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, 1996 .
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, 1996. 6,186,000
<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,
1996 are not necessarily indicative of the results of operations for
the full fiscal year ending December 31, 1996.
The consolidated balance sheet as of December 31, 1995 was
condensed from the audited consolidated balance sheet appearing in
the 1995 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, 1995.
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited)
A S S E T S
Current assets:
Cash and cash equivalents.............. $ 2,102,000 $ 2,274,000
Investment in marketable
securities (Note 5)................... 662,000 7,495,000
Accounts receivable - net of
estimated doubtful accounts........... 3,018,000 854,000
Inventories - at lower of cost (first
in, first out) or market (Notes 2 and
3).................................... 6,433,000 13,124,000
Other current assets................... 147,000 1,669,000
Assets held for sale including
restricted investments in marketable
securities (Notes 5 and 6)............ 8,171,000 .
Total current assets................ 20,533,000 25,416,000
Property, plant and equipment - at cost
less accumulated depreciation and
amortization........................... 2,350,000 3,069,000
Excess of cost over the fair value of
assets acquired - less accumulated
amortization........................... 1,069,000 834,000
Restricted investment in marketable
securities (Note 5).................... 7,567,000
Investment in marketable
securities (Note 5).................... 1,176,000 795,000
Other assets............................. 404,000 347,000
T O T A L .......................... $ 25,532,000 $ 38,028,000
Attention is directed to the accompanying notes to
condensed consolidated financial statements.
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(continued)
September 30, December 31,
1996 1995
(unaudited)
L I A B I L I T I E S
Current liabilities:
Current portion of long-term obligations $ 956,000 $ 2,292,000
Accounts payable........................ 883,000 3,860,000
Accrued expenses........................ 2,624,000 4,090,000
Due to factor........................... 15,294,000
Liabilities associated with assets held
for sale including amounts due to
factor (Note 6)....................... 11,319,000 .
Total current liabilities.......... 15,782,000 25,536,000
Long-term liabilities associated with
assets held for sale (Note 6)........... 3,230,000
Long-term obligations (less current
portion above).......................... 1,346,000 1,097,000
Other liabilities......................... 2,077,000
Total liabilities.................... 20,358,000 28,710,000
STOCKHOLDERS' EQUITY
Capital stock - authorized 25,000,000
shares $.10 par value; issued 9,071,000
shares at September 30, 1996 and
8,771,000 at December 31, 1995,
respectively........................... 907,000 877,000
Additional paid-in capital .............. 23,518,000 23,285,000
(Deficit)................................ ( 9,447,000) (4,026,000)
Unrealized holding (loss) in marketable
securities (Note 5).................... (22,000)
Less treasury stock ( 2,885,000 shares at
September 30, 1996 and December 31,
1995, respectively) at cost ........... (9,588,000) (9,588,000)
Unearned portion of performance shares... (194,000)
Foreign currency translation adjustment.. (1,230,000)
Total stockholders' equity.......... 5,174,000 9,318,000
T O T A L........................... $ 25,532,000 $ 38,028,000
Attention is directed to the 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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales............... $12,568,000 $10,026,000 $ 4,798,000 $ 1,851,000
Cost of sales (Note 2).. 7,024,000 6,265,000 2,648,000 1,309,000
Gross profit (Note 2)... 5,544,000 3,761,000 2,150,000 542,000
Other (income), costs
and expenses:
Selling, general and
administrative....... 4,115,000 3,367,000 1,462,000 1,172,000
Interest.............. 73,000 193,000 49,000 63,000
Investment and other
(income) (Note 5)... (1,224,000) (2,104,000) ( 102,000) (292,000)
2,964,000 1,456,000 1,409,000 943,000
Earnings from continuing
operations before taxes
on income.... ......... 2,580,000 2,305,000 741,000 (401,000)
Taxes on income......... .
