<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, 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)
<TABLE>
<S> <C>
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)
</TABLE>
(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 November 10, 2000.
1
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ORBIT/FR, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -- September 30, 2000
(Unaudited) and December 31, 1999.................................................... 3
Consolidated Statements of Operations-- Three and Nine months
ended September 30, 2000 and 1999 (Unaudited)........................................ 4
Consolidated Statements of Cash Flows-- Nine months
ended September 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 and Use of Proceeds............................................. 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
</TABLE>
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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>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,091 $ 7,353
Accounts receivable, less allowance of $135 and $244 at
September 30, 2000 and December 31, 1999, respectively 5,187 3,190
Inventory 2,190 2,001
Costs and estimated earnings in excess of billings
on uncompleted contracts 553 1,140
Deferred income taxes 668 651
Income tax refund receivable -- 744
Other 323 426
-------- --------
Total current assets 14,012 15,505
Property and equipment, net 1,059 1,093
Cost in excess of net assets acquired, less
accumulated amortization of $152 and $116 at September
30, 2000 and December 31, 1999, respectively 828 864
Purchased software, less accumulated amortization of $368 and
$293 at September 30, 2000 and December 31, 1999, respectively 131 206
Other 75 100
-------- --------
Total assets $ 16,105 $ 17,768
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 931 $ 1,726
Accounts payable--Parent 646 364
Accrued expenses 1,830 2,680
Income taxes payable 98 --
Customer advances 371 --
Billings in excess of costs and estimated earnings
on uncompleted contracts 647 930
Deferred income taxes 114 131
-------- --------
Total current liabilities 4,637 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 --6,084,473 and 6,072,973 at September 30, 2000
and December 31, 1999 respectively 61 61
Additional paid-in capital 15,173 15,139
Accumulated deficit (3,549) (3,046)
Treasury stock--62,200 shares (217) (217)
-------- --------
Total stockholders' equity 11,468 11,937
-------- --------
Total liabilities and stockholders' equity $ 16,105 $ 17,768
======== ========
</TABLE>
See accompanying notes.
3
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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 SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- ------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Contract revenues $ 4,268 $ 3,638 $ 12,826 $ 9,263
Cost of revenues 3,016 2,794 8,927 7,920
----------- ----------- ----------- -----------
Gross profit 1,252 844 3,899 1,343
Operating expenses:
General and administrative 570 507 1,980 1,788
Sales and marketing 610 502 1,657 1,449
Research and development 412 298 878 528
----------- ----------- ----------- -----------
Total operating expenses 1,592 1,307 4,515 3,765
----------- ----------- ----------- -----------
Operating loss (340) (463) (616) (2,422)
Other income, net 102 141 210 341
----------- ----------- ----------- -----------
Loss before income tax expense (benefit) (238) (322) (406) (2,081)
Income tax expense (benefit) 32 (53) 97 (669)
----------- ----------- ----------- -----------
Net loss $ (270) $ (269) $ (503) $ (1,412)
=========== =========== =========== ===========
Basic and diluted loss per share $ (.04) $ (.04) $ (.08) $ (.23)
=========== =========== =========== ===========
Weighted average number
common shares - basic and diluted 6,022,131 6,019,262 6,015,399 6,025,840
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
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ORBIT/FR, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (503) $ (1,412)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation 303 294
Amortization 136 137
Deferred income tax provision (benefit) (34) 51
Changes in operating assets and liabilities
Accounts receivable (1,997) 98
Inventory (189) 2
Costs and estimated earnings in excess of billings
on uncompleted contracts 587 738
Income tax refunds receivable 744 (496)
Other assets 103 (181)
Accounts payable and accrued expenses (1,645) (187)
Accounts payable--Parent 282 (373)
Income taxes payable 98 115
Customer advances 371 (30)
Billings in excess of costs and estimated earnings
on uncompleted contracts (283) 473
-------- --------
Net cash used in operating activities (2,027) (771)
Cash flows from investing activities:
Purchase of property and equipment (269) (285)
Purchases of treasury stock -- (55)
-------- --------
Net cash used in investing activities (269) (340)
-------- --------
Cash flows from financing activities:
Issuance of common stock 34 --
-------- --------
Net cash provided by financing activities 34 --
-------- --------
Net decrease in cash and cash equivalents (2,262) (1,111)
Cash and cash equivalents at beginning of period 7,353 10,751
-------- --------
Cash and cash equivalents at end of period $ 5,091 $ 9,640
======== ========
Supplemental disclosures of cash flow information:
Net cash paid (refunded) during the period for income taxes $ (460) $ 58
======== ========
</TABLE>
See accompanying notes.
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ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 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 nine months ended September 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)
SEPTEMBER 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 nine months
ended September 30, 2000 and 1999 because the assumed effect of these securities
would be antidilutive.
