SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended __September 27, 1997___
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-7203
AYDIN CORPORATION
_________________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 23-1686808
____________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 DRESHER ROAD, HORSHAM, PA 19044
____________________________________________________________
(Address of principle executive offices) (Zip Code)
(215) 657-7510
________________________________________________________
(Registrant's telephone number, including area code)
___________________________________________________________
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES _____X_____ NO ___________
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date. Shares of common stock, $1.00 par value,
outstanding as of November 7, 1997.
_____5,173,400______
<PAGE>
AYDIN CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Incorporated herein by reference are the Condensed Consolidated
Financial Statements of Aydin Corporation and the related Notes
to Financial Statements as set forth on pages 3 through 6 of the
"1997 Third Quarter Report" to Stockholders. These condensed
consolidated financial statements for the three month and nine
month periods ended September 27, 1997 have been subjected to a
limited review by Grant Thornton LLP, the Registrant's
independent accountants, whose report, set forth on page 7 of the
"1997 Third Quarter Report" to Stockholders, is incorporated
herein by reference.
Earnings per share are based on the weighted average number of
common shares outstanding plus shares issuable upon the assumed
exercise of dilutive common stock options. The number of shares
used in the computation of earnings per share for the three
months ended September 27,1997 and September 28, 1996 were
5,210,984 and 5,125,900, respectively, and for the nine-month
periods then ended were 5,149,461 and 5,121,081, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(1) Material Changes in Financial Condition (9/27/97
versus 12/31/96)
Accounts receivable decreased by $5.3 million primarily because
of lower billings during the quarter on the TMRC Contract with
the Government of Turkey which is winding down, and from improved
collections generally in other business areas.
Unbilled revenue (after progress billings and advance payments
and contract billings in excess of recognized revenue) increased
by $4.9 million because of the excess of costs incurred and
resulting revenue versus billings rendered on selected telemetry
contracts. This build up is expected to be reversed during the
fourth quarter.
Prepaid expenses and other (current assets) increased by
approximately $2.7 million and accrued and deferred income taxes
(current liabilities) increased by approximately $2.4 million
primarily because of the reclassification of refundable U.S.
federal income taxes from the accrued to the prepaid caption in
1997.
Accounts payable decreased by $6.6 million primarily because of
lower payables at the Turkish subsidiary reflecting lower volume
on the TMRC contract, and more current payments to vendors in
other business areas.
Other assets declined by $2.5 million because of the write-off
during the first quarter of an anticipated insurance recovery of
moneys previously spent ($1.5 million) and to be spent ($1.1
million) over a 30 year period on an environmental clean-up at a
site leased by Company prior to 1984. The write-off resulted
from an unfavorable court ruling in April 1997 involving the
future collection of the insurance recovery. The Company plans
to appeal this ruling.
Property, plant and equipment (net of accumulated depreciation)
decreased by $8.4 million primarily because of the sale of three
company-owned facilities for $11.5 million pursuant to the
previously announced restructuring plan.
The $4.5 million of restricted cash is being held as collateral
by a bank against a letter of credit on the TMRC contract. The
decrease of $3.1 million from 12/31/96 resulted from negotiating
more favorable letter of credit terms with a new bank and letter
of credit reductions from performance under the contract. This
decrease in restricted cash helped enable the Company to pay down
short term bank debt to $200,000 from $2.8 million at 12/31/96.
Although the Company's liquidity and financial condition continue
to improve, the Company continues to seek new financing
arrangements.
Based on the present backlog and projected cash flows, the
Company anticipates financing its capital needs from internal
sources and future borrowings.
(2) Material Changes in Operations (3rd Quarter 1997 vs.
1996)
Cost of sales for the quarter as a percentage of sales improved
to 74% from 81% primarily because of 1996 delays on the TMRC
contract and a cost overrun in 1996 on another major contract.
Cost of sales for the nine months improved to 76% from 80% for
the same reasons.
