data extractors, automated data processing including
multiple radar target tracking, Link-1 interfacing to other sites
and multiple operator display consoles. Aydin is offering this
flexible product worldwide for radar and air defense
applications.
Aydin is under contract to the Belgian Air Force to upgrade an
aging radar by adding a Radar Environmental Simulator, and
replacing the outdated data processor and terminals with modern
computer workstations.
[PHOTO]
Radar Integration System (RIS)
(page 11)
<PAGE>
COMMAND, CONTROL & COMMUNICATION (C3)
Turnkey command, control and communications (C3) and complete
air defense systems, both fixed and mobile, are provided by
Aydin. In-house capability in sensor technology includes 2-D and
3-D ASTAR radars, long haul communications using microwave radios
and/or troposcatter, local communications using LANs and
ground/air/ground radios, data links for external systems
interfaces, computer systems, display systems and other security
devices.
Applications software is also provided for air surveillance,
sea surveillance, anti-submarine warfare and air defense systems.
These C3 and air defense systems are built by coupling hardware
elements with standard software elements such as link processing,
tracking, correlation with data fusion, database, sensor and
multi-sensor processing, flight plan processing, data
recording-reduction-playback, simulation and training.
System elements include Aydin's ADC-22 standard console, large
screen plasma display consoles with soft-touch screen controls,
color CRT Operator Workstations with Windows environment, Aydin's
GRC-222 radio, LINK-11, JTIDS, Aydin UHF/VHF radios with or
without frequency hopping, and a variety of radar specific
devices. Aydin can provide cost effective C3 and air defense
systems which require mobility and significant data fusion
utilizing its technical expertise in a range of disciplines, such
as weapons, communications, radio theory, antenna design and
placement, threat analysis, sensor and display technology,
coupled with Aydin's wide range of standard hardware and software
system elements.
Work is near completion on the Turkish Mobile Radar Complexes
program, the C3 portion of a mobile air defense system, which was
awarded to Aydin by the Turkish Government in late 1990 and
valued at approximately $210 million. Most of the remaining
manpower testing and training work is being done at Aydin's
Turkish subsidiary.
[PHOTO]
Mobile Command, Control and Communications System as deployed at
the test site
[PHOTO]
Interior View of Aydin's Command Shelter for C3 Applications
(page 12)
<PAGE>
SYSTEM INTEGRATION
Aydin continues to believe that a major growth area for the
Company resides in winning major new Systems Integration (SI)
contracts. As existing SI programs such as TMRC and RIS are
being fielded, they must be replaced by SI programs of similar or
larger revenue bearing potential.
As stated in last year's Annual Report, the Company executed
three initiatives in 1995 to more effectively pursue and capture
SI business. Specifically, the Company: 1) Restructured the
Corporate Sales and Marketing organization and challenged them to
identify winnable SI opportunities, 2) Consolidated multiple
divisions into a single Aydin (East) division, and 3) Brought in
a new Corporate President, Dr. Donald S. Taylor, with extensive
SI experience. As a result of the successful execution of these
initiatives, the Company focused on several key SI opportunities
worth over $750 million.
Two of the key SI programs which the Company submitted
proposals in 1995 were programs that the Company has been
tracking and marketing for some time.
The largest of these is a reissuance of the Turkish Armed
Forces Integrated Communications System (TAFICS) Request for
Proposal. TAFICS is not a new program for Aydin. This program
was first bid by Aydin in 1993 but never went forward because of
a lack of funding. The funding issues have now been resolved and
new proposals were submitted in the fall of 1995. Aydin's strong
presence in Turkey, via our Aydin Yazilim subsidiary and TMRC
contract, places the Company in a highly competitive position for
this contract. The TAFICS contract is valued at several hundred
million dollars (U.S.) and is expected to be awarded in the
summer of 1996.
Aydin also responded to a key Invitation to Bid on an important
SI opportunity from NATO. This program is known as BICC and it
will provide the initial core capability for NATO's Battlefield
Information Collection & Exploitation System (BICES). While the
BICC program is relatively modest in size, less than $10 million,
it is an extremely critical program for NATO. As a result of a
recent shift in NATO priorities, the BICC program award has been
accelerated to the spring of 1996. Aydin believes that this is
an excellent opportunity for our Company since we have had
success in bidding and winning NATO programs in the past, e.g.
RIS.
The Company achieved accelerated results on three major
international SI opportunities. The first of these opportunities
involved the design and development of a Vehicle Theft Prevention
System (VTPS) for a far eastern country. Aydin signed a contract
in December 1995. Under the terms and conditions of Aydin's
contract, the Company is responsible for supporting the overall
system design and integration, as well as the design and
manufacture of the major components of the system. The contract
schedule calls for a prototype demonstration of the system and
its key components to be conducted in the first quarter of 1996.
Subject to a successful demonstration, Aydin would receive orders
targeted at one (1) million units over the next five (5) years.
Approximately 100,000 of these units are currently scheduled for
delivery in 1996. At the above stated quantities, this contract
has a value to Aydin of approximately $150 million.
The second major international SI opportunity that the Company
achieved accelerated results in 1995 is an upgrade program for
the Phillippines Air Defense System. Aydin focused on this
megacontract opportunity in the fall of 1995 by leveraging its
radar SI experience and troposcatter manufacturing capabilities.
The Company has been notified that it is on the short list of
companies who are eligible for award which is expected in the
spring of 1996.
The third opportunity in this category is to design and deliver
a Flight Test System (FTS) for use in civilian aviation testing
in the People's Republic of China (PRC). The Company's proposal
to deliver such a system to the customer was accepted on 27
October 1995. This contract is valued at $20 million over the
next two years. This award is subject to Aydin receiving an
appropriate export license from the U.S. Government. A formal
request for this license is being prepared for submission in the
first quarter of 1996.
While none of the opportunities identified above contributed to
Aydin's revenue in 1995, success from any one of them would
create revenue for the Company in 1996 and beyond. In 1996,
Aydin will continue to focus on closing these opportunities.
