<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended to
Commission file number 0-3936
Orbit International Corp.
(Exact name of registrant as specified in its charter)
Delaware ID # 11-1826363
(State or other jurisdiction (I.R.S. Employer Identification
incorporation or organization) Number)
80 Cabot Court, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
(516)435-8300
(Registrant's telephone number, including area code)
N/A
(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 month (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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15 (d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date:
June 30, 1995 5,886,000
<PAGE>
ORBIT INTERNATIONAL CORP.
The financial information herein is unaudited. However, in the opinion
of management, such information reflects all adjustments (consisting only of
normal recurring accruals) necessary to a fair presentation of the results of
operations for the periods being reported. Additionally, it should be noted
that the accompanying condensed financial statements do not purport to contain
complete disclosures in conformity with generally accepted accounting
principles.
The results of operations for the six months ended June 30, 1995 are
not necessarily indicative of the results of operations for the full fiscal
year ending December 31, 1995.
The condensed consolidated balance sheet as of December 31, 1994 was
condensed from the audited consolidated balance sheet appearing in the 1994
annual report on Form 10-K.
These condensed consolidated statements should be read in conjunction
with the Company's financial statements for the fiscal year ended December 31,
1994.
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
(unaudited)
<S> <C> <C>
A S S E T S
Current assets:
Cash and cash equivalents.............. $ 2,544,000 $ 815,000
Investment in marketable trading
securities, at lower of amortized
cost or market........................ 4,561,000 9,138,000
Accounts receivable - net of
estimated doubtful accounts........... 3,875,000 5,277,000
Inventories - at lower of cost (first
in, first out) or market (Notes 2 and
3).................................... 27,503,000 21,006,000
Other current assets................... 1,084,000 1,191,000
Total current assets................ 39,567,000 37,427,000
Property, plant and equipment - at cost
less accumulated depreciation and
amortization........................... 3,250,000 3,279,000
Excess of cost over the fair value of
assets acquired - less accumulated
amortization........................... 11,828,000 12,129,000
Restricted assets - marketable trading
securities............................. 12,366,000 7,805,000
Other assets............................. 3,105,000 2,871,000
T O T A L .......................... $ 70,116,000 $ 63,511,000
</TOTAL>
Attention is directed to accompanying notes to
condensed consolidated financial statements.
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(continued)
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
(unaudited)
<S> <C> <C>
L I A B I L I T I E S
Current liabilities:
Notes payable (Note 6).................. $ 2,797,000 $ 2,602,000
Current portion of long-term obligations 2,682,000 3,096,000
Accounts payable........................ 4,685,000 3,734,000
Accrued expenses (Note 5)............... 3,889,000 2,367,000
Due to factor........................... 19,430,000 11,540,000
Taxes payable........................... 210,000
Total current liabilities............ 33,693,000 23,339,000
Long-term obligations (less current
portion above).......................... 7,285,000 8,909,000
Total liabilities.................... 40,978,000 32,248,000
Commitments and contingencies (Notes 4 and 6)
STOCKHOLDERS' EQUITY
Capital stock - authorized 25,000,000
shares $.10 par value; issued 8,771,000
shares at June 30, 1995 and December
31, 1994................................ 877,000 877,000
Additional paid-in capital................ 23,285,000 23,170,000
Retained earnings......................... 15,781,000 18,227,000
Less treasury stock (2,885,000 and
2,844,000 shares at June 30, 1995 and
December 31, 1994, respectively) at cost (9,588,000) (9,520,000)
Less unearned portion of compensatory stock (148,000)
Foreign currency translation adjustment.... (1,217,000) (1,343,000)
Total stockholders' equity............ 29,138,000 31,263,000
T O T A L............................. $ 70,116,000 $ 63,511,000
</TABLE>
Attention is directed to accompanying notes to
condensed consolidated financial statements.