Selling, general and administrative and research and development
costs decreased by $2.2 million (25%) in the quarter and by $6.9
million (24%) in the nine months reflecting cost reductions
started in the third quarter 1996 pursuant to the Company's
restructuring plans.
Environmental remediation expense of $2.6 million in the first
quarter 1997 is explained under Item 2(1) above.
Gain on sale of facility relates to three company-owned buildings
sold in the second and third quarters pursuant to the Company's
previously announced restructuring plan. The operations housed in
these facilities have been relocated to other company-owned
buildings.
Income taxes for 1997 reflect provisions for foreign income
taxes against foreign income. There is no recovery recorded
against the U.S. 1997 losses because the Company has exhausted
its U.S. tax loss carrybacks. The 1996 income tax recoveries
reflect the carryback of the net operating losses of 1996.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3, "Legal Proceedings", in
Registrant's Annual Report on Form 10-K, Part I, for
the year ended December 31, 1996, regarding the
arbitration cross-claims of Loral Defense Systems-Eagan
and Registrant. After agreement by both parties to
proceed before a panel of two arbitrators, the
postponed hearing on the cross-claims was held
October 20, 1997 through October 29, 1997. The parties
will now file post-hearing briefs, which are due by
December 15,1997. The parties agreed to the request by
the panel to waive the 30-day rule for the panel to
render a decision due to the complex nature of the
claims and the numerous documents admitted into
evidence.
ITEM 5. OTHER INFORMATION
The FASB has issued Statement of Financial Accounting
Standards No. 128, Earnings Per Share, which is
effective for financial statements issued after
December 15, 1997. The new standard eliminates primary
and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share
together with disclosure of how the per share amounts
were computed. The adoption of this new Standard is
not expected to have a material impact on the
disclosure of earnings per share in the financial
statements.
The FASB has also recently issued SFAS No. 130,
Reporting Comprehensive Income, and SFAS No. 131,
Disclosures About Segments of an Enterprise and Related
Information. SFAS No. 130 requires companies to include
details of comprehensive income in their financial
statements; the Statement is effective for years
beginning after December 15, 1997. SFAS No. 131
requires companies to adopt a management approach to
identifying segments, rather than the industry approach
currently provided by SFAS No. 14. The Statement is
effective for years beginning after December 15, 1997.
Management is presently evaluating the impact of these
Statements on the Company's financial statements; the
impact is primarily disclosure oriented.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following is a list of Exhibits filed as part
of this report:
Exhibit 2 - None
Exhibit 3(i) - Restated Certificate of
Incorporation (filed as Exhibit
3(i) to Registrant's Annual
Report on Form 10-K for the
year ended December 31, 1994 and
incorporated herein by reference).
Exhibit 3(ii) - By-Laws (filed as Exhibit 3(ii)
to Registrant's Annual Report on
Form 10-K for the year ended
December 31, 1996 and
incorporated herein by
reference).