Earnings from continuing
operations............. 2,580,000 2,305,000 741,000 (401,000)
(Loss) from discontinued
operations (Note 6).... (4,200,000) (20,039,000) (14,887,000)
(Loss) from disposal of
discontinued operations
(Note 6)............... (3,801,000) .
(8,001,000) (20,039,000) (14,887,000)
NET EARNINGS (LOSS)..... $(5,421,000) (17,734,000) $ 741,000 (15,288,000)
EARNINGS(LOSS)PER SHARE
(Note 1):
Earnings from
continuing operations $ .41 $ .39 $ .12 $ (.07)
(Loss) from
discontinued operations (1.28) (3.40) (2.53)
NET EARNINGS (LOSS)..... $ ( .87) $ (3.01) $ .12 $ (2.60)
Attention is directed to the accompanying notes to
condensed consolidated financial statements.
</TABLE>
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net (loss)................................... $(5,421,000) $(2,446,000)
Adjustments to reconcile net (loss) to net
cash provided by (used in) operating
activities:
Depreciation and amortization............... 90,000 184,000
Amortization of goodwill.................... 86,000 326,000
Write-off of goodwill....................... 793,000
Write-off of foreign currency translation... 1,234,000
Provision for doubtful accounts............. 102,000
Compensatory issuance of stock and options.. 39,000 263,000
Gain on sale of fixed assets................ (80,000)
Imputed interest on Acquisition Note........ 142,000
Change in value of marketable trading
securities................................. 22,000 (222,000)
Purchases of marketable trading
securities................................. (17,157,000)
Proceeds of sales of marketable trading
securities................................. 17,395,000
Disposal of discontinued operations......... 3,008,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable. (2,896,000) 1,380,000
(Increase) decrease in inventory........... 1,138,000 (6,431,000)
Decrease in other current assets........... 1,032,000 78,000
Increase in accounts payable............... 625,000 1,024,000
Increase (decrease) in accrued expenses.... (555,000) 1,721,000
Change in assets held for sale............. 2,206,000
(Increase) in other assets................. (151,000) (234,000)
Net cash provided by (used in) operating
activities.............................. 1,250,000 (3,955,000)
(continued)
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(unaudited)
Nine Months Ended
September 30,
1996 1995
Cash flows from investing activities:
Purchase of net assets of acquired company... (3,779,000)
Acquisitions of fixed assets................. (141,000) (282,000)
Proceeds from sale of fixed assets........... 217,000
Purchase of marketable securities............ (14,547,000)
Proceeds of sales of marketable securities... 25,143,000 .
Net cash provided by (used in) investing
activities................................. 6,676,000 (65,000)
Cash flows from financing activities:
Proceeds from issuance of performance shares 30,000
Net advances from factor.................. 7,890,000
Net payments to factor.................... (8,118,000)
Proceeds from debt........................ 2,417,000 393,000
Repayments of debt........................ (2,427,000) (2,463,000)
Purchase of treasury stock................ (68,000)
Net cash provided by (used in) financing
activities............................... (8,098,000) 5,752,000
Effect of exchange rate changes on cash... (3,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ (172,000) (1,729,000)
Cash and cash equivalents - January 1....... 2,274,000 815,000
CASH AND CASH EQUIVALENTS - September 30 ... $ 2,102,000 $ 2,544,000
(continued)
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(unaudited)
Supplemental disclosures of cash flow information:
Nine Months Ended
September 30,
1996 1995
Cash paid for:
Interest........................ $ 1,364,000 $ 1,977,000
Income taxes.................... $ 29,000 $ 4,000
Supplemental schedule of noncash and financing activities:
[1] In February 1996, the Company acquired the operating assets and
business of Behlman Electronics, Inc. The fair value of the net
assets as of the date of acquisition is presented below:
Inventory $ 2,560,000
Property, plant and equipment 115,000
Excess of cost over the fair
value of assets acquired 1,104,000
$ 3,779,000
Attention is directed to the accompanying notes to
condensed consolidated financial statements
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(NOTE 1) - Earnings (Loss) Per Share:
Net earnings (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 nine month and three month periods ended September 30,
1996 and 1995 are as follows:
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
Primary 6,005,000 5,886,000 6,072,000 5,886,000
Fully Diluted 6,252,000 5,886,000 6,343,000 5,886,000
(NOTE 2) - Cost of Sales:
For interim periods, the Company estimates its inventory and related
gross profit based on management's estimates of costs associated with units
sold.
