<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 JUNE 30, 2000
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 6,084,473 shares of common stock, $.01 par value,
outstanding as of August 8, 2000.
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ORBIT/FR, INC.
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -- June 30, 2000
(Unaudited) and December 31, 1999......................... 3
Consolidated Statements of Operations-- Three and Six
months ended June 30, 2000 and 1999 (Unaudited)........... 4
Consolidated Statements of Cash Flows-- Six months
ended June 30, 2000 and 1999 (Unaudited)................... 5
Notes to Consolidated Financial Statements
(Unaudited)............................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk... 13
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
2
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ORBIT/FR, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,354 $ 7,353
Accounts receivable, less allowance of $135 and $244 at
June 30, 2000 and December 31, 1999, respectively 4,608 3,190
Inventory 2,238 2,001
Costs and estimated earnings in excess of billings
on uncompleted contracts 709 1,140
Deferred income taxes 663 651
Income tax refund receivable -- 744
Other 249 426
-------- --------
Total current assets 13,821 15,505
Property and equipment, net 1,087 1,093
Cost in excess of net assets acquired, less
accumulated amortization of $140 and $116 at June
30, 2000 and December 31, 1999, respectively 840 864
Purchased software, less accumulated amortization of $343 and
$293 at June 30, 2000 and December 31, 1999, respectively 156 206
Other 83 100
-------- --------
Total assets $ 15,987 $ 17,768
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 806 $ 1,726
Accounts payable--Parent 517 364
Accrued expenses 1,742 2,680
Customer advances 775 --
Billings in excess of costs and estimated earnings
on uncompleted contracts 298 930
Deferred income taxes 124 131
-------- --------
Total current liabilities 4,262 5,831
Stockholders' equity:
Preferred stock: $.01 par value:
Authorized shares--2,000,000, Issued and outstanding--none -- --
Common stock: $.01 par value:
Authorized shares--10,000,000
Issued --6,080,123 and 6,072,973 at June 30,2000
and December 31, 1999 respectively 61 61
Additional paid-in capital 15,161 15,139
Accumulated deficit (3,280) (3,046)
Treasury stock--62,200 shares (217) (217)
-------- --------
Total stockholders' equity 11,725 11,937
-------- --------
Total liabilities and stockholders' equity $ 15,987 $ 17,768
======== ========
</TABLE>
See accompanying notes.
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ORBIT/FR, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ ------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Contract revenues $ 4,359 $ 2,816 $ 8,558 $ 5,625
Cost of revenues 3,108 2,423 5,911 5,126
----------- ----------- ----------- -----------
Gross profit 1,251 393 2,647 499
Operating expenses:
General and administrative 692 604 1,410 1,281
Sales and marketing 591 469 1,047 947
Research and development 235 132 466 231
----------- ----------- ----------- -----------
Total operating expenses 1,518 1,205 2,923 2,459
----------- ----------- ----------- -----------
Operating loss (267) (812) (276) (1,960)
Other income, net 106 107 108 201
----------- ----------- ----------- -----------
Loss before income taxes (benefit) (161) (705) (168) (1,759)
Income tax expense (benefit) 25 (246) 66 (615)
----------- ----------- ----------- -----------
Net loss $ (186) $ (459) $ (234) $ (1,144)
=========== =========== =========== ===========
Basic and diluted loss per share $ (.03) $ (.08) $ (.04) $ (.19)
=========== =========== =========== ===========
Weighted average number
common shares - basic and diluted 6,012,770 6,027,247 6,011,997 6,029,188
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
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ORBIT/FR, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (234) $ (1,144)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation 202 203
Amortization 91 91
Deferred income tax provision (19) (48)
Changes in operating assets and liabilities
Accounts receivable (1,418) (577)
Inventory (237) (54)
Costs and estimated earnings in excess of billings
on uncompleted contracts 431 823
Income tax refund receivable 744 (259)
Other current assets 177 (52)
Accounts payable and accrued expenses (1,858) (178)
Accounts payable--Parent 153 (106)
Customer advances 775 (41)
Billings in excess of costs and estimated earnings
on uncompleted contracts (632) 1,152
-------- --------
Net cash used in operating activities (1,825) (190)
Cash flows from investing activities:
Purchase of property and equipment (196) (253)
Purchase of treasury stock -- (31)
-------- --------
Net cash used in investing activities (196) (284)
-------- --------
Cash flows from financing activities:
Issuance of common stock 22 --
-------- --------
Net cash provided by financing activities 22 --
-------- --------
Net decrease in cash and cash equivalents (1,999) (474)
Cash and cash equivalents at beginning of period 7,353 10,751
-------- --------
Cash and cash equivalents at end of period $ 5,354 $ 10,277
======== ========
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the period for income taxes $ (706) $ 155
======== ========
</TABLE>
See accompanying notes.