Additionally, the Company has already identified, and is
positioning itself to bid on several new SI opportunities.
[PHOTO]
Automation of Manual Radar (AMR) System
[PHOTO]
Fleet Management and Tracking System utilizing Large Screen
Displays and Aydin Desktop Workstations
(page 13)
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Aydin Corporation and Subsidiaries
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
Net sales $140,607,000 $ 142,441,000 $ 141,475,000
Costs and expenses:
Cost of sales (1993 includes $14.8 million
settlement with Justice Department) 102,391,000 104,270,000 118,554,000
Selling, general, and administrative 25,660,000 26,080,000 25,178,000
Research and development 6,603,000 5,159,000 4,782,000
Interest expense, net 45,000 5,000 273,000
____________ _____________ ____________
134,699,000 135,514,000 148,787,000
____________ _____________ ____________
Income (loss) before income taxes and
minority interest 5,908,000 6,927,000 ( 7,312,000)
Income tax provision (recovery) 1,971,000 1,880,000 ( 2,466,000)
____________ _____________ ____________
Income (loss) before minority interest 3,937,000 5,047,000 ( 4,846,000)
Less minority interest 7,000 -0- 121,000
____________ _____________ ____________
Net income (loss) $ 3,930,000 $ 5,047,000 ($ 4,967,000)
____________ _____________ ____________
____________ _____________ ____________
Earnings (loss) per common and
common equivalent share $.77 $1.01 ( $1.00)
____________ _____________ ____________
____________ _____________ ____________
</TABLE>
(page 14)
<PAGE>
CONSOLIDATED BALANCE SHEETS
Aydin Corporation and Subsidiaries
<TABLE>
<CAPTION>
ASSETS DECEMBER 31,
CURRENT ASSETS 1995 1994
<S> <C> <C>
Cash and cash equivalents:
1995-$3,569,000; 1994-$2,741,000 $ 4,638,000 $ 9,771,000
Restricted cash 11,672,000 18,170,000
Accounts receivable, including contract
retainage: 1995-$455,000; 1994-$2,155,000 53,216,000 35,351,000
Unbilled revenue, after progress billings:
1995-$6,152,000; 1994-$14,982,000 46,927,000 54,909,000
Inventories 22,780,000 20,564,000
Prepaid expenses 1,577,000 1,350,000
____________ ____________
TOTAL CURRENT ASSETS 140,810,000 140,115,000
PROPERTY, PLANT, AND EQUIPMENT, at cost,
net of accumulated depreciation and
amortization: 1995-$59,055,000;
1994-$56,103,000 25,624,000 25,486,000
OTHER ASSETS 426,000 477,000
____________ ____________
$ 166,860,000 $ 166,078,000
____________ ____________
____________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 342,000 $ 402,000
Short-term bank debt 5,486,000 6,486,000
Accounts payable 29,222,000 27,055,000
Accrued liabilities:
Compensation 3,405,000 3,552,000
Department of Justice settlement 2,064,000 3,618,000
Other 1,901,000 3,430,000
Advance payments and contract billings
in excess of recognized revenue 2,843,000 4,169,000
Accrued and deferred income taxes 9,932,000 9,617,000
____________ ____________
TOTAL CURRENT LIABILITIES 55,195,000 58,329,000
LONG-TERM DEBT, less current maturities 770,000 1,549,000
DEFERRED INCOME TAXES 6,232,000 6,983,000
MINORITY INTEREST 90,000 -0-
STOCKHOLDERS' EQUITY
Common Stock, par value $1-authorized,
7,500,000 shares; issued and outstanding,
1995-5,112,127 shares; 1994-4,990,400 shares 5,112,000 4,990,000
Additional paid-in capital 2,188,000 787,000
Retained earnings 97,883,000 93,953,000
Foreign currency translation effects ( 610,000) ( 513,000)
____________ ____________
104,573,000 99,217,000
____________ ____________
$ 166,860,000 $ 166,078,000
____________ ____________
____________ ____________
</TABLE>
(page 15)
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Aydin Corporation and Subsidiaries
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 3,930,000 $ 5,047,000 ($ 4,967,000)
Adjustments to reconcile net income (loss)
to net cash provided (used) by
operating activities:
Depreciation and amortization 3,032,000 4,101,000 4,473,000
Deferred income taxes 833,000 ( 7,444,000) ( 1,823,000)
Minority interest 7,000 -0- 121,000
Changes in other operating assets and
liabilities, net:
Accounts receivable ( 17,865,000) ( 1,826,000) ( 7,887,000)
Unbilled revenue 7,982,000 11,650,000 ( 7,504,000)
Advance payments and contract billings
in excess of recognized revenue ( 1,326,000) 2,606,000 443,000
Inventories ( 2,216,000) ( 2,967,000) 3,321,000
Prepaid expenses ( 227,000) 120,000 454,000
Accounts payable 2,167,000 5,324,000 ( 1,667,000)
Accrued liabilities ( 3,230,000) ( 4,695,000) 10,333,000
Accrued income taxes ( 1,269,000) 10,800,000 ( 2,365,000)
Other 203,000 118,000 50,000
_____________ _____________ _____________
CASH PROVIDED (USED) BY
OPERATING ACTIVITIES ( 7,979,000) 22,834,000 ( 7,018,000)
INVESTING ACTIVITIES
Purchase of property, plant, and equipment ( 3,170,000) ( 4,377,000) ( 2,381,000)
_____________ _____________ _____________
CASH (USED)
BY INVESTING ACTIVITIES ( 3,170,000) ( 4,377,000) ( 2,381,000)
FINANCING ACTIVITIES
Release of collateral on restricted cash 6,498,000 1,685,000 2,645,000
Principal payments on long-term debt ( 839,000) ( 348,000) ( 389,000)
Purchase of treasury stock ( 248,000) -0- -0-
Minority investment in consolidated
subsidiary 83,000 ( 105,000) ( 2,327,000)
Proceeds from exercise of stock options 1,522,000 96,000 454,000
Net short-term borrowings, (repayments) ( 1,000,000) ( 15,039,000) ( 475,000)
_____________ _____________ _____________
CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 6,016,000 ( 13,711,000) ( 92,000)
_____________ _____________ _____________
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ( 5,133,000) 4,746,000 ( 9,491,000)
Cash and cash equivalents at
beginning of year 9,771,000 5,025,000 14,516,000
_____________ _____________ _____________
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 4,638,000 $ 9,771,000 $ 5,025,000
_____________ _____________ _____________
_____________ _____________ _____________
</TABLE>
see notes to consolidated financial statements
(page 16)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Aydin Corporation and Subsidiaries
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany
transactions and balances are eliminated in consolidation.