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales............... $ 19,476,000 $ 16,248,000 $ 8,588,000 $ 5,691,000
Cost of sales (Note 2).. 15,013,000 11,504,000 7,002,000 4,002,000
Gross profit (Note 2)... 4,463,000 4,744,000 1,586,000 1,689,000
Other (income), costs
and expenses:
Selling, general and
administrative....... 7,799,000 6,653,000 3,680,000 3,369,000
Interest.............. 1,286,000 425,000 631,000 225,000
Investment and other
(income) (Note 5).... (2,176,000) (326,000) (592,000) (190,000)
Equity in loss and
write-down of
investment in
affiliate............ 13,687,000
6,909,000 20,439,000 3,719,000 3,404,000
(Loss) before tax
(benefit)............. (2,446,000) (15,695,000) (2,133,000) (1,715,000)
Tax (benefit)........... (3,299,000) (503,000)
NET (LOSS).............. $ (2,446,000) $(12,396,000) $(2,133,000) $(1,212,000)
NET (LOSS) PER SHARE
(Note 1)............... $ (.42) $ (1.96) $ (.36) $ (.19)
</TABLE>
Attention is directed to the accompanying notes to
condensed consolidated financial statements
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net (loss)................................... $ (2,446,000) $(12,396,000)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Depreciation and amortization................. 184,000 271,000
Amortization of goodwill...................... 326,000 326,000
Provision for doubtful accounts............... 102,000 (79,000)
Compensatory issuance of stock and options.... 263,000 263,000
Deferred tax (benefit)........................ (2,104,000)
Gain on sale of fixed assets.................. (80,000)
Equity in loss and write-down of investment
in affiliate................................. 13,687,000
Imputed interest on acquisition note.......... 142,000 198,000
Change in value of marketable trading
securities................................... (222,000) 142,000
Purchases of marketable trading securities.... (17,157,000) (17,339,000)
Proceeds of sales of marketable trading
securities................................... 17,395,000 14,538,000
Changes in operating assets and liabilities:
Decrease in accounts receivable............. 1,380,000 2,762,000
(Increase) in inventory..................... (6,431,000) (5,280,000)
(Increase) in prepaid and refundable taxes.. (840,000)
(Increase) decrease in other current assets. 78,000 (100,000)
Increase (decrease) in accounts payable..... 1,024,000 (477,000)
Increase in accrued expenses................ 1,721,000 94,000
Net cash (used in) operating activities.... (3,721,000) (6,334,000)
Cash flows from investing activities:
Acquisitions of fixed assets................ (282,000) (293,000)
Proceeds from sale of fixed assets.......... 217,000
(Increase) decrease in other assets......... (234,000) 164,000
Net cash (used in) investing activities... (299,000) (129,000)
</TABLE>
(continued)
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(unaudited)
<TABLE>
<CAPTIONS>
Six Months
Ended June 30,
1995 1994
<S> <C> <C>
Cash flows from financing activities:
Net advances from factor.................... $ 7,890,000 $ 3,773,000
Proceeds from debt.......................... 393,000 2,588,000
Repayments of debt.......................... (2,463,000) (2,001,000)
Purchase of treasury stock.................. (68,000) (449,000)
Net cash provided by financing activities.. 5,752,000 3,911,000
Effect of exchange rate changes on cash..... (3,000) 20,000
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................. 1,729,000 (2,532,000)
Cash and cash equivalents - January 1......... 815,000 5,447,000
CASH AND CASH EQUIVALENTS - June 30........... $ 2,544,000 $ 2,915,000
</TABLE>
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
Three Months
Ended June 30,
1995 1994
<S> <C> <C>
Cash paid for:
Interest...................... $ 1,200,000 $ 375,000
Income taxes (net of $ 444,000
refund in 1994)............. $ 4,000 $ (390,000)
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(NOTE 1) - Loss Per Share:
Loss per share is based on the weighted average number of common and
common equivalent shares (where appropriate) outstanding during each period.
The average number of shares and equivalent shares outstanding for the six and
three month periods ended June 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Primary 5,886,000 6,311,000 5,886,000 6,282,000
Fully Diluted 5,886,000 6,311,000 5,886,000 6,282,000
</TABLE>
(NOTE 2) - Cost of Sales:
For interim periods, the Company estimates its inventory and related gross
profit.