Exhibit 4.1- None
Exhibit 4.2- None
Exhibit 10 - None
Exhibit 11 - None
Exhibit 15 - Letter re unaudited interim
financial information
Exhibit 18 - None
Exhibit 19 - "1997 THIRD QUARTER REPORT" to
Stockholders
Exhibit 22 - None
Exhibit 23 - None
Exhibit 24 - None
Exhibit 27 - Financial Data Schedule
(electronic filing only)
Exhibit 99 - None
(b) Reports on Form 8-K
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
AYDIN CORPORATION
DATE November 10, 1997 /s/ James R. Henderson
James R. Henderson,
Vice President and Chief
Financial Officer
DATE November 10, 1997 /s/ Robert A. Clancy
Robert A. Clancy,
Secretary
<PAGE>
AYDIN CORPORATION
FORM 10-Q QUARTERLY REPORT
EXHIBIT INDEX
N0. DESCRIPTION OF EXHIBIT
15 Letter re unaudited interim financial information
19 1997 Third Quarter Report to Stockholders
27 Financial Data Schedule
<PAGE>
Exhibit 15
Securities and Exchange Commission
Washington, D.C. 20549
We have made a review of the condensed consolidated financial
statements of Aydin Corporation and subsidiaries as of
September 27, 1997 and for the three-month and nine-month periods
ended September 27, 1997, in accordance with standards
established by the American Institute of Certified Public
Accountants, and issued our report thereon dated October 23,
1997. We are aware that such financial statements and our
above-mentioned report appearing in the Form 10-Q of Aydin
Corporation for the quarter ended September 27, 1997 are being
incorporated by reference in the Registration Statement Nos. 333-
31263; 333-24591; 33-61537; 33-53549; 33-34863; 33-22016;
33-14284; 2-97645; 2-93603; 2-77623; 2-64093 and that such report
pursuant to Rule 436(c) of the Securities Act of 1933 is not
considered a part of a registration prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Paragraphs 7 and 11 of that Act.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
November 7, 1997
<PAGE>
Exhibit 19
Dear Stockholder:
One year ago, the current Aydin management team committed to
restructuring Aydin s business to improve long term revenues and
profitability. The goal was to operate at breakeven in the second
half of 1997. Management believes that third quarter results
demonstrate that the Company is on a course to meet this goal.
Third quarter sales were $25,990,000. This represents an
increase of 2.9% over third quarter 1996 sales of $25,249,000.
The Company recorded net income of $1,894,000, or $0.37 per
share, for the quarter. Included in this amount is profit of
$1,800,000 from the sale of real estate in San Jose, California,
pursuant to the previously announced restructuring plan. These
results compare to a loss of $5,467,000, or $1.07 per share, in
the third quarter of 1996. The third quarter 1996 loss included a
$3,730,000 restructuring charge.
Profit margins improved in the third quarter. Cost of sales
were 74% compared to 78% in the second quarter of 1997 and 81% in
the third quarter of 1996. The improvement in the third quarter
of 1997 is the result of the Company's restructuring plan. The
consolidation of the Company's manufacturing facilities improved
efficiency in operations, marketing savings were realized through
the combination of related product lines and there was
improvement in contract management techniques.
The Company's backlog, exclusive of the TMRC program, was
constant for the quarter. The backlog exclusive of TMRC as of
September 27, 1997 was $65,755,000 compared to $65,954,000 as of
June 28, 1997. New bookings for the quarter included $2.2
million
(page 1)
<PAGE>
in orders for TDMA Intelsat earth stations, and $1.6 million in
orders for workstations to upgrade the US Navy Trident submarine
fleet.
Sales for the nine month period ended September 27, 1997
were $85,226,000. This represents a 3.4% decrease in sales of
$88,238,000 in the corresponding period of 1996. For the nine
month period ended September 27, 1997, a net loss of $2,115,000,
or $0.41 per share, was incurred. This compares to a net loss of
$11,528,000, or $2.25 per share, in the nine month period ended
September 28, 1996.
The Company's cash position declined $710,000 in the nine
month period ended September 27, 1997. During this period,
accounts payable were reduced by $6,600,000 or 44% and short term
debt was reduced by $2,600,000.