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, 1995 matures in 1996.
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, 1995 and 1994. Unbilled revenue at December 31,
1994 also included approximately $3.7 million relating to
contract options exercised by a customer conditional upon
completion of certain acceptance tests. Acceptance was obtained
in 1995 and substantially all the contract options were
exercised.
Use of Estimates: In preparing its financial statements in
accordance with generally accepted accounting principles,
management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expense during the
reported periods. Actual results could differ from those
estimates. One such area where the use of estimates could have
a significant impact on future results is estimated costs to go
on the company's larger long-term type contracts. During 1995
the estimated costs at completion for a major contract with the
government of Turkey increased by $4.3 million. This increase
was substantially offset by corresponding increases in the
contract value because the contract provides for price
escalation based on U.S. and Turkish inflation and involves
exchange rate fluctuations. Management does not anticipate any
significant impact on future earnings as a result of these
fluctuations.
Capitalized Software: The Company capitalized $586,000 of
software development costs related to telecommunication
products in 1995 in accordance with FASB 86. These costs will
be amortized starting in 1996 when sales of the related
products are expected to commence. Realization of this asset is
dependent upon bringing this product successfully to market.
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. Buildings are
depreciated over lives ranging up to 35 years. Machinery and
equipment is depreciated over useful lives ranging from 3 to 5
years.
Income Taxes: The Company accounts for income taxes on the
liability method in accordance with Statement of Financial
Accounting Standards (FAS) No. 109.
Foreign Currency Translation: In accordance with FAS No. 52,
balance sheet accounts of the Company's United Kingdom and
Argentina subsidiaries 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 the Turkish subsidiary are reflected in the income
statement as required by FAS No. 52 because of the high
inflation in the Turkish economy. Pretax income includes
foreign currency translation gains relating to the Turkish
subsidiary of $516,000 for 1995 and $755,000 for 1994.
Earnings Per Share: Earnings per share are based on the
weighted average number of common shares outstanding plus
shares issuable upon the assumed exercise of dilutive common
stock options. The number of shares used in earnings per share
calculations was 5,114,642 for 1995, 4,998,701 for 1994 and
4,959,740 for 1993.
Liquidity and Cash Flows: The Company's liquidity and
financial flexibility was adversely affected during 1995
because of delays in excess of one year in obtaining customer
acceptance of the software on the TMRC-C3 contract with the
Government of Turkey. These delays have held up collections
from the customer of significant amounts which in turn has
caused a delay in paying certain obligations including
repayment required by certain banks of approximately $3.0
million of short-term borrowings (net of $2.5 million held by
the banks as collateral). Management believes it has now
resolved the contract delays and the customer has paid
approximately $13 million on the contract since December 31,
1995. A significant portion of these payments will be used to
pay the software subcontractor. The Company considers all
highly liquid investments with a maturity of three months or
less when purchased to be cash equivalents.
Restricted Cash: Restricted cash at December 31, 1995 and
1994 represents interest bearing cash collateral required to be
maintained against letters of credit and at December 31, 1995
includes $2.5 million held by banks as collateral against
outstanding short-term debt of $5,486,000.
Reclassification: Certain reclassifications, none of which
affected net income, have been made to the prior years' amounts
in order to conform to the current year's presentation.
Advertising Costs: The Company expenses advertising costs as
incurred. Advertising costs were $371,000 and $255,000 for 1995
and 1994, respectively.
NOTE B-INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of: 1995 1994
<S> <C> <C>
Raw materials $ 11,581,000 $ 9,440,000
Work in process 7,965,000 7,419,000
Finished product 3,234,000 3,705,000
____________ ____________
$ 22,780,000 $ 20,564,000
____________ ____________
____________ ____________
</TABLE>
NOTE C-PROPERTY, PLANT, AND EQUIPMENT
The Company's investment in property, plant, and equipment
consists of:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 5,264,000 $ 5,264,000
Buildings 20,519,000 20,490,000
Machinery and equipment 58,896,000 55,835,000
____________ ____________
84,679,000 81,589,000
Less accumulated depreciation
and amortization 59,055,000 56,103,000
____________ ____________
$25,624,000 $25,486,000
____________ ____________
____________ ____________
</TABLE>
New Financial Accounting Standard No. 121, regarding the
"Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be disposed of", will be in effect for
1996. The Company does not expect this standard to have a
material impact on income.
Note D-CREDIT ARRANGEMENTS
The Company has arrangements with certain banks whereby
$50,514,000 has been used for letters of credit and short-term
cash borrowings and $1.1 million is available at December 31,
1995, mostly for letters of credit. These arrangements provide
for interest on borrowings at the prime lending rate (8.5% at
December 31, 1995) plus 2% to 4%. These arrangements also
require informal compensating cash balances of $150,000 and
provide for commission rates on letters of credit at 1.125% to
1.2%. As of December 31, 1995 and 1994, there were $5,486,000
and $6,486,000 of cash borrowings under these arrangements,
respectively. The banks are requiring payment of these
short-term borrowings which the Company anticipates making
during 1996. The Company is seeking new banking arrangements to
cover future potential operating needs on terms that are
acceptable to the Company.
