<PAGE> 1
UNITED STATES
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 30, 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 0-22583
ORBIT/FR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 23-2874370
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
506 PRUDENTIAL ROAD, HORSHAM, PA 19044
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(215) 674-5100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(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
There were 6,000,000 shares of Common Stock $.01 par value outstanding
as of November 14, 1997.
<PAGE> 2
ORBIT/FR, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets--September 30, 1997
(Unaudited) and December 31, 1996 3
Consolidated Statements of Operations--
Three months ended September 30, 1997 and 1996;
Nine months ended September 30, 1997
and 1996 (Unaudited) 4
Consolidated Statements of Cash Flows--
Nine months ended September 30, 1997 and 1996
(Unaudited) 5
Notes to Consolidated Financial Statements
(Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ORBIT/FR, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $15,241 $ 325
Accounts receivable 5,256 4,865
Inventory 2,887 2,241
Costs and estimated earnings in excess of billings
on uncompleted contracts 2,055 573
Deferred income taxes 394 382
Other 247 206
------- ------
Total current assets 26,080 8,592
Property and equipment, net 1,287 994
Excess of cost over net assets acquired, net 876 --
Purchased software, less accumulated amortization
of $88 at September 30, 1997 and $35 at December 31, 1996 264 317
------- ------
Total assets $28,507 $9,903
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 824 $ 671
Accounts payable--Parent 813 1,052
Accrued expenses 2,674 1,552
Income taxes payable 844 73
Customer advances 831 359
Billings in excess of costs and estimated earnings
on uncompleted contracts 177 932
Deferred income taxes 784 683
------ ------
Total current liabilities 6,947 5,322
Note payable to Parent 2,722 2,722
Other liabilities 207 --
------- -------
Total liabilities 9,876 8,044
Stockholders' equity:
Preferred stock: $.01 par value:
Authorized shares--2,000,000
Issued and outstanding shares--none -- --
Common stock: $.01 par value:
Authorized shares--10,000,000
Issued and outstanding shares--6,000,000 at
September 30, 1997 and 4,000,000 at December 31, 1996 60 40
Additional paid-in capital 14,558 450
Retained earnings 4,013 1,369
------- ------
Total stockholders' equity 18,631 1,859
------- ------
Total liabilities and stockholders' equity $28,507 $9,903
======= ======
</TABLE>
See accompanying notes.
3
<PAGE> 4
ORBIT/FR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $6,298 $2,821 $16,518 $6,157
Cost of revenues 3,437 1,697 9,719 3,916
----- ----- ----- -----
Gross profit 2,861 1,124 6,799 2,241
Operating expenses:
General and administrative 435 412 1,118 863
Sales and marketing 457 263 1,002 563
Research and development 315 155 781 401
--- --- --- ---
Total operating expenses 1,207 830 2,901 1,827
----- --- ----- -----
Operating income 1,654 294 3,898 414
Other income 184 --- 201 3
----- --- --- -
Income before income taxes 1,838 294 4,099 417
Income tax expense 645 101 1,455 147
--- --- ----- ---
Net income $1,193 $193 $2,644 $270
====== ==== ====== ====
Net income per common share $.19 $.05 $.54 $.07
==== ==== ==== ====
Weighted average number
of common shares 6,364,330 4,000,000 4,877,547 4,000,000
========== ========= ========== ==========
</TABLE>
See accompanying notes.
4
<PAGE> 5
ORBIT/FR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,644 $ 270
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 280 131
Amortization 53 18
Deferred income tax provision (13) 70
Changes in operating assets and liabilities
(net of effects of acquisitions):
Accounts receivable (16) (619)
Inventory (313) 343
Costs and estimated earnings in excess of billings on
uncompleted contracts (1,482) 419
Other assets (5) (88)
Accounts payable and accrued expenses 744 724
Accounts payable--Parent (239) 598
Income taxes payable 739 (96)
Customer advances 472 148
Billings in excess of costs and estimated earnings on
uncompleted contracts (754) (471)
Other liabilities (77) --
----- -----
Net cash provided by operating activities 2,033 1,447
Cash flows from investing activities:
Purchase of property and equipment (162) (101)
Purchase of net assets through businesses acquired,
net of cash acquired (1,216) (573)
------- -----
Net cash used in investing activities (1,378) (674)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of
offering expenses paid 14,261 --
Borrowings on line of credit -- 1,150
Net repayments from note payable--Parent -- (729)
Repayments on line of credit -- (1,300)
------ -------
Net cash provided by (used in) financing activities 14,261 (879)
------ -------
Net increase (decrease) in cash and cash equivalents 14,916 (106)
Cash and cash equivalents at beginning of period 325 776
------- -------
Cash and cash equivalents at end of period $15,241 $ 670
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $ 453 $62
===== ====
</TABLE>
See accompanying notes.