3. INVENTORY
Inventory consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
Work-in-process $ 791 $ 860
Parts and components 1,399 1,141
------ ------
$2,190 $2,001
====== ======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
Lab and computer equipment $1,558 $1,491
Office equipment 1,031 939
Transportation equipment 243 193
Furniture and fixtures 65 63
Leasehold improvements 127 116
------ ------
3,024 2,802
Less accumulated depreciation 1,965 1,709
------ ------
Property and equipment, net $1,059 $1,093
====== ======
</TABLE>
7
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ORBIT/FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
Accrued compensation $ 748 $ 562
Accrued contract costs 308 272
Accrued commissions 311 182
Accrued warranty 202 139
Accrued royalties 126 133
Other accruals 135 491
Accrued other charges -- 901
------ ------
$1,830 $2,680
====== ======
</TABLE>
6. LONG-TERM CONTRACTS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
Accumulated expenditures on uncompleted contracts $ 14,368 $ 12,114
Estimated earnings (loss) thereon 182 (98)
-------- --------
14,550 12,016
Less: applicable progress billings 14,644 11,806
-------- --------
Total $ (94) $ 210
======== ========
</TABLE>
The long-term contracts are shown in the accompanying balance sheets as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 553 $ 1,140
Billings in excess of costs and estimated
earnings on uncompleted contracts (647) (930)
------- -------
$ (94) $ 210
======= =======
</TABLE>
8
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ORBIT/FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 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 nine months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three months ended September 30, 2000 North America Europe Asia Total
------------------------------------- ------------- ------- ------- --------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 2,102 $ 621 $ 1,545 $ 4,268
Cost of sales to unaffiliated customers 1,457 471 1,088 3,016
------- ------- ------- -------
Gross profit unaffiliated customers $ 645 $ 150 $ 457 $ 1,252
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Three months ended September 30, 1999 North America Europe Asia Total
------------------------------------- ------------- ------- ------- --------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 2,287 $ 532 $ 819 $ 3,638
Cost of sales to unaffiliated customers 1,843 412 539 2,794
------- ------- ------- -------
Gross profit unaffiliated customers $ 444 $ 120 $ 280 $ 844
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30, 2000 North America Europe Asia Total
------------------------------------- ------------- ------- ------- --------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 6,586 $ 2,451 $ 3,789 $12,826
Cost of sales to unaffiliated customers 4,377 2,024 2,526 8,927
------- ------- ------- -------
Gross profit unaffiliated customers $ 2,209 $ 427 $ 1,263 $ 3,899
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30, 1999 North America Europe Asia Total
------------------------------------- ------------- ------- ------- --------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 6,094 $ 1,446 $ 1,723 $ 9,263
Cost of sales to unaffiliated customers 5,454 1,300 1,166 7,920
------- ------- ------- -------
Gross profit unaffiliated customers $ 640 $ 146 $ 557 $ 1,343
======= ======= ======= =======
</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 SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30
-------------------------------- ------------------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Contract revenues 100.0% 100.0% 100.0% 100.0%
Gross profit 29.3 23.2 30.4 14.5
General and
administrative 13.4 13.9 15.4 19.3
Sales and marketing 14.3 13.8 12.9 15.6
Research and development 9.6 8.2 6.8 5.7
Operating loss (8.0) (12.7) (4.8) (26.1)
Loss before
income taxes (5.6) (8.9) (3.2) (22.5)
Net loss (6.4) (7.4) (3.9) (15.2)
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999.
Revenues. Revenues for the three months ended September 30, 2000 were
$4.3 million compared to $3.6 million for the three months ended September 30,
1999, an increase of approximately $630,000 or 17.3%. Revenues from the wireless
market increased approximately $1.1 million, while revenues from the defense and
satellite markets declined $360,000 and $140,000, respectively. Revenues from
the automotive and electromagnetic compatibility markets remained relatively
constant. Geographically, revenues from Europe and Asia increased $89,000 and
$726,000, respectively, while revenues from North America declined approximately
$185,000 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 September
30, 2000 were $3.0 million compared to $2.8 million for the three months ended
September 30, 1999. Gross margins increased to 29.3% for the three months ended
September 30, 2000 from 23.2% for the three months ended September 30, 1999. The
increased margins are due to improvements in the Company's bid and proposal and
manufacturing processes.
General and administrative expenses. General and administrative
expenses for the three months ended September 30, 2000 were $570,000 compared to
$507,000 for the three months ended September 30, 1999, an increase of
approximately $63,000 or 12.4%. As a percentage of revenues, general and
administrative expenses decreased to 13.4% for the three months ended September
30, 2000 from 13.9% for the three months ended September 30, 1999.
Sales and marketing expenses. Sales and marketing expenses for the
three months ended September 30, 2000 were $610,000 compared to $502,000 for the
three months ended September 30, 1999, an increase of approximately $108,000 or
21.5%. As a percentage of revenues, sales and marketing expenses were 14.3% for
the three months ended September 30, 2000, an increase from 13.8% for the three
months ended September 30, 1999. The increase in sales and marketing expenses
over prior year levels is a result of increased commissions expense on increased
contract revenues, and additional investment in the Company's North American
sales rep network.