(NOTE 3) - Inventories:
Inventories are comprised of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Raw Materials........................ $ 3,707,000 $ 1,902,000
Work-in-process...................... 5,251,000 5,697,000
Finished goods....................... 18,545,000 13,407,000
T O T A L............... $ 27,503,000 $ 21,006,000
(NOTE 4) - Litigation:
</TABLE>
On September 23, 1993, a class action was commenced by an alleged
shareholder of USA Classic (formerly a subsidiary of the Company), against USA
Classic and certain directors in the United States District Court for the
Southern District of New York.
(continued)
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(continued)
The action was commenced on behalf of shareholders, other than the
defendants, who acquired their shares from November 20, 1992, the date of the
initial offering, through September 22, 1993, and alleges violations of the
Securities Act of 1993 in connection with the offering as well as violations of
Section 10b of the Securities Exchange Act of 1934. The plaintiffs are seeking
compensatory damages as well as fees and expenses.
On February 1, 1994, a Consolidated Amended Complaint was filed in the
class action. The amended Complaint adds the Company as a defendant and
alleges that the Company is a "controlling person" of USA Classic and an "aider
and abetter" of the alleged violations of the securities laws. The Amended
Complaint was answered on March 21, 1994.
On October 4, 1994, a Second Amended and Consolidated Complaint was filed
in the Class Action. The Second Amended and Consolidated Complaint restated
the allegations against the Company and added Paine Webber Incorporated and
Ladenburg Thalmann & Co. Inc., the lead underwriters in the Offering, as
additional defendants. On November 15, 1994, the Company and such underwriters
moved to dismiss certain of the allegations in the Second Amended and
Consolidated Complaint. Such motion was argued on March 17, 1995 and the
parties are awaiting the court's decision. While the dismissal motion, if
granted, will not dispose of all the claims asserted in the Second Amended and
Consolidated Complaint, the Company intends to vigorously defend against any
remaining claims.
(NOTE 5) - Death of principal officer:
On February 24, 1995, the Company's principal officer died. Pursuant to
his employment contract, the Company will pay approximately $ 500,000 to the
principal officer's estate in monthly installments over the next three years.
The Company is a beneficiary of key-man policies aggregating $ 1,500,000 on the
life of the principal officer. Such amounts reflected above have been recorded
in the accompanying financial statements.
(NOTE 6) - Debt:
Under the various debt agreements, the Company and its subsidiaries are
required to comply with certain covenants which specify minimum cash and cash
equivalents to be on its balance sheet at all times, minimum working capital,
and tangible net worth requirements and are precluded from declaring and paying
dividends without the consent of such lenders. The Company is currently in
compliance with all but one covenant and has been granted a waiver by its
lender for the period ended June 30, 1995. The lending facilities of the
Canadian Apparel Segment expired on December 31, 1993. During the current
period, the Company opened up standby letters of credit totaling $ 3,610,000
for the beneficiary of the primary lender to its Canadian subsidiaries to
secure a certain level of borrowings of such subsidiaries until a new lending
arrangement is finalized.
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULT OF OPERATIONS
Liquidity, Capital Resources and Inflation:
Working capital decreased by $ 8,214,000 to $ 5,874,000 during the six
month period ended June 30, 1995 from the year ended December 31, 1994
principally due to $ 3,610,000 of marketable securities which was pledged to
secure standby letters of credit issued to the Company's lender to its Canadian
Apparel Segment as security for borrowings of the Segment under a temporary
banking arrangement and to a net loss of $ 2,446,000 incurred by the Company
for the six months ended June 30, 1995. The Company expects to finalize a new
banking arrangement during the third quarter of 1995. In addition, the Company
pledged $ 1,700,000 of its marketable securities as security for the Factoring
Agreement between its wholly owned subsidiary, East End Apparel Group Ltd and
its primary lender. The Company's working capital ratio as at June 30, 1995
was 1.2 to 1 compared to 1.6 to 1 at December 31, 1994.
In July 1993, East/West entered into a Restated and Amended Factoring
Agreement with its primary lender. Advances by the factor prior to the
maturity date of receivables sold bear interest at a rate of prime plus 1.50%.
As security for its obligations under such amended facility, the Company has
pledged approximately $ 5,000,000 of its marketable securities.
In September, 1994 East End entered into a Factoring Agreement with the
Company's primary lender under the same terms and conditions as East/West. The
facility is guaranteed by the Company and as security for its obligations under
such facility, the Company has pledged approximately $ 2,200,000 of its
marketable securities including $ 500,000 subsequent to June 30, 1995.