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ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
(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 the wireless communications,
satellite, automotive, aerospace/defense and electromagnetic compatibility (EMC)
industries, and manufactures anechoic foam, a microwave absorbing material that
is an integral component of microwave test and measurement systems. ORBIT/FR,
Inc., a holding company, supports its world wide customers through its
subsidiaries ORBIT/FR Engineering, LTD (hereinafter referred to as
"Engineering", Israel), ORBIT/FR Europe, (Germany), Advanced Electromagnetics,
Inc. ("AEMI", San Diego, CA), and Orbit Advanced Technologies, Inc. and Flam and
Russell, Inc, (Horsham, PA). The Company sells its products to customers
throughout Asia, Europe, Israel, and North and South America.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The accompanying unaudited consolidated financial statements for the
three and six months ended June 30, 2000, and 1999 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 ending December 31, 2000. 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 Forms 10-K and Proxy Statement for the period ended
December 31, 1999, filed on March 29, 2000 and April 28, 2000, respectively,
with the Securities and Exchange Commission, which included the consolidated
financial statements and footnotes for the year ended December 31, 1999.
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 accounting
principles generally accepted in the United States 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.
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ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net Loss Per Share
Basic loss per share is calculated by dividing net loss by the weighted
average common shares outstanding for the period. Diluted loss per share is
calculated by dividing net loss by the weighted average common shares
outstanding for the period plus the dilutive effect of stock options. The
dilutive effect of stock options was not assumed for the three and six months
ended June 30, 2000 and 1999 because the assumed effect of these securities
would be antidilutive.
3. INVENTORY
Inventory consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
Work-in-process $ 910 $ 860
Parts and components 1,328 1,141
------ ------
$2,238 $2,001
====== ======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
Lab and computer equipment $ 1,538 $ 1,491
Office equipment 1,016 939
Transportation equipment 254 193
Furniture and fixtures 64 63
Leasehold improvements 126 116
-------- --------
2,998 2,802
Less accumulated depreciation 1,911 1,709
-------- --------
Property and equipment, net $ 1,087 $ 1,093
======== ========
</TABLE>
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ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
Accrued compensation $ 668 $ 562
Accrued contract costs 342 272
Accrued commissions 263 182
Accrued warranty 154 139
Accrued royalties 129 133
Other accruals 186 491
Accrued other charges -- 901
--------- ---------
$ 1,742 $ 2,680
========= =========
</TABLE>
6. LONG-TERM CONTRACTS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
Accumulated expenditures on uncompleted contracts $ 14,227 $ 12,114
Estimated earnings (loss) thereon 407 (98)
-------- --------
14,634 12,016
Less: applicable progress billings 14,223 11,806
-------- --------
Total $ 411 $ 210
======== ========
</TABLE>
The long-term contracts are shown in the accompanying balance sheets as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 709 $ 1,140
Billings in excess of costs and estimated
earnings on uncompleted contracts (298) (930)
--------- ---------
$ 411 $ 210
========= =========
</TABLE>
8
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ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. RELATED PARTY TRANSACTIONS
Engineering and the Parent have an agreement, whereby Engineering
purchases from the Parent electrical and mechanical production services. In
addition, the Parent provides other administrative services, including, but not
limited to, bookkeeping, computer, legal, accounting, cost management,
information systems, and production support. Engineering pays the Parent for
these services based upon a rate of cost of production services plus 21%.