5
<PAGE> 6
ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. OWNERSHIP AND BASIS OF PRESENTATION
ORBIT/FR, Inc. (the "Company"), was incorporated in Delaware on
December 9, 1996, as a wholly-owned subsidiary of Orbit Alchut Technologies,
Ltd., an Israeli publicly traded corporation (hereinafter referred to as the
"Parent"). The Company develops, markets, and supports sophisticated automated
microwave test and measurement systems for wireless communications, satellite,
automotive, and aerospace/defense industries. The Company sells its products to
customers throughout Asia, Europe, Israel, and North and South America.
On December 31, 1996, as part of a corporate restructuring and in
exchange for 4,000,000 shares of the Company, the Parent transferred or caused
to be transferred to the Company, all of its issued and outstanding shares of
two of its subsidiaries, Orbit Advanced Technologies, Inc. ("Technologies"), a
Delaware corporation established in 1985, and Orbit F.R. Engineering, Ltd.
("Engineering"), an Israeli company incorporated on December 29, 1996. Both of
these subsidiaries are responsible for the microwave test and measurement
business. Prior to its incorporation on December 29, 1996, Engineering
operated as a separate division of the Parent. Effective January 1, 1997, the
personnel formerly employed in the microwave test and measurement division of
the Parent are employed by Engineering.
The consolidated results of the Company reflect Technologies and
Engineering on an as-if pooled basis for businesses under common control for
all periods presented in 1996. Further, the recapitalization of these
businesses on December 31, 1996 has retroactively been restated for common
stock for all 1996 periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of the consolidated financial statements have been included.
The results of interim periods are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997. The consolidated
financial statements and footnotes should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in this Form 10-Q and the Company's Form S-1 Registration
Statement, filed on June 17, 1997 with the Securities and Exchange Commission,
which included the consolidated financial statements and footnotes for the year
ended December 31, 1996.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
6
<PAGE> 7
Net Income Per Share
Net income per share is computed using the weighted average number of
common shares and common share equivalents (stock options) outstanding during
the period. The common shares outstanding for all 1996 periods have been
restated to reflect the corporate restructuring described in Note 1.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which is required to be adopted on
December 31, 1997. Under the new requirements for calculating basic earnings
per share, the dilutive effect of stock options will be excluded. Under the
new guidance earnings per share for the quarter ended September 30, 1997 would
have been $.20 per share.
3.INVENTORY
Inventory consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Work-in-process $1,544 $1,211
Parts and components 1,343 1,030
----- ------
$2,887 $2,241
====== ======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Lab and computer equipment $1,986 $ 667
Office equipment 316 657
Transportation equipment 157 163
Furniture and fixtures 77 44
Leasehold improvements 115 4
------ ------
2,651 1,535
Less accumulated depreciation 1,364 541
------ ------
Property and equipment, net $1,287 $ 994
====== ======
</TABLE>
7
<PAGE> 8
5. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Purchase price payable relating to AEMI $ 927 $ --
Accrued contract costs 520 414
Accrued offering costs 134 --
Accrued compensation 490 436
Accrued commissions 79 92
Accrued royalties 86 87
Accrued warranty 67 81
Other 371 167
Purchase price payable relating to
Flam & Russell, Inc. -- 275
------ ------
$2,674 $1,552
====== ======
</TABLE>
6. LINE OF CREDIT AGREEMENTS
During June 1997, the Company entered into two new working capital
line of credit agreements which increased its available funds from $1,150 to
$2,150. At September 30, 1997, no amounts under these lines were outstanding.