Between November, 1993 and January, 1995 the Company repurchased 750,700
shares of its common stock in the open market at an average price of $3.57 per
share. In October, 1994, the Company announced that it planned to purchase up
to an additional 300,000 shares of its common stock in the open market or in
privately negotiated or block transactions. The Company has purchased 166,200
shares under this program.
The Company's existing capital resources (including its bank credit
facilities) and its cash flow from operations are expected to be adequate to
cover the Company's cash requirements for the foreseeable future. The lending
facilities of the Canadian Apparel Segment expired on December 31, 1993 and it
is currently holding discussions with a subsidiary of the Company's primary
lender and expects to finalize a new lending arrangement by the third quarter
of 1995. The Canadian Apparel Segment continues to borrow from its current
lender. The facility is guaranteed by the Company, and, as security for its
obligations under this temporary arrangement, the Company has provided such
lender with standby letters of credit equal to or above the level of
borrowings.
Inflation has not materially impacted the operations of the Company.
<PAGE>
Results of Operations:
Six month period ended June 30, 1995 v. June 30, 1994
Consolidated net sales for the six month period ended June 30, 1995
increased to $ 19,476,000 from $ 16,248,000 from the comparable period of the
prior fiscal year due principally to increases in sales from each of its
business segments.
Consolidated net loss for the six months ended June 30, 1995 significantly
decreased to $ 2,446,000 from $ 12,396,000 from the comparable period of the
prior fiscal year due to a non cash charge in the prior period of $ 13,687,000
(exclusive of tax benefit) reflecting the Company's write-off of its 43% equity
interest in USA Classic, Inc., subordinated debt approximating $ 2,400,000 and
approximately $ 2,200,000 of related costs. Exclusive of the non-cash charge,
the pre-tax loss increased to $ 2,446,000 for the six month period ended
June 30, 1995 compared to $ 2,008,000 from the comparable period of the prior
fiscal year due principally to increased operating losses at the Company's
United States Apparel Segment.
Revenues for the United States Apparel Segment for the six months ended
June 30, 1995 increased to $ 7,695,000 from $ 5,186,000 from the comparable
period of the prior year principally due to revenues recorded by the Company's
new East End Apparel Group Ltd. ("Campton Place") subsidiary. Revenues also
increased at the Company's East/West division. The operating loss for the six
month period ended June 30, 1995 increased to $ 3,406,000 from $ 1,806,000 from
the comparable period of the prior year due to a lower gross profit recorded by
the Segment due to several factors related to a significantly weak retail
environment.
Revenues for the Canadian Apparel Segment for the six months ended June
30, 1995 increased to $ 3,606,000 from $ 3,214,000 from the comparable period
of the prior year due to increased revenue from its Apparel Image Marketing
("A.I.M.") division. The operating loss for the six month period significantly
decreased to $ 598,000 from $ 1,137,000 in the prior period due to improved
gross margin on sales and a reduction in selling general and administrative
costs. The results for the current six month period include $ 353,000 of one-
time restructuring consisting of product line and personnel termination charges
related to the Segment.
Revenues for the Electronics Segment for the six months ended June 30,
1995 slightly increased to $ 8,175,000 from $ 7,848,000 from the comparable
period of the prior year. Despite the slight increase in revenues, operating
income for the six months ended June 30, 1995 slightly decreased to $ 2,255,000
from $ 2,277,000 from the comparable period of the prior fiscal year. Included
in the current period results is a provision of approximately $ 875,000 taken
in anticipation of costs to be incurred to repair and/or refurbish certain
units that have been already shipped to one of the Segment's customers.
Management will monitor these costs in subsequent periods.
<PAGE>
Consolidated gross profit as a percentage of sales for the six months
ended June 30, 1995 decreased to 22.9% from 29.2% for the comparable period of
the prior fiscal year due principally to a lower gross profit realized by the
Company's United States Apparel Segment and Electronics Segment and despite a
higher gross profit realized by the Company's Canadian Apparel Segment.