At December 31, 1995, $45,028,000 of letters of credit were
outstanding under these arrangements. Against these letters of
credit, cash or short-term investment collateral of $11,672,000
is required to be maintained and most of the company-owned
buildings have been pledged. These letters of credit have been
issued to foreign entities, principally to guarantee either
contract performance or the return of unearned advance payments
in the unlikely event that
(page 17)
<PAGE>
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, $27.1 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-term investment collateral is required to be
maintained equal to 1/3 of the balance outstanding in the
letter of credit which amounts to $9.2 million. In addition to
certain financial covenant requirements, there are restrictions
concerning the incurrence of liens on the Company's assets and
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.
Since December 31, 1995, a $4.5 million additional line of
credit has been approved for letter of credit and cash
borrowing. Use of this line will require payment of the
Company's two remaining mortgages of $1.1 million to
collateralize the property pledged against this line.
NOTE E-LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 consists of the
following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Fixed-rate mortgage payable $8,000 monthly through 2001,
including interest at 8 1/4% $ -0- $ 497,000
Variable-rate mortgage bearing interest at 70% of the prime rate
(5.95% at December 31, 1995), quarterly principal payments of
$55,000 plus interest through November 30, 1997 437,000 655,000
Variable-rate mortgage bearing interest at 70% of the prime rate
(5.95% at December 31, 1995), quarterly principal payments of
$31,000 plus interest through May 1, 2001 675,000 799,000
__________ ___________
1,112,000 1,951,000
Less current maturities 342,000 402,000
__________ ___________
$ 770,000 $ 1,549,000
__________ ___________
__________ ___________
</TABLE>
Interest expense for the years 1995, 1994, and 1993 amounted to
$1,243,000, $1,142,000, and $1,310,000, respectively. Interest
paid for the years 1995, 1994, and 1993 amounted to $832,000,
$1,226,000, and $1,402,000, respectively.
Land and buildings having a net carrying value of $3,689,000 at
December 31, 1995 have been pledged as collateral for the
mortgages.
Aggregate maturities of long-term debt for each of the years
1996 through 2000 are as follows: 1996-$342,000; 1997-$342,000;
1998-$124,000; 1999-$124,000; 2000-$124,000.
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 1993, 1994, and 1995 were
as follows:
<TABLE>
<CAPTION>
Foreign
Common Additional Currency
Stock Paid-In Treasury Retained Translation
Par $1 Capital Stock Earning Effects
____________________________________________________________
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993
(4,939,197 common shares) $4,939,000 $ 237,000 $ -0- $ 93,873,000 ($ 628,000)
Issuance of 42,076 shares on
exercise of stock options 42,000 412,000
Tax benefit related to shares
acquired by employees under
stock options 48,000
Foreign currency translation
adjustment 3,000
Net loss ( 4,967,000)
__________ __________ __________ ____________ ___________
Balance, December 31, 1993
(4,981,273 common shares) 4,981,000 697,000 -0- 88,906,000 ( 625,000)
Issuance of 9,127 shares on
exercise of stock options 9,000 87,000
Tax benefit related to shares
acquired by employees under
stock 3,000
Foreign currency translation
adjustment 112,000
Net income 5,047,000
__________ __________ __________ ____________ ___________
Balance December 31, 1994
(4,990,400 common shares) 4,990,000 787,000 -0- 93,953,000 ( 513,000)
Issuance of 136,718 shares on
exercise of stock options 137,000 1,385,000
Tax benefit related to shares
acquired by employees under
stock options 249,000
Acquisition of 14,991 shares of
treasury stock received from
employees as payment for stock
options exercises ( 248,000)
Retirement of 14,991 treasury
shares ( 15,000) ( 233,000) ( 248,000)
Foreign currency translation
adjustment ( 97,000)
Net income 3,930,000
__________ __________ __________ ____________ ___________
Balance December 31, 1995
(5,112,127 common shares) $ 5,112,000 $2,188,000 -0- $97,883,000 ($610,000)
__________ __________ __________ ____________ ___________
__________ __________ __________ ____________ ___________
</TABLE>
(page 18)
<PAGE>
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 changesin options during
1993, 1994, and 1995 follows:
<TABLE>
<CAPTION>
Shares Shares
Under Available
Option For Option
________________________
<S> <C> <C>
At January 1, 1993 477,563 35,041
Options granted:
Option plan 42,450 ( 42,450)
Options exercised
(average price $10.80) ( 42,076) -0-
Options cancelled (154,644) 154,644
Cancellation of authorization -0- ( 100,000)
_________ ___________
At December 31, 1993 323,293 47,235
Options granted:
Option plan
164,600 ( 164,600)
Individual options 30,000 ( 30,000)
Options exercised
(average price, $10.55) ( 9,127) -0-
Options cancelled (185,648) 185,648
Authorization of 1994 options -0- 150,000
Cancellations of authorization -0- ( 97,000)
_________ ___________
At December 31, 1994 323,118 91,283
Options granted:
Option plan 22,900 ( 22,900)
Individual options 72,000 ( 72,000)
Options exercised
(average price, $11.13) (136,716) -0-
Options cancelled ( 22,639) 22,639
Authorization of individual options -0- 72,000
_________ ___________
At December 31, 1995
(32,895 exercisable) 258,663 91,022
_________ ___________
_________ ___________
</TABLE>
These options expire on various dates beginning April 1996 and
ending July 2000. The average exercise price of options
outstanding at December 31, 1995 is $12.02. New Financial
Accounting Standard No. 123 regarding "Accounting for
Stock-Based Compensation" will be in effect for 1996. The
Company does not expect this standard to have a material impact
on income. The Company has chosen to disclose the impact of
stock-based compensation in its notes and will not include such
impact on its recorded earnings.