/s/ I. Gary Bard
I. Gary Bard
Chairman and Chief Executive Officer
October 24, 1997
(page 2)
<PAGE>
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
9/27/97 9/28/96 9/27/97 9/28/96
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $25,990 $25,249 $85,226 $ 88,238
COST AND EXPENSES
Cost of sales 19,259 20,425 64,738 70,961
Selling, general
and administrative 6,260 6,557 19,433 21,946
Environmental remediation -0- -0- 2,612 -0-
Research and development 425 2,353 2,492 6,904
Gain on sale of facility (1,800) -0- (2,874) -0-
Interest expense (income)
net (195) (60) (375) 364
Restructuring Costs -0- 3,730 -0- 3,730
_______ _______ _______ ________
Total 23,949 33,005 86,026 103,905
_______ _______ _______ ________
INCOME (LOSS) BEFORE
INCOME TAXES AND
MINORITY INTEREST 2,041 (7,756) (800) (15,667)
INCOME TAXES (RECOVERY) 147 (2,289) 1,315 (4,049)
_______ _______ ________ ________
INCOME (LOSS) BEFORE
MINORITY INTEREST 1,894 (5,467) (2,115) (11,618)
LESS MINORITY INTEREST -0- -0- -0- (90)
_______ _______ ________ ________
NET INCOME (LOSS) $ 1,894 $(5,467) $(2,115) $(11,528)
_______ _______ _______ _______
_______ _______ _______ _______
EARNINGS (LOSS)
PER SHARE $ .37 ($ 1.07) ($ .41) ($ 2.25)
_______ _______ _______ _______
_______ _______ _______ _______
</TABLE>
(page 3)
<PAGE>
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000 Omitted)
ASSETS
<TABLE>
<CAPTION>
Sept. 27, 1997 Dec. 31, 1996
_____________ _____________
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash, including cash equivalents-
1997, $7,022; 1996, $1,584 $ 7,856 $ 5,495
Restricted cash 4,500 7,571
Accounts receivable 19,841 25,156
Unbilled revenue, after
progress billings 43,227 37,993
Inventories:
Raw materials 9,506 7,938
Work-in-process 5,947 5,957
Finished product 2,271 2,520
Prepaid expenses and other 5,007 2,331
________ ________
Total current assets 98,155 94,961
PROPERTY, PLANT AND EQUIPMENT,
net of accumulated depreciation: 14,310 22,739
1997, $57,395; 1996, $59,261
OTHER ASSETS 78 2,622
________ ________
TOTAL ASSETS $112,543 $120,322
________ ________
________ ________
____________________________________________________________
<FN>
NOTE TO FINANCIAL STATEMENTS:
Interim financial statements reflect all adjustments which are,
in the opinion of management, necessary to a fair statement of
the results for the periods. The 1996 balance sheet has been
derived from the audited financial statements contained in the
1996 Annual Report to Stockholders. These interim financial
statements conform with the requirements for interim financial
statements and consequently do not include all the disclosures
normally required by generally accepted accounting principles.
Reporting developments have been updated where appropriate. In
this connection, there are no significant changes in contingency
disclosures, except for the environmental clean-up matter where
an unfavorable court ruling has been rendered, resulting in the
write-off during the First Quarter of 1997 of $2.6 million.
Pretax results for the nine months include foreign currency
translation gains or losses relating to the Turkish subsidiary
of a $499,000 loss for 1997 and a $605,000 gain for 1996.
</TABLE>
(page 4)
<PAGE>
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS ($000 Omitted)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Sept. 27, 1997 Dec. 31, 1996
_____________ _____________
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Short-term bank debt $ 200 $ 2,800
Accounts payable 8,224 14,865
Accrued liabilities 6,772 5,827
Advanced payments and
contract billings in
excess of recognized
revenue 2,608 2,278
Accrued and deferred
income taxes 2,869 426
__________ _______
Total current liabilities 20,673 26,196
DEFERRED INCOME TAXES 2,666 2,665
OTHER LIABILITIES 974 1,134
STOCKHOLDERS' EQUITY:
Common stock, par value $1-
authorized 7,500,000
shares: issued 1997,
5,153,400 shares;
1996, 5,133,400 shares 5,153 5,133
Additional paid-in capital 2,639 2,436
Retained earnings 80,988 83,103
Foreign currency
translation effects (550) (345)
_________ _______
Stockholders' equity 88,230 90,327
_________ _______
TOTAL LIABILITIES
AND EQUITY $ 112,543 $120,322
_________ _______
_________ _______
</TABLE>
(page 5)
<PAGE>
AYDIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS ($000 omitted)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 27, 1997 Sept. 28, 1996