Selling, general and administrative expenses as a percentage of sales for
the six months ended June 30, 1995 decreased to 40.0% of sales from 40.9% from
the comparable period of the prior fiscal year due to increased revenues.
Selling, general and administrative expenses increased to $ 7,799,000 for the
six months ended June 30, 1995 from $ 6,653,000 from the comparable period of
the prior fiscal year. These increases were principally due to selling,
general and administrative costs incurred by the Company's new Campton Place
subsidiary and were partially offset by reduced selling, general, and
administrative costs at the Company's Canadian Apparel Segment.
Interest expense significantly increased for the six months ended June 30,
1995 to $ 1,286,000 from $ 425,000 from the prior comparable period principally
due to interest charges associated with the financing of the United States
Apparel Segment's higher inventory levels in the current period.
Investment and other income for the six months ended June 30, 1995
significantly increased to $ 2,176,000 from $ 326,000 from the comparable
period of the prior year primarily due to (i) insurance proceeds due the
Company resulting from the death of the Company's principal officer net of
accrued costs due to the officer's estate, (ii) to the reduction in the
unrealized loss on marketable securities due to a decrease in interest rates
and (iii) increased commission income earned by the Company's U.S. Apparel
Segment.
The Company did not record any tax benefit on the current pre-tax loss
because of the uncertainty of future realization.
Three month period ended June 30, 1995 v. June 30, 1994
Consolidated net sales for the three month period ended June 30, 1995
increased to $ 8,588,000 from $ 5,691,000 from the prior period of the
comparable year due principally to increased revenues from each of its business
segments.
Consolidated net loss for the three months ended June 30, 1995 increased
to $ 2,133,000 from $ 1,212,000 from the comparable period of the prior fiscal
year due principally to increased operating losses at the Company's United
States Apparel Segment. The second quarter is historically the weakest
operating quarter for the Company's apparel segments. The increased net loss
was also due to the Company not recording an income tax benefit in the current
period as it did in the prior period because it is uncertain whether such
benefit will be realized in future periods.
<PAGE>
Revenues for the United States Apparel Segment for the three months ended
June 30, 1995 increased to $ 2,613,000 from $ 1,602,000 from the comparable
period of the prior year principally due to revenues recorded by the Company's
new Campton Place subsidiary. Revenues also increased at the Company's
East/West division. The operating loss for the three month period ended June
30, 1995 increased to $ 2,221,000 from $ 1,231,000 from the comparable period
of the prior year principally due to an operating loss recorded by the new
Campton Place subsidiary.
Revenues for the Canadian Apparel Segment for the three months ended June
30, 1995 increased to $ 1,906,000 from $ 980,000 from the comparable period of
the prior year due to increased revenue from its A.I.M. division. The
operating loss for the period decreased to $ 259,000 from $ 748,000 in the
prior period due principally to increased revenues and gross profit and to a
reduction in selling general and administrative expenses. The results for the
current six month period include $ 353,000 of one-time restructuring costs
related to the Segment.
Revenues for the Electronics Segment for the three months ended June 30,
1995 increased to $ 4,069,000 from $ 3,109,000 from the comparable period of
the prior year due to the billing for the reimbursement of certain engineering
costs during the period that were expensed in previous periods. Despite the
increase in sales, operating income slightly decreased to $ 952,000 for the
period from $ 959,000 in the prior period due principally to a provision of
approximately $ 875,000 taken during the period in anticipation of costs to be
incurred to repair and/or refurbish certain units that have been already
shipped to one of the Segment's customers. Management will monitor these costs
in subsequent periods.
Consolidated gross profit as a percentage of sales for the three months
ended June 30, 1995 decreased to 18.5% from 29.7% for the comparable period of
the prior fiscal year due principally to a lower gross profit realized by the
Company's United States Apparel Segment and Electronics Segment and despite a
higher gross profit realized by the Company's Canadian Apparel Segment.
Selling, general and administrative expenses as a percentage of sales for
the three months ended June 30, 1995 decreased to 42.9% from 59.2% from the
prior period of the comparable year due principally to an increase in revenues.