NOTE H-TAXES ON INCOME
The provision (recovery) for income taxes consists of the
following:
<TABLE>
<CAPTION>
Federal State Foreign Total
_______________________________________________________
<S> <C> <C> <C> <C>
1995:
Current ($ 877,000) ($ 130,000) $ 1,896,000 $ 889,000
Deferred 533,000 173,000 127,000 833,000
Charge equivalent to tax benefit
related to shares acquired by
employees under stock options 249,000 -0- -0- 249,000
_____________ ____________ _____________ ___________
($ 95,000) $ 43,000 $ 2,023,000 $1,971,000
_____________ ____________ _____________ ___________
_____________ ____________ _____________ ___________
1994:
Current $ 5,799,000 $ 973,000 $ 2,549,000 $9,321,000
Deferred ( 5,929,000) ( 1,418,000) ( 97,000) ( 7,444,000)
Charge equivalent to tax benefit
related to shares acquired by
employees under stock options 2,000 1,000 -0- 3,000
_____________ ____________ _____________ ___________
($ 128,000) ($ 444,000) $ 2,452,000 $1,880,000
_____________ ____________ _____________ ___________
_____________ ____________ _____________ ___________
1993:
Current ($ 339,000) $ 62,000 ($ 414,000) ($ 691,000)
Deferred ( 3,110,000) ( 812,000) 2,099,000 ( 1,823,000)
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)
_____________ ____________ _____________ ___________
_____________ ____________ _____________ ___________
</TABLE>
(page 19)
<PAGE>
The components of deferred income tax balances follow.
No valuation allowances were required.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
Contract accounting $ 7,353,000 $ 7,169,000 $ 15,294,000
Excess tax over book depreciation 2,811,000 2,765,000 2,824,000
Inventory valuation ( 677,000) ( 1,141,000) ( 1,599,000)
Alternative minimum tax -0- -0- ( 50,000)
State deferred taxes ( 328,000) ( 269,000) ( 786,000)
Other, net ( 435,000) ( 633,000) ( 348,000)
_____________ _____________ ______________
$ 8,724,000 $ 7,891,000 $ 15,335,000
_____________ _____________ ______________
_____________ _____________ ______________
</TABLE>
A reconciliation between the federal statutory rate and the
effective income tax rate (computed by dividing income taxes by
income before income taxes and minority interest) is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% ( 34.0%)
State income taxes net of federal tax benefit .5 ( 3.7 ) ( 6.7 )
Benefit from nontaxable FSC income ( 2.1 ) ( 7.1 ) ( 6.3 )
Effects of higher foreign income tax rates 1.3 2.5 5.6
Statutory federal rate increase to 35% on
income over $10 million - - 2.6
Non-deductible Department of Justice settlement cost - - 4.3
Other, net ( .3 ) 1.4 .8
________ _______ ________
Effective income tax rate 33.4% 27.1% ( 33.7%)
________ _______ ________
________ _______ ________
</TABLE>
Income tax payments, net of refunds, amounted to $2,138,000
in 1993 and $1,614,000 in 1995. Income tax refunds, net of
payments, amounted to $940,000 in 1994. As of December 31, 1995
there was approximately $5.0 million of unpaid 1994 income
taxes including interest owed to the IRS of which $1.9 million
has been paid since December 31, 1995.
As stated in Note J to the 1994 Annual Report, the IRS has
disallowed prior years research and development credits of
approximately $3.5 million (excluding interest) which the
Company appealed. This matter was resolved with the IRS during
the 4th quarter of 1995 for approximately $1.3 million
including interest with no adverse effect on the results of
operations.
The Company has not provided deferred income taxes on
cumulative unremitted earnings of foreign subsidiaries because
of the availability of foreign tax credits which would
eliminate the U.S. tax liability related to the inclusion of
the foreign earnings. During 1995, $1.0 million of dividends
were received from the Company's Argentine and Turkish
subsidiaries.
NOTE I-NATURE OF OPERATIONS, EXPORT SALES, MAJOR CUSTOMERS, AND
FOREIGN OPERATIONS
The Company operates predominantly in the electronics
manufacturing industry. Aydin designs, manufactures and markets
a wide range of telecommunications equipment, defense
electronic systems and computer equipment and software, which
are sold worldwide. Aydin generates approximately one-half of
its sales from standard products and systems and the balance of
its sales from custom-designed systems and equipment based on
customers' specific requirements. Aydin offers a broad range of
products due to its ability to combine analog microwave
engineering methods with digital techniques and software.
Export sales by geographic area are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Asia $ 6,224,000 $ 6,788,000 $ 8,688,000
Africa 4,003,000 2,553,000 2,301,000
Europe 18,273,000 27,137,000 42,220,000
North America 1,605,000 1,852,000 528,000
South America 376,000 1,005,000 475,000
Other 263,000 384,000 844,000
___________ ___________ ___________
Total export sales $30,744,000 $39,719,000 $55,056,000
___________ ___________ ___________
___________ ___________ ___________
</TABLE>
The U.S. Government, the Government of Turkey and CTI
(Argentina) 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 $44,309,000, $42,015,000 and $38,600,000
in 1995, 1994 and 1993, respectively. Sales to the Government
of Turkey amounted to $16,549,000, $24,888,000 and $45,134,000
in 1995, 1994 and 1993, respectively. Sales to CTI amounted to
$15,739,000 in 1994.
Foreign assets included in the consolidated balance sheet
amounted to $25.6 million, $25.2 million and $22.9 million at
December 31, 1995, 1994 and 1993, respectively. Of these
amounts, $.4 million, $6.7 million, and $10.0 million, at
December 31, 1995, 1994 and 1993, respectively, is cash and
short-term investments of the Company's Turkish subsidiary
consisting of U.S. dollar denominated interest-bearing time
deposits. Foreign sales and pretax income for 1995 was $28.9
million and $5.4 million, respectively, of which substantially
all of the income comes from the Company's Turkish subsidiary.
Foreign sales and pretax income for 1994 amounted to $37.2
million and $6.7 million, respectively, of which $21.1 million
and $2.1 million, respectively, was for the Argentina
subsidiary. Foreign sales and pretax income for 1993 amounted
to $23.0 million and $3.9 million, respectively.
Under the contract with the Government of Turkey, the Company
received total advance payments of $56 million in October 1990
to be applied against future billings over the period of
contract performance, approximately six to seven years. The
contract provides for price escalation based on U.S. and
Turkish inflation and exchange rates. The impact on 1995
pre-tax results of the changes in these inflation and exchange
rates and the resulting effect on estimated contract costs to
go was to add $375,000 to pre-tax results. No material adverse
impact on near-term future results is expected from these
factors.
