<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 September 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:
September 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 nine months ended September 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>
September 30, December 31,
1995 1994
(unaudited)
A S S E T S
Current assets:
<S> <C> <C>
Cash and cash equivalents.............. $ 2,403,000 $ 815,000
Investment in marketable trading
securities, at lower of amortized
cost or market........................ 4,696,000 9,138,000
Accounts receivable - net of
estimated doubtful accounts........... 4,129,000 5,277,000
Inventories - at lower of cost (first
in, first out) or market (Notes 2 and
3).................................... 24,210,000 21,006,000
Other current assets................... 960,000 1,191,000
Total current assets................ 36,398,000 37,427,000
Property, plant and equipment - at cost
less accumulated depreciation and
amortization........................... 3,192,000 3,279,000
Excess of cost over the fair value of
assets acquired - less accumulated
amortization........................... 864,000 12,129,000
Restricted assets - marketable trading
securities............................. 11,934,000 7,805,000
Other assets 704,000 2,871,000
T O T A L .......................... $ 53,092,000 $ 63,511,000
</TABLE>
Attention is directed to accompanying notes to
condensed consolidated financial statements.
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(continued)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
(unaudited)
L I A B I L I T I E S
Current liabilities:
<S> <C> <C>
Notes payable .......................... $ $ 2,602,000
Current portion of long-term obligations 2,330,000 3,096,000
Accounts payable........................ 2,800,000 3,734,000
Accrued expenses (Note 5)............... 3,943,000 2,367,000
Due to factor (Note 6).................. 22,691,000 11,540,000
Total current liabilities.......... 31,764,000 23,339,000
Long-term obligations (less current
portion above).......................... 7,408,000 8,909,000
Total liabilities.................... 39,172,000 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 September 30, 1995 and
December 31, 1994, respectively.......... 877,000 877,000
Additional paid-in capital ................ 23,285,000 23,170,000
Retained earnings.......................... 493,000 18,227,000
Less treasury stock ( 2,885,000 and
2,844,000 shares at September 30, 1995
and December 13, 1994, respectively) at
cost .................................... (9,588,000) (9,520,000)
Less unearned portion of compensatory stock (148,000)
Foreign currency translation adjustment.... (1,147,000) (1,343,000)
Total stockholders' equity............ 13,920,000 31,263,000
T O T A L............................. $ 53,092,000 $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>
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales.................. $40,831,000 $ 37,265,000 $21,355,000 $21,017,000
Cost of sales (Note 2)..... 33,856,000 27,979,000 18,843,000 16,475,000
Gross profit (Note 2)...... 6,975,000 9,286,000 2,512,000 4,542,000
Other (income), costs and
expenses:
Selling, general and
administrative.......... 12,641,000 11,068,000 4,842,000 4,415,000
Interest................ 2,129,000 898,000 843,000 473,000
Investment and other
(income) (Note 5)..... (3,277,000) (1,473,000) (1,101,000) (1,147,000)
Write-off of excess of
cost over fair value
of assets acquired
and other intangible
assets................ 13,216,000 13,216,000
Equity in loss and
write-down of
investment in
affiliate ............ 13,687,000
24,709,000 24,180,000 17,800,000 3,741,000
Earnings (loss) before
taxes (benefit) on
income................... (17,734,000) (14,894,000) (15,288,000) 801,000
Taxes (benefit) on income.. (3,134,000) 165,000
NET EARNINGS (LOSS)........$(17,734,000)$(11,760,000)$(15,288,000) $ 636,000
NET EARNINGS (LOSS) PER
SHARE (Note 1)..........$ (3.01) $ (1.89) $ (2.60) $ .11
</TABLE>
Attention is directed to the accompanying notes to
condensed consolidated financial statements
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net (loss).................................... $(17,734,000) $(11,760,000)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Depreciation and amortization................ 273,000 411,000
Amortization of goodwill..................... 508,000 494,000
Provision for doubtful accounts.............. 52,000 (140,000)
Compensatory issuance of stock and options... 262,000 394,000
Deferred tax (benefit)....................... (2,104,000)
Gain on sale of fixed assets................. (80,000)
Imputed interest on Acquisition Note......... 213,000 297,000
Write-off of excess of cost over fair value of
assets acquired and other intangible assets. 13,216,000