These lines are renewable annually in April, bear interest at rates ranging
from 0.5% to 1.5% over the bank's prime rate, and are secured by accounts
receivable. The line of credit agreements require the Company to comply with
certain financial performance covenants of which the Company was in compliance
at September 30, 1997.
7. LONG-TERM CONTRACTS
Long-term contracts in process accounted for using the percentage of
completion method are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Accumulated expenditures on uncompleted contracts $6,512 $ 8,914
Estimated earnings thereon 2,596 1,031
------ --------
9,108 9,945
Less: applicable progress billings 7,230 10,304
------ --------
Total $1,878 $ (359)
====== =========
</TABLE>
The long-term contracts are shown in the accompanying balance sheets
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Costs and estimated earnings on uncompleted
contracts in excess of billings $2,055 $ 573
Billings on uncompleted contracts in excess of
costs and estimated earnings (177) (932)
------ ------
$1,878 $ (359)
====== ======
</TABLE>
8. INITIAL PUBLIC OFFERING
On June 17, 1997, the Company filed a Form S-1 Registration Statement
with the Securities and Exchange Commission whereby 2,000,000 shares of its
common stock were offered and sold at $8.25 per share (less underwriting
discounts and commissions). The Company generated net proceeds of $14,127 in
connection with this offering.
8
<PAGE> 9
9. ACQUISITION OF ADVANCED ELECTROMAGNETICS, INC.
On June 17, 1997, contemporaneously with the completion of the
Company's public offering of its common stock, the Company acquired all of the
issued and outstanding shares of Advanced Electromagnetics, Inc. (AEMI) (a
manufacturer of anechoic foam) for a maximum purchase price of $1,600,based on
AEMI's financial performance for the three years ended March 31, 1997.
One-half of the final purchase price will be paid in cash and the other half
will be paid by the issuance of shares of the Company's common stock valued at
the initial offering price of $8.25. The acquisition was accounted for as a
purchase, and accordingly, the results of operations from June 17, 1997 through
September 30, 1997 are included in the Company's results of operations. The
purchase price remains preliminarily determined to be $1,377 at September 30,
1997 and has been allocated to the net assets acquired based on their estimated
fair market values ($450 of the purchase price was paid in cash on June 20,
1997). The excess of the purchase price over the fair value of net assets
acquired of $887 is being amortized on a straight-line basis over twenty years.
The following unaudited proforma information represents a summary of
consolidated results of operations of the Company and AEMI for the nine months
ended September 30, 1997 and 1996, as if the acquisition had occurred at the
beginning of 1996:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Revenues $17,970 $8,610
Net income 2,554 608
Net income per common share .52 .15
</TABLE>
10. RELATED PARTY TRANSACTIONS
The financial results of Engineering in the 1996 periods include all
contract revenue of the microwave test and measurement business unit of the
Parent, direct contract costs, direct personnel costs, electrical and
mechanical production services in an amount equal to the Parent's cost of
providing such services plus 5% and pro rata allocations of administrative
expenses from the Parent to Engineering. Such allocations of administrative
expenses are based on management's estimate of the level of these expenses
required to support Engineering, relative to the reasonable allocation of such
costs. Interest expense on intercompany debt has not been provided.
Note payable--Parent reflects the amount due to the Parent for the net
working capital required by Engineering. At December 31, 1996, the balance of
$2,722 was converted into a three year, non-interest bearing promissory note
payable due in 1999.
Effective January 1, 1997, Engineering and the Parent entered into an
agreement, whereby Engineering has purchased from the Parent electrical and
mechanical production services. Engineering has paid the Parent the cost of
providing such services plus 5%. The Parent is providing other administrative
services, including but not limited to, bookkeeping, computer, legal,
accounting, cost management, information systems, and production support for a
fixed amount of $360 during 1997. This amount will be evaluated and determined
on an annual basis. Engineering is leasing office space from the Parent on an
annual basis, for a rental of $51 per year.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Certain information contained in this Form 10-Q contains forward
looking statements (as such term is defined in the Securities Exchange Act of
1934 and the regulations thereunder), including without limitation, statements
as to the Company's financial condition, results of operations and liquidity
and capital resources and statements as to management's beliefs, expectations
or options. Such forward looking statements are subject to risks and
uncertainties and may be affected by various factors which may cause actual
results to differ materially from those in the forward looking statements.