(page 20)
<PAGE>
At December 31, 1995, unbilled revenue on the TMRC contract,
net of advance payments, amounted to approximately $19 million.
Accounts receivable amounted to approximately $23 million of
which $7.9 million is for equipment billed over one year ago
which the customer contends is not yet needed. The balance of
the accounts receivable is primarily for system software.
Significant delays have been experienced in obtaining delivery
from the software subcontractor but the software has been
conditionally accepted since the end of the year. This
concentration of billed and unbilled receivables ($42 million)
and the remaining contract backlog ($41 million) at December
31, 1995 from the Government of Turkey represents a current
vulnerability to the Company based on the current political
environment. However, management believes that the government
of Turkey has the intent and ability to fulfill its obligations
and approximately $13 million has been paid since December 31,
1995.
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 eleven years has
been approximately $7.4 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. A court has
granted a declaratory judgment requiring the fourth carrier to
pay all cleanup costs in excess of the $6.7 million already
received. This judgment is being appealed by the fourth
carrier. Management believes the ultimate resolution of this
entire matter will not have a materially adverse effect on the
financial position or results of operations.
During 1995 a subcontractor to the Company in the TMRC
program with the Government of Turkey filed a demand for
arbitration alleging a breach of contract and equitable
adjustment of $12.4 million. The Company has filed a claim
against the subcontractor for an amount in excess of the
subcontractor's claim. Both arbitration claims are on hold
pursuant to an interim settlement agreement between the
parties. Based on discussions with its outside counsel,
management believes that it has meritorious defenses and
counterclaims and expects the outcome to have no material
adverse impact on the Company's financial position.
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. The total
impact on pretax income of this settlement was approximately
$14,819,000, which is included in 1993 cost of sales. The
additional work and the related expenditures are being incurred
over a period of three years or longer.
REPORT OF INDEPENDENT AUDITORS
Report of Grant Thornton LLP
Independent Auditors
Stockholders and Board of Directors
Aydin Corporation
We have audited the consolidated balance sheets of Aydin
Corporation and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of operations and cash
flows for the two year period then ended. 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. The
consolidated financial statements of Aydin Corporation and
subsidiaries for the year ended December 31, 1993 were audited
by other auditors whose report dated February 25, 1994,
expressed an unqualified opinion on those statements.
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, 1995 and 1994, and the results of its operations
and its cash flows for the two year period then ended, in
conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
February 26, 1996 except as to Note A for which the date is
March 22, 1996
(page 21)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Aydin Corporation and Subsidiaries
LIQUIDITY AND SOURCES OF CAPITAL
Cash used by operations during 1995 was $8.0 million. The
primary reason for the negative cash flow has been delays of in
excess of one year in obtaining delivery from the software
subcontractor of the software for the TMRC-C3 contract with the
Government of Turkey. These delays have held up collection from
the customer of approximately $26 million, of which
approximately $8 million is payable to the software
subcontractor. The software has been conditionally accepted by
the customer and approximately $13 million has been paid since
December 31, 1995 (out of $23.5 million of TMRC-C3 December 31,
1995 accounts receivable). Most of the balance of this accounts
receivable represents equipment shipped over one year ago and
for which there is a dispute with the customer as to when
payment is due although the amount due is not disputed.
The major component of the $8.0 million of cash used by
operations during 1995 was a net increase of $9.9 million in
the aggregate of accounts receivable and unbilled revenue of
which $1.7 million related to the TMRC-C3 program and $8.2
million related to non-TMRC activity reflecting increased sales
volume during 1995 in contracts other than TMRC.
As is explained in Note D, the Company had an unused line of
credit available at December 31, 1995 of $1.1 million to be
used mostly for letter of credit borrowing. A $4.5 million
addition to this line was approved since December 31, 1995 for
letter of credit and cash borrowing. Use of this line will
require payment of the Company's two remaining mortgages of
$1.1 million to collateralize the property against this credit
line.
Of the $11.7 million of restricted cash at December 31, 1995,
approximately $9.2 million is collateral being held at a bank
against a letter of credit on the Turkish contract and $2.5
million is being held as collateral against $5.5 million of
short-term bank borrowings outstanding at December 31, 1995.
The banks have required payment of these short-term bank
borrowings. The Company anticipates making full payment of
these bank loans during the first half of 1996. Further, the
Company is under agreement with the IRS to pay approximately $5
million in income taxes during 1996, in installments. The
Company is seeking additional new banking arrangements to
augment its future potential operating needs on terms that are
acceptable to the Company.
Cash provided from operations during 1994 was $22.8 million.
In addition to the net income, the primary reason for the
positive cash flow was a $11.6 million decrease in unbilled
revenue mainly because of an excess of billings rendered on the
TMRC-C3 contract with the Government of Turkey versus costs
incurred and resulting revenue recorded for this contract.
The positive cash from operations in 1994 was used to repay
$15.0 million of short-term bank debt and purchase capital
equipment of $4.4 million.
The $18.2 million of restricted cash at December 31, 1994 is
required to be maintained as collateral against letters of
credit on the Turkish and other contracts.
RESULTS OF OPERATIONS
1995 versus 1994: Net sales for 1995 declined by 1% from
1994. U.S. Government sales, although still depressed,
increased to 32% of total sales from 29% last year. Export and
foreign sales decreased to 41% of total sales from 53% last
year primarily because of lower sales of the Argentine
subsidiary compared to last year's unusually high level and a
slow-down in sales on the TMRC-C3 contract. Domestic industrial
sales increased to 27% of total sales from 18% last year
because of higher commercial color CRT monitors and
telecommunication sales.
Backlog at December 31, 1995 was approximately $106 million
as compared to $134 million a year ago. There is an additional
$150 million of backlog which is subject to prototype approval
and the receipt of production quantity releases, which are
expected to be received over several years. The Company has
additional production options not included in the above
figures. The TMRC-C3 contract backlog amounted to $41 million
and $52 million, respectively, at December 31, 1995 and 1994.