Equity in loss and write-down of investment
in affiliate................................ 13,687,000
Change in value of marketable trading
securities.................................. (222,000) 167,000
Purchases of marketable trading securities... (20,155,000) (18,792,000)
Proceeds of sales of marketable trading
securities.................................. 20,690,000 18,849,000
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable.. 1,260,000 (2,995,000)
(Increase) in inventory..................... (3,073,000) (7,462,000)
(Increase) in prepaid and refundable taxes.. (47,000)
(Increase) decrease in other current assets. 200,000 (292,000)
Increase (decrease) in accounts payable..... (967,000) 2,262,000
Increase (decrease) in accrued expenses..... 1,588,000 (315,000)
Net cash (used in) operating activities.... (3,969,000) (7,346,000)
Cash flows from investing activities:
Acquisitions of fixed assets.................. (359,000) (410,000)
Proceeds from sale of fixed assets............ 271,000
(Increase) in other assets.................... (243,000) (183,000)
Net cash (used in) investing activities...... (331,000) (593,000)
(continued)
</TABLE>
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from financing activities:
Net advances from factor..................$ 11,151,000 $ 5,138,000
Proceeds from debt........................ 402,000 5,332,000
Repayments of debt........................ (5,593,000) (2,276,000)
Purchase of treasury stock................ (68,000) (1,148,000)
Net cash provided by financing activities. 5,892,000 7,046,000
Effect of exchange rate changes on cash..... (4,000) (1,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ 1,588,000 (894,000)
Cash and cash equivalents - January 1....... 815,000 5,447,000
CASH AND CASH EQUIVALENTS - September 30.... $ 2,403,000 $ 4,553,000
</TABLE>
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash paid for:
Interest........................ $ 1,977,000 $ 829,000
Income taxes (net of $ 444,000
refund in 1994)............... 4,000 (271,000)
</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) - Earnings (loss) Per Share:
Earnings (loss) per share are 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 nine and three month periods ended September 30, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Primary and
Fully Diluted 5,886,000 6,233,000 5,886,000 6,054,000
</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>
September 30, December 31,
1995 1994
<S> <C> <C>
Raw Materials........................ $ 1,857,000 $ 1,902,000
Work-in-process...................... 4,992,000 5,697,000
Finished goods....................... 17,361,000 13,407,000
T O T A L............... $ 24,210,000 $ 21,006,000
</TABLE>
(NOTE 4) - Litigation:
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 PaineWebber 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 received insurance proceeds aggregating $ 1,500,000 on keyman
policies 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 violation of certain of its covenants and has been granted
waivers by its lender for the period ended September 30, 1995. In September,
1995, the Canadian subsidiaries entered into a new factoring arrangement with
a subsidiary of the Company's primary lender. The new arrangement provides
the Canadian subsidiaries with a C$7,000,000 line of credit and bears interest
at a rate of prime plus .75%. As security for its obligations under this
facility, the Company has provided the lender with a C$4,000,000 standby
letter of credit.
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity, Capital Resources and Inflation:
Working capital decreased by $ 9,454,000 to $ 4,634,000 during the nine
month period ended September 30, 1995 from the year ended December 31, 1994
principally due to approximately $ 3,000,000 of marketable securities which
was pledged to secure standby letters of credit issued to the Company's factor
to its Canadian Apparel Segment as security for borrowings of the Segment
under a new banking arrangement, $ 2,500,000 of its marketable securities
pledged as security for the Factoring Agreement between its wholly owned
subsidiary, East End Apparel Group Ltd. and its primary lender, and to a net
loss of $ 4,518,000 (before write-off of excess of cost over the fair value of
assets acquired ("goodwill") and other intangible assets) incurred by the
Company for the nine months ended September 30, 1995. The Company's working
capital ratio as at September 30, 1995 was 1.1 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 $ 5,250,000 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 $ 2,500,000 of its
marketable securities.
In September, 1995, the Company's Canadian Apparel Segment entered into
a new factoring arrangement with a subsidiary of the Company's primary lender.