_____________ _____________
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ (2,115) $(11,528)
Items not affecting cash:
Environmental remediation 2,612 -0-
Depreciation and
amortization 2.037 2,215
Deferred income taxes 1,364 300
Minority Interest -0- (90)
Gain on sale of facility (2,874) (216)
Other (433) 374
Changes in certain
working capital items:
Accounts receivable 5,315 20,916
Unbilled revenue (5,234) 4,030
Advance payments and
contract billings in
excess of recognized
revenue 330 (115)
Inventories (1,309) 5,357
Prepaid expenses and other (2,676) (411)
Accounts payable and
accrued liabilities (5,696) (11,270)
Accrued income taxes 1,080 (11,427)
________ __________
CASH (USED) BY
OPERATING ACTIVITIES (7,599) (1,865)
INVESTING ACTIVITIES
Net property, plant and
equipment additions (2,196) (1,769)
Proceeds from sale
of facility 11,462 1,159
________ __________
CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 9,266 (610)
FINANCING ACTIVITIES
Release of collateral on
restricted cash 3,071 5,049
Principal payments on
long-term debt -0- (1,112)
Net repayments of
short-term borrowings (2,600) (1,688)
Proceeds from exercise
of stock options 223 182
________ __________
CASH PROVIDED BY
FINANCING ACTIVITIES 694 2,431
________ __________
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,361 (44)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 5,495 4,638
________ __________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 7,856 $ 4,594
________ __________
________ __________
</TABLE>
(page 6)
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF
INTERIM FINANCIAL INFORMATION
Board of Directors and Stockholders
Aydin Corporation
We have reviewed the accompanying condensed consolidated
balance sheet of Aydin Corporation and subsidiaries as of
September 27, 1997, and the related condensed consolidated
statements of operations for the three month and nine month
periods and cash flows for the nine month period ended September
27, 1997 and September 28, 1996. These financial statements are
the responsibility of the management of Aydin Corporation and
subsidiaries.
We conducted our reviews in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements as a whole. Accordingly, we do
not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet as of
December 31, 1996, and the related consolidated statements of
operations and cash flows for the year then ended (not presented
herein) and in our report dated March 7, 1997, we expressed
an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December
31, 1996 is fairly stated, in all material respects in relation
to the consolidated balance sheet from which it has been derived.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
October 23, 1997
__________________________________________________________
A copy of Aydin Corporation's Form 10Q may be obtained
without charge, upon written request sent to Aydin
Corporation
(page 7)
<PAGE>
[logo]
AYDIN CORPORATION
Aydin Corporation designs, engineers, manufactures, markets,
distributes, installs, and operates technologically advanced
communication and information systems.
The Company's capabilities include: telecommunications;
airborne and ground data acquisition and avionics; computer
equipment and software; air and other traffic control; radars,
radar simulation, integration and modernization; command control
and communications systems; and systems integration.
Aydin is a world-class provider of products and services for
the acquisition and distribution of information over
electronic communications media.
The Company has facilities in the United States, the United
Kingdom and Turkey.
(page 8)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from Third Quarter Report to Stockholders and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-27-1997
<CASH> 7,856
<SECURITIES> 4,500
<RECEIVABLES> 19,841
<ALLOWANCES> 0
<INVENTORY> 17,724
<CURRENT-ASSETS> 98,155
<PP&E> 71,705
<DEPRECIATION> 57,395
<TOTAL-ASSETS> 112,543
<CURRENT-LIABILITIES> 20,673
<BONDS> 0
<COMMON> 5,153
0
0
<OTHER-SE> 83,077
<TOTAL-LIABILITY-AND-EQUITY> 112,543
<SALES> 25,990
<TOTAL-REVENUES> 25,990
<CGS> 19,259
<TOTAL-COSTS> 25,749
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (195)
<INCOME-PRETAX> 2,041
<INCOME-TAX> 147
<INCOME-CONTINUING> 1,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,894
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