Certain of these risks, uncertainties and other factors, as and when
applicable, are discussed in the Company's filings with the Securities and
Exchange Commission including its most recent Registration Statement on Form
S-1, a copy of which may be obtained from the Company upon request and without
charge (except for the exhibits thereto).
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage
of net revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE-MONTH PERIOD ENDED NINE-MONTH PERIOD ENDED
------------------------ -----------------------
SEPTEMBER 30,1997 SEPTEMBER 30,1996 SEPTEMBER 30,1997 SEPTEMBER 30,1996
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0%
Gross profit 45.4 39.8 41.2 36.4
General and
administration 6.9 14.6 6.8 14.0
Sales and marketing 7.3 9.3 6.1 9.1
Research and
development 5.0 5.5 4.7 6.5
Operating income 26.3 10.4 23.6 6.7
Income before
income taxes 29.2 10.4 24.8 6.8
Net income 18.9 6.8 16.0 4.4
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30,1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30,1996
Revenues. Revenues for the nine months ended September 30, 1997 were
$16.5 million compared to $6.2 million for the nine months ended September 30,
1996, an increase of approximately $10.3 million or 168.3%. Revenues from
microwave test and measurement accounted for all but $400,000 of this increase.
Approximately $3.9 million of the increase was attributable to the
aerospace/defense industry which resulted from an improvement in the Company's
ability to capture opportunities within that industry following the acquisition
of Flam & Russell with some growth in the industry's domestic commercial
sector. Approximately $3.1 million of the increase was attributable to the
wireless communications industry, $1.9 million of the increase was attributable
to the satellite industry, $500,000 of the increase was attributable to the
automotive industry and $500,000 of the increase was attributable to sales in
the electromagnetic compatibility (EMC) market.
Cost of revenues. Cost of revenues for the nine months ended September
30, 1997 were $9.7 million compared to $3.9 million for the nine months ended
September 30, 1996, an increase of approximately $5.8 million or 148.2%. Gross
margins rose from 36.4% for the nine months ended September 30, 1996 to 41.2%
for the nine months ended September 30, 1997, as a result of increased
efficiencies in the Company's solution, design, production and installation
stages, as well as increasing use of the Company's standard off-the-shelf
components in its turnkey systems, plus an increased role for higher margin
software sales.
10
<PAGE> 11
General and administrative expenses. General and administrative
expenses for the nine months ended September 30, 1997 were $1,118,000 compared
to $863,000 for the nine months ended September 30, 1996, an increase of
approximately $255,000 or 29.6%. As a percentage of revenues, general and
administrative expenses decreased from 14.0% for the nine months ended
September 30, 1996 to 6.8% for the nine months ended September 30, 1997 due to
an increase in revenues without a corresponding increase in general and
administrative expenses.
Sales and marketing expenses. Sales and marketing expenses for the
nine months ended September 30, 1997 were $1,002,000 compared to $563,000 for
the nine months ended September 30, 1996, an increase of approximately $439,000
or 78.0%. As a percentage of revenues, sales and marketing expenses were 6.1%
for the nine months ended September 30, 1997, a decrease from 9.1% for the nine
months ended September 30, 1996. Approximately $183,000 of this increase
represented higher commissions and salaries due to increased sales, while
approximately $169,000 reflected the addition of the Flam & Russell and AEMI
sales forces and approximately $87,000 was attributable to increased marketing
activities.
Research and development expenses. Research and development expenses
for the nine months ended September 30, 1997 were $781,000 compared to $401,000
for the nine months ending September 30, 1996, an increase of $380,000 or
94.8%. This increase reflected the additional development relating to the
modification of the Flam & Russell software to support the Company's software
and hardware products for the Company's solution for the wireless and
automotive markets.
Income taxes. Income tax expense for the nine months ended September
30, 1997 was $1,455,000 compared to $147,000 for the nine months September 30,
1996, an increase of $1,308,000. The Company's effective tax rate increased
slightly from 35.3% for the nine months ended September 30, 1996 to 35.5% for
the nine months ended September 30, 1997.