Research and Development costs increased by $1.4 million
(28%) during 1995 because of expanded development efforts in
telecommunication systems. Additionally, $586,000 of software
development costs related to the telecommunication R&D was
capitalized during 1995 in accordance with Financial Accounting
Standard 86.
As was previously mentioned in Note I, the TMRC-C3 contract
provides for price escalation based on U.S. and Turkish
inflation and exchange rates. The impact on 1995 pre-tax
results of the changes in these inflation and exchange rates
and the resulting effect on estimated contract costs to go was
to add $375,000 to pre-tax results. No material adverse impact
on near-term future results is expected from these factors.
The effective income tax rate increased to 33.4% for 1995
compared to 27.1% for 1994. The higher rate for 1995 is
primarily the result of a reduced 1995 benefit from non-taxable
Foreign Sales Corporation income and higher state income taxes
in 1995 compared with 1994.
A substantial portion of the consolidated net income for both
1995 and 1994 was generated by the Turkish subsidiary, 82% for
1995 and 63% for 1994. Based on the subsidiary's backlog of
December 31, 1995, which primarily consists of the TMRC-C3
contract, the subsidiary is expected to generate comparable
earnings for 1996.
1994 versus 1993: Net sales for 1994 were basically flat
compared to 1993. U.S. Government sales, although still
depressed, increased to 29% of total sales from 27% last year.
Export and foreign sales declined to 53% of total sales from
56% last year because of a slow down in sales on the TMRC-C3
contract, partially offset by higher sales at the Company's
South American subsidiary. There is no assurance that the
higher level of sales and earnings at the Argentina subsidiary
will continue. Domestic industrial sales increased slightly to
18% of total sales from 17% last year.
Cost of sales, other than the settlement with the Department
of Justice, as a percentage of sales was essentially the same
as last year. Costs incurred during 1994 against the settlement
amounted to $3,994,000 and have been charged against the
settlement liability established at December 31, 1993. During
1994 the settlement liability was further reduced by $403,000,
reflecting a decrease in the December 31, 1993 estimate of
ultimate costs to be incurred.
Selling, general and administrative expenses increased by
$902,000 (4%) in 1994 primarily as a result of a higher level
of proposal activity and resulting proposal costs.
The effective income tax rate was 27% for 1994 compared to a
34% benefit for 1993. The lower rate for 1994 is primarily the
result of the impact on the rates of the 1993 pretax loss
compared to pretax income in 1994.
(page 22)
<PAGE>
SELECTED FINANCIAL DATA
Aydin Corporation and Subsidiaries
($000 omitted except for per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993* 1992 1991**
<S> <C> <C> <C> <C> <C>
For the Year:
Net sales $ 140,607 $ 142,441 $ 141,475 $ 145,221 $ 158,544
Cost of sales 102,391 104,270 118,554 * 101,452 113,329
Income (loss) before
income taxes and
minority interest 5,908 6,927 ( 7,312)* 12,281 17,195
Net income (loss) 3,930 5,047 ( 4,967)* 7,062 10,787
Earnings (loss) per share .77 1.01 ( 1.00)* 1.40 2.13
Cash dividend per share -0- -0- -0- .50 .50
Return on average
stockholders equity 4% 5% ( 5%) 7% 12%
At Year End:
Total Assets $ 166,860 $ 166,078 $ 169,721 $ 172,332 $ 154,493
Working Capital 85,615 81,786 76,506 80,578 82,287
Long-term debt 770 1,549 1,902 2,295 2,688
Stockholders' equity 104,573 99,217 93,959 98,421 94,707
Stockholders' equity
per share 20.46 19.88 18.86 19.93 19.14
<FN>
* Cost of sales includes a fourth quarter 1993 charge of
$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 for per share amounts)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C>
1995:
Net sales $ 35,588 $ 36,494 $ 32,932 $ 35,593 $ 140,607
Cost of sales 25,937 26,661 24,014 25,779 102,391
Income before income taxes
and minority interest 1,835 1,665 1,077 1,331 5,908
Net income 1,191 1,073 774 892 3,930
Earnings per share .24 .21 .15 .17 .77
1st 2nd 3rd 4th Year
1994:
Net sales $ 33,975 $ 38,635 $ 35,053 $ 34,778 $ 142,441
Cost of sales 25,455 28,283 24,931 25,601 104,270
Income before income taxes 1,867 1,686 2,158 1,216 6,927
Net income 1,193 1,272 1,304 1,278* 5,047
Earnings per share .24 .25 .26 .26* 1.01
<FN>
* Fourth quarter net income was increased by $500,000 ($.10 per
share) to reflect a reduction in the tax provision resulting
from a decrease in deferred state income taxes only partially
offset by an increase in taxes payable.
</TABLE>
(page 23)
<PAGE>
COMMON STOCK PRICES
Aydin Corporation and Subsidiaries
Aydin Corporation is listed on the New York Stock Exchange,
symbol AYD.
<TABLE>
<CAPTION>
1995: High Low 1994: High Low
<S> <C> <C> <C> <C> <C>
Fourth Q 17 3/4 14 3/4 Fourth Q 13 1/2 10 1/8
Third Q 19 3/4 14 1/8 Third Q 11 3/8 10 1/8
Second Q 15 3/4 14 1/8 Second Q 13 3/8 10 5/8
First Q 15 11 1/2 First Q 14 1/4 11 7/8
</TABLE>
STOCKHOLDER AND DIVIDEND INFORMATION
Aydin has approximately 6,000 stockholders of record and
individual participants in security position listings. 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 26, 1996, 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 10K may
be obtained without charge by writing to Aydin Corporation,
700 Dresher Road, P.O. Box 349, Horsham, PA 19044, Attn:
Investor Relations.