Engineering is leasing office space from the Parent on an annual basis, for a
rental of $51 per year. These agreements are evaluated on an annual basis.
8. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates exclusively in one industry segment, the business
of developing, marketing and supporting sophisticated automated microwave test
and measurement systems. In addition to its principal operations and markets in
the United States, the Company conducts sales, customer support and service
operations out of other geographic locations in Europe, Asia, and North America.
The following table represents financial information by geographic region for
the three and six months ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three months ended June 30, 2000 North America Europe Asia Total
-------------------------------- ------------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 1,654 $ 1,241 $ 1,464 $ 4,359
Cost of sales to unaffiliated customers 941 1,072 1,095 3,108
--------- ------- ------- -------
Gross profit unaffiliated customers $ 713 $ 169 $ 369 $ 1,251
========= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Three months ended June 30, 1999 North America Europe Asia Total
-------------------------------- ------------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 1,932 $ 407 $ 477 $ 2,816
Cost of sales to unaffiliated customers 1,851 301 271 2,423
--------- ------- ------- -------
Gross profit unaffiliated customers $ 81 $ 106 $ 206 $ 393
========= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 2000 North America Europe Asia Total
------------------------------ ------------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 4,484 $ 1,830 $ 2,244 $ 8,558
Cost of sales to unaffiliated customers 2,920 1,553 1,438 5,911
--------- ------- ------- -------
Gross profit unaffiliated customers $ 1,564 $ 277 $ 806 $ 2,647
========= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1999 North America Europe Asia Total
------------------------------ ------------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 3,767 $ 949 $ 909 $ 5,625
Cost of sales to unaffiliated customers 3,524 937 665 5,126
--------- ------- ------- -------
Gross profit unaffiliated customers $ 243 $ 12 $ 244 $ 499
========= ======= ======= =======
</TABLE>
In table above "North America" includes all United States operations,
and "Europe" includes subsidiaries in Germany and Israel.
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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, and in its most recent Annual Report
on Form 10 K, as amended, 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 revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE-MONTHS ENDED JUNE 30, SIX-MONTHS ENDED JUNE 30
-------------------------- ------------------------
2000 1999 2000 1999
---------- -------- -------- ------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Gross profit 28.7 14.0 30.9 8.9
General and
administrative 15.9 21.4 16.5 22.8
Sales and marketing 13.6 16.7 12.2 16.8
Research and development 5.4 4.7 5.4 4.1
Operating loss (6.1) (28.8) (3.2) (34.8)
Loss before
income taxes (3.7) (25.0) (2.0) (31.3)
Net loss (4.3) (16.3) (2.7) (20.3)
</TABLE>
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999.
Revenues. Revenues for the three months ended June 30, 2000 were $4.4
million compared to $2.8 million for the three months ended June 30, 1999, an
increase of approximately $1.6 million or 57.1%. Revenues from the wireless and
satellite markets increased approximately $1.6 million and $307,000,
respectively, while revenues from the automotive, defense and electromagnetic
compatibility (EMC) markets each declined slightly. Geographically, revenues
from Asia and Europe increased $987,000 and $834,000, respectively, while
revenues from North America declined approximately $278,000 from prior year
levels. The sharp rise in Asian and European revenues is a result of progress on
large wireless contracts, while the decline in North American revenues is a
result of the near completion of large defense contracts.