THREE MONTHS ENDED SEPTEMBER 30,1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30,1996
Revenues. Revenues for the three months ended September 30, 1997 were
$6.3 million compared to $2.8 million for the three months ended September 30,
1996, an increase of approximately $3.5 million or 123.3%. Revenues from
microwave test and measurement accounted for all but $200,000 of the increase.
Approximately $600,000 of the increase was attributable to the
aerospace/defense industry which resulted from an improvement in the Company's
ability to capture opportunities in this industry following the acquisition of
Flam & Russell. Approximately $1.4 million of the increase was attributable to
strong worldwide growth in the wireless communications industry, $800,000 of
the increase was attributable to the satellite industry, $100,000 of the
increase was attributable to the automotive industry and $400,000 of the
increase was attributable to sales in the electromagnetic compatibility (EMC)
market.
Cost of revenues. Cost of revenues for the three months ended
September 30, 1997 was $3.4 million compared to $1.7 million for the three
months ended September 30, 1996, an increase of approximately $1.7 million or
102.5%. Gross margin rose from 39.8% for the three months ended September 30,
1996 to 45.4% for the three months ended September 30, 1997, which reflects an
increased role for higher-margin software sales as well as the Company's effort
to maximize the use of higher-margin off-the-shelf products as components in
its measurements solutions.
General and administrative expenses. General and administrative
expenses for the three months ended September 30, 1997 were $435,000 compared
to a $412,000 for the three months ended September 30, 1996, an increase of
approximately $23,000 or 5.6%. As a percentage of revenues, general and
administrative expenses decreased from 14.6% for the three months ended
September 30, 1996 to 6.9% for the three months ended September 30, 1997 due to
an increase in revenues without a corresponding increase in general and
administrative expenses.
Sales and marketing expenses. Sales and marketing expenses for the
three months ended September 30, 1997 were $457,000 compared to $263,000 for
the three months ended September 30, 1996, an increase of approximately
$194,000 or 73.8%. As a percentage of revenues, sales and marketing expenses
were 7.3% for the three months ended September 30, 1997, a decrease from 9.3%
11
<PAGE> 12
for the three months ended September 30, 1996. Approximately $64,000 of this
increase represented higher commissions and salaries in the USA due to
increased sales, plus $54,000 from increased focus on the worldwide wireless
market, with another $76,000 from the addition of the AEMI sales force.
Research and development expenses. Research and development expenses
for the three months ended September 30, 1997 were $315,000 compared to
$155,000 for the three months ended September 30, 1996, an increase of $160,000
or 103.2%. This increase reflects the additional development and improvement
of the software and hardware components for the Company's solution for the
wireless and automotive markets.
Income taxes. Income tax expense for the three months ended September
30, 1997 was $645,000 compared to $101,000 for the three months September 30,
1996, an increase of $544,000. The Company's effective tax rate went from
34.4% for the three months ended September 30, 1996 to 35.1% for the three
months ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its working capital
requirements through cash flows from its operations. The Company has two
working capital bank lines of credit aggregating $2,150,000, which were
increased in June 1997 from $1,150,000. At September 30, 1997, no amounts
under these lines were outstanding. These lines of credit are renewable
annually in April, bear interest at rates ranging from 0.5% to 1.5% over the
bank's prime rate and are secured by accounts receivable. The line of credit
agreements require the Company to comply with certain financial performance
covenants of which the Company was in compliance at September 30, 1997. At
September 30, 1997, the Note Payable to Parent of $2,722,000 represented a
three year, non-interest bearing promissory note owed by ORBIT/FR Engineering,
Ltd., the Company's Israeli subsidiary to Orbit-Alchut Technologies, Ltd., the
majority shareholder of the Company for the transfer by Alchut of working
capital at the end of 1996.
Net cash provided by operating activities for the first nine months
amounted to $2,033,000 in 1997 versus $1,447,000 in 1996. The increase in cash
provided by operating activities in 1997 compared to 1996 was principally due
to the increase in net income to $2,644,000 in 1997 from $270,000 in 1996.