The new arrangement provides the Segment with a C$7,000,000 line of credit and
bears interest at prime plus .75%. As security for its obligations under this
facility, the Company has provided the lender with a C$4,000,000 standby
letter of credit.
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.
Pursuant to the terms of the Purchase Agreement between the Company and
the sellers of East/West entered into in July 1993, the Company is required to
secure the $ 8,000,000 Promissory Note to the sellers with an $ 8,000,000
letter of credit or equivalent at June 30, 1996. The Company is currently in
<PAGE>
discussions with the sellers to amend the terms and conditions of such
promissory note, although there can be no assurance such promissory note will
be favorably amended, if at all.
Assuming the favorable amendment of such promissory note, 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.
Inflation has not materially impacted the operations of the Company.
Results of Operations:
Nine month period ended September 30, 1995 v. September 30, 1994
Consolidated net sales for the nine month period ended September 30, 1995
increased to $ 40,831,000 from $ 37,265,000 from the comparable period of the
prior fiscal year principally due to an increase in sales from its United
States Apparel Segment.
Consolidated net loss for the nine months ended September 30, 1995
increased to $ 17,734,000 from $ 11,760,000 from the comparable period of the
prior fiscal year principally due to noncash charges in the current period of
$ 13,216,000 reflecting the Company's write-off of goodwill and other
intangible costs related to its East/West division and $ 2,000,000 of
inventory write-downs taken by its United States Apparel Segment. Management,
in its continuing review of operations, wrote off all of the goodwill upon
determining that cash flows from future operations of its East/West division
would not be sufficient to support any carrying value of goodwill. Two
consecutive years of disappointing results during its primary selling season
along with significant financial weakness and excess inventories throughout
the apparel and retail sector leave management with great uncertainty as to
when business conditions will improve. The loss in the prior period reflects
the Company's write-off of its 43% equity interest in USA Classic, Inc.,
subordinated receivable approximating $ 2,400,000 and approximately
$ 2,500,000 of related costs. Exclusive of the noncash write-off, the pre-tax
loss for the nine month period ended September 30, 1995 increased to
$ 2,518,000 from $ 1,207,000 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 nine months ended
September 30, 1995 increased to $ 21,990,000 from $ 15,473,000 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 nine month period ended September 30, 1995 increased to
$ 4,487,000 from $ 1,140,000 from the comparable period of the prior fiscal
year due to a lower gross profit recorded by the Segment due to $ 2,000,000 of
inventory write-downs resulting from a significantly weak retail environment.
The operating loss was also affected by a loss of $ 181,000 incurred by the
Company's new subsidiary RAPP Style International principally due to start up
costs.
<PAGE>
Revenues for the Canadian Apparel Segment for nine months ended September
30, 1995 decreased to $ 8,815,000 from $ 11,280,000 from the comparable period
of the prior fiscal year due to a higher number of units shipped in the prior
period at a lower gross profit. The operating loss for the nine month period
decreased to $ 400,000 from $ 850,000 in the prior period due to improved
gross margin on sales and reduction in selling, general and administrative
costs. The results for the current nine month period include $ 367,000 of
one-time restructuring costs consisting of product line and personnel
termination charges related to the Segment.
Revenues for the Electronics Segment for the nine months ended September
30, 1995 decreased to $ 10,026,000 from $ 10,512,000 from the comparable
period of the prior fiscal year due to a decrease in the number of units
shipped. Operating income for the nine month period ended September 30, 1995
decreased to $ 2,304,000 from $ 2,929,000 from the comparable period of the
prior fiscal year due to a decrease in revenue and to a slight decrease in the
gross profit on sales. 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 continue to monitor these costs in
subsequent periods.
Consolidated gross profit as a percentage of sales for the nine months
ended September 30, 1995 decreased to 17.1% from 24.9% for the comparable
period of the prior fiscal year due to principally to a lower gross profit
realized by the Company's United States Apparel Segment resulting from
$ 2,000,000 in inventory write-downs.
Selling, general and administrative expenses, as a percentage of sales,
for the nine months ended September 30, 1995 increased to 31.0% of sales from
29.7% from the comparable period of the prior fiscal year. Selling, general
and administrative costs increased to $ 12,641,000 for the nine months ended
September 30, 1995 from $ 11,068,000 from the comparable fiscal year. These
increases were due principally to selling, general and administrative costs
incurred by the Company's new Campton Place and RAPP Style International
subsidiaries and were partially offset by reduced selling, general, and
administrative costs at the Company's Canadian Apparel Segment.