HISTORY OF OPERATIONS *
<TABLE>
<CAPTION>
Cost of Income Income(Loss)
Year Net Sales Sales (Loss) Per Share
<S> <C> <C> <C> <C>
1995 $140,607,000 $102,391,000 $ 3,930,000 $ .77
1994 142,441,000 104,270,000 5,047,000 1.01
1993** 141,475,000 118,554,000 ( 4,967,000) (1.00)
1992 145,221,000 101,452,000 7,062,000 1.40
1991 158,544,000 113,329,000 10,787,000 2.13
1990 142,269,000 99,873,000 7,465,000 1.51
1989 157,486,000 108,665,000 9,190,000 1.81
1988 169,655,000 120,733,000 8,368,000 1.66
1987*** 149,240,000 101,634,000 8,803,000 1.56
1986 136,791,000 90,539,000 6,952,000 1.21
1985 133,019,000 92,094,000 3,799,000 .57
1984**** 137,500,000 90,811,000 8,965,000 1.30
1983 152,911,000 101,158,000 15,778,000 2.21
1982 124,308,000 84,910,000 10,284,000 1.46
1981 100,424,000 70,611,000 6,321,000 .90
1980 102,908,000 75,753,000 7,319,000 1.05
1979 64,167,000 45,599,000 4,062,000 .59
1978 47,443,000 33,566,000 2,676,000 .40
1977 51,436,000 36,864,000 3,457,000 .53
1976 42,413,000 31,752,000 2,072,000 .33
1975 35,426,000 28,032,000 910,000 .13
1974 32,569,000 23,750,000 1,646,000 .26
1973 28,324,000 20,474,000 1,380,000 .19
1972 22,176,000 17,414,000 386,000 .03
1971 15,632,000 12,251,000 (538,000) (.13)
1970 16,301,000 13,115,000 (1,297,000) (.27)
1969 12,733,000 9,052,000 468,000 .09
1968 4,380,000 3,121,000 175,000 .05
1967
(3 months) 1,528,000 1,142,000 75,000 -
<FN>
* Discontinued operations and extraordinary items are
excludedfrom above table.
** As a result of a settlement with the Department of
Justice, there was a pretax charge of $14,819,000 or
$9,430,000 after tax ($1.90 per share).
*** Excludes cumulative effect on prior years to December 31,
1986 of adopting new method of accounting for income
taxes.
**** As a result of the Tax Reform Act of 1984, there was a
charge of $750,000 to Net Income in 1984, or $.11 per
share.
</TABLE>
(page 24)
<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 80%
Aydin Foreign Sales Limited Guam 100%
Aydin Investments, Inc. Delaware 100%
Aydin Yazilim ve Elektronik
Sanayi A.S. Turkey 100% (1)
<FN>
(1) Ninety nine (99%) percent of the 100% is owned by
registrant's wholly owned subsidiary, Aydin Investments,
Inc.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Aydin Corporation:
We consent to incorporation by reference in Registration
Statement Numbers: 33-61537, 33-53549, 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 26, 1996,
except as to Note A for which the date is March 22, 1996
relating to the consolidated balance sheet of Aydin Corporation
and subsidiaries as of December 31, 1995 and the related
consolidated statements of operations and cash flows, and
related schedules for the year ended December 31, 1995, which
reports appear in or incorporated by reference in the 1995
annual report on Form 10-K of Aydin Corporation.
/s/ Grant Thornton LLP
Grant Thornton LLP
Philadelphia, Pennsylvania
March 27, 1996
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Aydin Corporation:
We consent to incorporation by reference in the Registration
Statement Numbers: 33-61537, 33-53549, 33-34863, 33-22016, 33-
14284, 2-97645, 2-93603, 2-77623, and 2-64093 on Form S-8 of
Aydin Corporation of our report dated February 25, 1994,
relating to the consolidated statements of operations and cash
flows and related schedule of Aydin Corporation and
subsidiaries for the year ended December 31, 1993, which report
appears in the 1995 annual report on Form 10-K of Aydin
Corporation.
/s/ KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
March 27, 1996
<PAGE>
Exhibit 99.1
INDEPENDENT AUDITORS' REPORT
Under date of February 26, 1996, except as to Note A for which
the date is March 22, 1996, we reported on the consolidated
balance sheet of Aydin Corporation and subsidiaries as of
December 31, 1995, and the related consolidated statements of
operations and cash flows for the year ended December 31, 1995,
as contained in the 1995 annual report to stockholders. These
consolidated financial statements and our reports thereon are
incorporated by reference in the annual report on Form 10-K for
the year 1995. 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 audit.
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
respect, the information set forth therein.
/s/ Grant Thornton LLP
Grant Thornton LLP
Philadelphia, Pennsylvania
February 26, 1996 except as to Note A
for which the date is March 22, 1996
<PAGE>
Exhibit 99.2
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Aydin Corporation
We have audited the consolidated statements of operations and
cash flows of Aydin Corporation and subsidiaries for the year
ended December 31, 1993 which financial statements are
incorporated by reference in this Form 10-K from the Company's
1995 Annual Report to Stockholders. In connection with our
audit of the consolidated financial statements, we have also
audited the financial statement schedule listed in the
accompanying index for the year ended December 31, 1993. These
consolidated financial statements and financial statement
schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements and financial statement schedule.
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 audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the results
of operations and cash flows of Aydin Corporation and
subsidiaries for the year ended December 31, 1993, in
conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule
when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
February 25, 1994
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Annual Report to Stockholders and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 16,310
<SECURITIES> 0
<RECEIVABLES> 53,216
<ALLOWANCES> 0
<INVENTORY> 22,780
<CURRENT-ASSETS> 140,810
<PP&E> 84,679
<DEPRECIATION> 59,055
<TOTAL-ASSETS> 166,860
<CURRENT-LIABILITIES> 55,195
<BONDS> 770
<COMMON> 5,112
0
0
<OTHER-SE> 99,461
<TOTAL-LIABILITY-AND-EQUITY> 166,860
<SALES> 140,607
<TOTAL-REVENUES> 140,607
<CGS> 102,391
<TOTAL-COSTS> 134,699
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,000
<INCOME-PRETAX> 5,908
<INCOME-TAX> 1,971
<INCOME-CONTINUING> 3,937
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,930
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