Net cash used in investing activities increased to $1,378,000 in 1997
from $674,000 in 1996. This increase was principally due to the net assets
acquired in the AEMI acquisition.
Net cash provided by in financing activities in 1997 amounted to
$14,261,000 versus $879,000 used in 1996. These changes were principally due
to the proceeds raised in connection with the Company's initial public offering
net of offering exepenses paid.
During the quarter ended June 30, 1997, the Company incurred an
obligation for approximately $1,377,000 for the AEMI acquisition of which
$450,000 was paid on June 20, 1997. Upon finalization of the AEMI purchase
price, the total obligation will be paid one half in cash and one half in
common shares at the initial public offering price of $8.25 per share.
During 1997, the Company also plans to incur capital expenditures of
approximately $400,000, a portion of which will be used to establish the
Company's European office, along with improving the Company's hardware and
software tools, and by investing in information systems for the Company and its
subsidiaries.
The Company has exposure to currency fluctuations as a result of
billing certain of its contracts in foreign currency. When selling to
customers in countries with less stable currencies, the Company bills in U.S.
dollars. For the nine months ended September 30, 1997, approximately 3% of the
Company's revenues was billed in currencies other than U.S. dollars.
Substantially all of the costs of the Company's contracts, including costs
12
<PAGE> 13
subcontracted to Alchut, have been, and will continue to be, U.S.
dollar-denominated except for wages for Engineering employees which are
denominated in local currency. The Company intends to continue to enter into
U.S. dollar-denominated contracts.
INFLATION AND SEASONALITY
The Company does not believe that inflation or seasonality has had a
significant effect on the Company's operations to date.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS--NOT APPLICABLE.
ITEM 2. CHANGES IN SECURITIES--NOT APPLICABLE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES--NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS--NOT APPLICABLE.
ITEM 5. OTHER INFORMATION--NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
11 Statement Re: Computation of Earnings per Share
27 Financial Data Schedule
b. The Company filed on August 29,1997,a Form 8-K dated June 20,1997
in connection with the acquisition of Advanced ElectroMagnetics,
Inc.
14
<PAGE> 15
ORBIT/FR, INC.
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.
ORBIT/FR, INC.
Registrant
Date: November 14, 1997
By: /s/ ARYEH TRABELSI
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 1997
By: /s/ JOSEPH SULLIVAN
Director of Finance and Treasurer
(Principal Financial Officer)
15
<PAGE> 16
ORBIT/FR, INC.
QUARTERLY REPORT ON FORM 10-Q
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE
- ------ ----
<S> <C> <C>
11 Statement RE: Computation of Earnings per Share 17
27 Financial Data Schedule 18
</TABLE>
16
<PAGE> 1
EXHIBIT 11
ORBIT/FR,INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
September 30 September 30
------------ ------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C> <C> <C>
Net income $1,193 $193 $2,644 $270
------ ---- ------ ----
Weighted average number of common
shares outstanding 6,000,000 4,000,000 4,747,253 4,000,000
Net effect of dilutive stock options--
using the treasury stock method 280,875 -- 99,114 --
Shares to be issued in connection
with the AEMI acquisition 83,455 -- 31,181 --
------ ------ ------ ------
6,364,330 4,000,000 4,877,547 4,000,000
--------- --------- --------- ---------
Net income per share $ 0.19 $ 0.05 $ 0.54 $ 0.07
---- ---- ---- ----
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001037115
<NAME> ORBIT/FR, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 15,241
<SECURITIES> 0
<RECEIVABLES> 5,256
<ALLOWANCES> 0
<INVENTORY> 2,887
<CURRENT-ASSETS> 26,080
<PP&E> 2,651
<DEPRECIATION> 1,364
<TOTAL-ASSETS> 28,507
<CURRENT-LIABILITIES> 6,947
<BONDS> 0
0
0
<COMMON> 60
<OTHER-SE> 18,571
<TOTAL-LIABILITY-AND-EQUITY> 28,507
<SALES> 16,518
<TOTAL-REVENUES> 16,518
<CGS> 9,719
<TOTAL-COSTS> 9,719
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,099
<INCOME-TAX> 1,455
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,644
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
</TABLE>