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Cost of revenues. Cost of revenues for the three months ended June 30,
2000 were $3.1 million compared to $2.4 million for the three months ended June
30, 1999. Gross margins increased to 28.7% for the three months ended June 30,
2000 from 14.0% for the three months ended June 30, 1999. This increase is
primarily due to the Company's recognition of export related losses during the
three months ended June 30, 1999. These losses were non recurring during the
three months ended June 30, 2000.
General and administrative expenses. General and administrative
expenses for the three months ended June 30, 2000 were $692,000 compared to
$604,000 for the three months ended June 30, 1999, an increase of approximately
$88,000 or 14.6%. As a percentage of revenues, general and administrative
expenses decreased to 15.9% for the three months ended June 30, 2000 from 21.4%
for the three months ended June 30, 1999.
Sales and marketing expenses. Sales and marketing expenses for the
three months ended June 30, 2000 were $591,000 compared to $469,000 for the
three months ended June 30, 1999, an increase of approximately $122,000 or
26.0%. As a percentage of revenues, sales and marketing expenses were 13.6% for
the three months ended June 30, 2000, an decrease from 16.7% for the three
months ended June 30, 1999.
Research and development expenses. Research and development expenses
for the three months ended June 30, 2000 were $235,000 compared to $132,000 for
the three months ended June 30, 1999, an increase of $103,000 or 78.0%. The
increase was due to continued expenditures on development activity focused on
both full systems design in the wireless and automotive markets and new software
development in the U.S. and Europe.
Other income. Other income for the three months ended June 30, 2000 was
approximately $106,000 compared to $107,000 for the three months ended June 30,
1999.
Income taxes. Income tax expense for the three months ended June 30,
2000 was $25,000 compared to $246,000 of income tax benefit for the three months
ended June 30, 1999, an increase in expense of $271,000. Although no income tax
benefit on losses was recorded, the Company's income tax expense for the three
months ended June 30, 2000 reflects income taxes recorded by its profitable
foreign operations. The Company recorded a 35% tax benefit for the three months
ended June 30, 1999.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999.
Revenues. Revenues for the six months ended June 30, 2000 were $8.6
million compared to $5.6 million for the six months ended June 30, 1999, a
increase of approximately $3.0 million or 53.6%. Revenues from the wireless,
defense, and satellite markets increased approximately $2.2 million, $951,000,
and $98,000, respectively, while revenues from the automotive and
electromagnetic compatibility (EMC) markets declined approximately $197,000 and
$98,000, respectively. Geographically, revenues from Asia, Europe, and North
America increased $1.3 million, $881,000 and $717,000 respectively. The sharp
increase in revenues resulted from the continued progress on large North
American defense related contracts, and further inroads into Asia and Europe.
Cost of revenues. Cost of revenues for the six months ended June 30,
2000 were $5.9 million compared to $5.1 million for the six months ended June
30, 1999. Gross margins increased to 30.9% for the six months ended June 30,
2000 from 8.9% for the six months ended June 30, 1999. This increase is
primarily due to the Company's recognition of export related losses during the
six months ended June 30, 1999. These losses were not repeated during the six
months ended June 30, 2000.
General and administrative expenses. General and administrative
expenses for the six months ended June 30, 2000 were $1.4 million compared to
$1.3 million for the six months ended June 30, 1999,
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an increase of approximately $100,000 or 7.7%. As a percentage of revenues,
general and administrative expenses decreased to 16.5% for the six months ended
June 30, 2000 from 22.8% for the six months ended June 30, 1999.
Sales and marketing expenses. Sales and marketing expenses for the six
months ended June 30, 2000 were $1.0 million compared to $947,000 for the six
months ended June 30, 1999. As a percentage of revenues, sales and marketing
expenses were 12.2% for the six months ended June 30, 2000, a decrease from
16.8% for the six months ended June 30, 1999.
Research and development expenses. Research and development expenses
for the six months ended June 30, 2000 were $466,000 compared to $231,000 for
the six months ended June 30, 1999, a decrease of $235,000 or 101.7% due mainly
to continued expenditures on development activity focused on both full systems
design in the wireless and automotive markets and new software development in
the U.S. and Europe.