Research and development expenses. Research and development expenses
for the three months ended September 30, 2000 were $412,000 compared to $298,000
for the three months ended September 30, 1999, an increase of $114,000 or 38.2%.
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, net, for the three months ended September
30, 2000 was approximately $102,000 compared to $141,000 for the three months
ended September 30, 1999, a decrease of approximately $39,000 or 27.7%. This
decrease reflects a reduction in the Company's cash balances available for
investment.
Income taxes. Income tax expense for the three months ended September
30, 2000 was $32,000 compared to $53,000 of income tax benefit for the three
months ended September 30, 1999, an increase in expense of $85,000. Although no
income tax benefit on losses was recorded, the Company's income tax expense for
the three months ended September 30, 2000 reflects income taxes recorded by its
profitable foreign operations. The Company recorded a 35% tax benefit for the
three months ended September 30, 1999.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999.
Revenues. Revenues for the nine months ended September 30, 2000 were
$12.8 million compared to $9.3 million for the nine months ended September 30,
1999, an increase of approximately $3.5 million or 38.5%. Revenues from the
wireless and defense markets increased approximately $3.3 million, $582,000,
respectively, while revenues from the satellite, automotive and electromagnetic
compatibility (EMC) markets declined approximately $62,000, $191,000 and
$34,000, respectively. Geographically, revenues from Asia, Europe, and North
America increased $2.1 million, $1.0 million and $492,000 respectively. The
sharp increase in revenues resulted from the completion of a large North
American defense related contract, and significant progress on major wireless
contracts in Asia and Europe.
Cost of revenues. Cost of revenues for the nine months ended September
30, 2000 were $8.9 million compared to $7.9 million for the nine months ended
September 30, 1999. Gross margins increased to 30.4% for the nine months ended
September 30, 2000 from 14.5% for the nine months ended
11
<PAGE> 12
September 30, 1999. The increased margins are due primarily to improvements in
the Company's bid and proposal and manufacturing processes, and the Company's
recognition of export related losses during the nine months ended September 30,
1999. These losses were non-recurring during the nine months ended September 30,
2000.
General and administrative expenses. General and administrative
expenses for the nine months ended September 30, 2000 were $2.0 million compared
to $1.8 million for the nine months ended September 30, 1999, an increase of
approximately $200,000 or 10.9%. As a percentage of revenues, general and
administrative expenses decreased to 15.4% for the nine months ended September
30, 2000 from 19.3% for the nine months ended September 30, 1999.
Sales and marketing expenses. Sales and marketing expenses for the nine
months ended September 30, 2000 were $1.7 million compared to $1.4 million for
the nine months ended September 30, 1999, an increase of approximately $300,000.
As a percentage of revenues, sales and marketing expenses were 12.9% for the
nine months ended September 30, 2000, a decrease from 15.6% for the nine months
ended September 30, 1999 . The increase in sales and marketing expenses over
prior year levels is a result of increased commissions expense on increased
contract revenues, and additional investment in the Company's North American
sales rep network.
Research and development expenses. Research and development expenses
for the nine months ended September 30, 2000 were $878,000 compared to $528,000
for the nine months ended September 30, 1999, a decrease of $350,000 or 66.3%
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, net, for the nine months ended September
30, 2000 was approximately $210,000 compared to $341,000 for the nine months
ended September 30, 1999. This decrease reflects a reduction in the Company's
cash balances available for investment.
Income taxes. Income tax expense for the nine months ended September
30, 2000 was $97,000 compared to a $669,000 income tax benefit for the nine
months ended September 30, 1999, an increase in expense of $766,000. Although no
income tax benefit on losses was recorded in the nine months ended September 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 nine months ended September 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 nine months ended
September 30, 2000 was $2.0 million. Primary reductions in cash from operations
resulted from the decrease in accounts payable and accrued expenses, and
relating mainly to the Company's March 2, 2000 payment of the $600,000 U.S.
Customs fine, and payment of the related accrued legal expenses. 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 $1.3 million decrease in cash provided by operating activities.
12
<PAGE> 13
Net cash used in investing activities resulted primarily from purchases
of property and equipment. During the nine months ended September 30, 2000 and
1999 such purposes were $269,000 and $285,000, respectively.
Net cash provided by financing activities was $34,000 and $0 for the
nine months ended September 30, 2000 and 1999 respectively. The $34,000 provided
related 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 nine months ended September 30, 2000, approximately 98% of the Company's
revenues were 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
13
<PAGE> 14
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
None
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: November 10, 2000
By: /s/ David S. Bernstein
--------------------------------------
President and Chief Operating Officer
Date: November 10, 2000
By: /s/ Dave Lubbe
--------------------------------------
Chief Financial Officer
15