Investment expense significantly increased for the nine months ended
September 30, 1995 to $ 2,129,000 from $ 898,000 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.
Interest and other income for the nine months ended September 30, 1995
significantly increased to $ 3,277,000 from $ 1,473,000 from the comparable
period of the prior year primarily due to (i) insurance proceeds received by
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.
<PAGE>
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 September 30, 1995 v. September 30, 1994
Consolidated net sales for the three months ended September 30, 1995
slightly increased to $ 21,355,000 from $ 21,017,000 from the prior period of
the comparable year due principally to increased revenues from its United
States Apparel Segment and despite reduced revenues from its Canadian Apparel
and Electronics Segments.
Consolidated net loss for the three month period ended September 30, 1995
was $ 15,288,000 compared to net income of $ 636,000 from the comparable
period of the prior year due principally to non cash charges in the current
period of $ 13,216,000 reflecting the Company's write-off of goodwill and
other intangible costs related to its East/West division and $ 2,000,000 of
inventory write-downs taken by its United States Apparel Segment.
Revenues for the United States Apparel Segment for the three months ended
September 30, 1995 increased to $ 14,295,000 from $ 10,287,000 from the
comparable period of the prior year principally due to revenues recorded by
the Company's new Campton Place subsidiary. Revenues also slightly increased
at the Company's East/West division. The operating loss for the three months
ended September 30, 1995 was $ 1,081,000 compared to operating income of
$ 666,000 from the comparable period of the prior year due to $ 2,000,000 of
inventory write-downs taken by the Segment.
Revenues for the Canadian Apparel Segment for the three month period
ended September 30, 1995 decreased to $ 5,209,000 from $ 8,066,000 from the
comparable period of the prior year due to a decrease in the number of units
shipped. Despite the significant decrease in revenues, operating income only
slightly decreased to $ 198,000 from $ 287,000 in the prior year due
principally to increased gross profit on sales and to a reduction in selling,
general and administrative expenses.
Revenues for the Electronics Segment for the three months ended September
30, 1995 decreased to $ 1,851,000 from $ 2,664,000 from the comparable period
of the prior year due to a decrease in the number of units that were shipped
in the current period. Operating income decreased for the period to $ 49,000
from $ 652,000 principally due to a decrease in revenues and lower gross
profit on sales shipped out during the quarter.
Consolidated gross profit as a percentage of sales for the three months
ended September 30, 1995 decreased to 11.8% from 21.6% for the comparable
period of the prior year due to a lower gross profit realized by the Company's
United States Apparel Segment and the 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 September 30, 1995 increased to 22.7% from 21.0% from
the prior period of the comparable year. Selling, general and administrative
expenses increased to $ 4,842,000 from $ 4,415,000. These increases were due
<PAGE>
to higher expenses incurred by the Company's United States Apparel Segment and
Electronics Segment and despite lower expenses incurred by the Canadian
Apparel Segment as well as lower corporate expenses.
Interest expense significantly increased for the three months ended
September 30, 1995 to $ 843,000 from $ 473,000 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 three months ended September 30, 1995
decreased to $ 1,101,000 from $ 1,147,000 from the comparable period of the
prior year due to less 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.
<PAGE>
Despite the continued market acceptance of its established lines, a
weakened economy in the United States and Canada continues to 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. Warm weather throughout many regions of the
United States created sluggish outerwear sales for retailers in 1994. This
sluggishness created oversupply which impacted the buying capabilities and
attitudes of buyers in 1995. In addition, the financial problems experienced
by many retailers has impacted revenues due to credit concerns of the
financial community. These factors have contributed to a very weak and
uncertain apparel and retail sector. These present conditions, if they
continue, could have a negative impact on the performance of the Apparel
Segments in future quarters.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORBIT INTERNATIONAL CORP.
Registrant
Dated: /s/ Dennis Sunshine
Dennis Sunshine, President, Chief
Executive Officer and Director
Dated: /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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