Other income. Other income for the six months ended June 30, 2000 was
approximately $108,000 compared to $201,000 for the six months ended June 30,
1999. This decrease reflects a reduction in the Company's cash balances
available for investment.
Income taxes. Income tax expense for the six months ended June 30, 2000
was $66,000 compared to a $615,000 income tax benefit for the six months ended
June 30, 1999, an increase in expense of $681,000. Although no income tax
benefit on losses was recorded in the six months ended June 30, 2000, the
Company's income tax expense for the period reflects income taxes recorded by
its profitable foreign operations. The Company recorded a 35% tax benefit for
the six months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its working capital
requirements through cash flows from its operations. Reductions in revenues and
increased costs associated with the recently completed investigation into the
Company's past export practices and the related commodities jurisdiction, have
reversed this trend and caused negative cash flows from operations for the past
two years.
Net cash used in operating activities during the six months ended June
30, 2000 was $1.8 million, resulting primarily from a decrease in accounts
payable and accrued expenses, and relating mainly to the Company's payment of
the $600,000 U.S. Customs fine. In addition, the net change in the Company's
accounts receivable, costs and estimated earnings in excess of billings on
uncompleted contracts, customer advances, and billings in excess of costs and
recognized earnings on uncompleted contracts resulted in an $844,000 decrease in
cash provided by operating activities.
Net cash used in investing activities, resulting primarily from
purchases of property and equipment during the six months ended June 30, 2000
and 1999 were $196,000 and $284,000, respectively.
Net cash provided by financing activities was $22,000 and $0 for the
six months ended June 30, 2000 and 1999 respectively, relating to the exercise
of common stock options.
During 2000, the Company plans to incur capital expenditures of
approximately $450,000, ($431,000 incurred in 1999) a portion of which will be
used to improve the Company's hardware and software tools.
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 six months ended June 30, 2000, approximately 98% of the Company's revenues
were
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billed in U.S. dollars. Substantially all of the costs of the Company's
contracts, including costs subcontracted to the Parent, have been, and will
continue to be, U.S. dollar-denominated except for wages for employees of the
Company's Israeli and German subsidiaries, 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.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its
plan to become Year 2000 ready. In late 1999, the Company completed its
remediation and testing of its systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believes those systems successfully responded to the Year 2000 date change.
The Company expensed less than $10,000 in connection with this effort. The
Company is not aware of any material problems resulting from Year 2000 issues,
either with its products, its internal systems, or the products or services of
third parties. The Company will continue to monitor its mission critical
computer applications and those of its suppliers and vendors throughout the year
2000 to ensure that any latent Year 2000 matters that may arise are addressed
promptly.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently subject to any additional material legal
proceedings and is not aware of any other threatened litigation, unasserted
claims or assessments that could have a material adverse effect on the Company's
business, operating results, or financial condition.
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.
The 1999 Annual Meeting of Stockholders of ORBIT/FR, Inc. was held on
May 19, 2000. At such meeting the Company's slate of directors were selected for
a one year term.
The voting results are as follows:
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C>
Ze'ev Stein 3,700,000 0
Shimon Alon 3,700,000 0
Uri Jenach 3,700,000 0
Reuven Fatal 3,700,000 0
</TABLE>
Additionally, the Company's selection of its auditors, Ernst and Young,
LLP was ratified. The voting results of such ratification were as follows:
3,700,000 for; zero against.
ITEM 5. OTHER INFORMATION--NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
27 Financial Data Schedule
b. REPORTS ON FORM 8-K - None
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: August 8, 2000
By: /s/ Ze'ev Stein
---------------------------------------------
Acting President and Chief Executive Officer
Date: August 8, 2000
By: /s/ Dave Lubbe
---------------------------------------------
Chief Financial Officer
15