Selling, general and administrative expenses increased to $ 3,680,000 from
$ 3,369,000 for the prior comparable period. This increase was principally due
to higher expenses incurred by the Company's United States Apparel Segment,
particularly those incurred by the new Campton Place subsidiary and despite
lower selling and general and administrative expenses incurred by the Company's
Canadian Apparel and Electronics segment and lower corporate expenses.
Interest expense significantly increased for the three months ended June
30, 1995 to $ 631,000 from $ 225,000 from the prior comparable period
principally due to interest charges associated with the financing of the United
States Apparel Segment's higher inventory levels in the current period.
<PAGE>
Investment and other income for the three months ended June 30, 1995
significantley increased to $ 592,000 from $ 190,000 from the comparable period
of the prior year primarily due to the reduction in the unrealized loss on
marketable securities due to a decrease in interest rates and increased
commission income earned by the Company's U.S. Apparel Segment.
The Company did not record any tax benefit on the current pre-tax loss
because of the uncertainty of future realization.
Certain Material Trends:
Despite continued profitability into 1995, the Company's Electronic
Segment continues to face a difficult business environment marked by increasing
pressure on the Company's prices for its sole source sales and a general
reduction in the level of funding for the defense sector. Based on its planned
delivery schedules, the Company expects a reduction in Electronic Segment
revenues in 1995 and 1996.
The Company's Electronic Segment is continuing to seek new contracts which
require up-front design, engineering, prototype and preproduction costs. While
the Segment attempts to negotiate contract awards for reimbursement of product
development, there is no assurance that sufficient monies will be set aside by
the government for such effort. In addition, even if the government agrees to
reimburse development costs, there is still a significant risk of cost overrun
which may not be reimbursable. Furthermore, once the Company has completed the
design and preproduction stage, there is no assurance that funding will be
provided for future production.
The Electronics Segment is heavily dependent upon military spending as a
source of revenues and income. World events have led the government of the
United States to reevaluate the level of military spending necessary for
national security. Any significant reductions in the level of military
spending by the Federal Government could have a negative impact on the
Electronics Segment's future revenues and earnings.
A majority of the business of both the United States and the Canadian
Apparel Segment is associated with the sale of outerwear. The third and fourth
quarters are generally the primary selling seasons for outerwear sales.
Furthermore, where sale of outerwear constitutes a significant percentage of
such segment's business, the first and second quarters are historically weak
periods since its customers do not generally request shipment of merchandise
during this time.
Despite the continued market acceptance of its established lines, a
weakened economy in the United States and Canada could have an adverse impact
on the Apparel Segments' revenues and earnings. The Apparel Segments' large
customers include many of the major department stores which may be vulnerable
in a weakened economy. Furthermore, many published reports have indicated that
the apparel industry has not yet participated in the nation's recent economic
recovery and the share of consumer personal spending devoted to apparel has
dropped to record lows. Finally, warm weather throughout many regions of the
United States and Canada created sluggish outerwear sales for retailers during
<PAGE>
the third and fourth quarters of 1994. In addition to the negative impact this
had on the Company's fourth quarter sales and gross profit in 1994, it is
uncertain what impact this may have on the buying capabilities of the major
retailers in 1995.
The lending facilities of the Canadian Apparel Segment expired on December
31, 1993. The Segment is currently holding discussions with a subsidiary of
the Company's primary lender and expects to finalize a new lending arrangement
by the third quarter of 1995. If the Segment experiences any significant delay
in finalizing a new lending arrangement, timely delivery of products to
customers during its primary selling season could be impaired. Furthermore, in
the event that the Segment is unable to consummate any such banking
transaction, it will be forced to significantly decrease its ongoing
operations.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned therunto duly authorized.
ORBIT INTERNATIONAL CORP.
Registrant
Dated: August 14, 1995 /s/ Dennis Sunshine
Dennis Sunshine, President, Chief
Executive Officer and Director
Dated: August 14, 1995 /s/ Mitchell Binder
Mitchell Binder, Vice President-
Finance, Chief Financial Officer
and Director
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits. None
(b) Reports on Form 8-K. No reports on form 8-K were filed by
Registrant for the quarter for which this report is filed.
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
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<SECURITIES> 4561000
<RECEIVABLES> 4962000
<ALLOWANCES> 1087000
<INVENTORY> 27503000
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0
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<OTHER-SE> 28261000
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