(NOTE 3) - Inventories:
Inventories are comprised of the following:
September 30, December 31,
1996 1995
Raw Materials................ $ 2,240,000 $ 1,594,000
Work-in-process.............. 4,193,000 4,756,000
Finished goods............... 6,774,000
T O T A L....... $ 6,433,000 $ 13,124,000
(NOTE 4) - Acquisition:
On February 6, 1996, the Company, through a wholly-owned subsidiary
acquired certain assets subject to certain liabilities of Astrosystems, Inc.
and Behlman Electronics, Inc. ("Behlman"). The assets are primarily used in
the business of manufacturing and selling various power supply and power
source products.
(continued)
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(continued)
The purchase price for the assets, which includes inventory, equipment and
other physical property, was $3,700,000, subject to a final valuation of
said assets as of the closing date. The transaction was partially financed
pursuant to a bridge loan in the amount of $500,000 from the Company's
primary lender which was replaced by a term loan and revolving credit
facility. The term loan is secured with a mortgage on the Company's
corporate facility.
Had the acquisition been made on January 1, 1995 (unaudited) proforma
sales, income and earnings per share from continuing operations would have
been $17,501,000, $1,960,000 and $.33 per share respectively, for the nine
month period ended September 30, 1995.
(NOTE 5) - Available-For-Sale Securities:
On December 31, 1995 the Company transferred its marketable securities
to the available for sale category of investments. Available-for-sale
securities are carried at fair value, with the net unrealized gains and
losses, net of income taxes, reported as a separate component of
stockholders' equity. The cost of marketable securities was determined by
the specific identification method. Interest earned on securities
classified as available-for-sale are included in investment and other income
in the accompanying financial statements.
Under the terms of certain credit facilities, the Company's investment
portfolio and certain cash balances must be maintained at a minimum
collateral value. On September 30, 1996, this collateral requirement
amounted to approximately $3,401,000 of marketable securities.
The following is a summary of available-for-sale securities as of
September 30, 1996:
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(continued)
<TABLE>
<CAPTION>
Cost or Estimated Gross Gross
Amortized Fair Unrealized Unrealized
Cost Value Gains (Losses)
<S> <C> <C> <C> <C>
U.S. Treasury bills
maturing September 1997 $4,018,000 $4,018,000 $ $
Debt securities issued
by other government
agencies, maturing
September 1997......... 45,000 45,000 .
Total maturing
within 1 year..... 4,063,000 4,063,000 .
Corporate debt
securities, maturing
October 1997 to
Septemer 2002.......... 506,000 500,000 (6,000)
Total maturing
after 1 year
through 5 years... 506,000 500,000 (6,000)
Corporate debt
securities, maturing
October 2002 to
September 2007......... 357,000 358,000 1,000 .
Total maturing
after 5 years
through 10 years.. 357,000 358,000 1,000 .
Corporate debt
securities, maturing
September 2007 and
thereafter............. 335,000 318,000 (17,000)
Total maturing
after 10 years.... 335,000 318,000 (17,000)
Total maturing
after 1 year...... 1,198,000 1,176,000 1,000 (23,000)
Total marketable
securities........ $5,261,000 5,239,000 $ 4,000 $(23,000)
Less amounts included in
assets held for sale... (3,401,000)
Less non-current
marketable securities.. (1,176,000)
Total current marketable
securities........ $ 662,000
</TABLE>
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(continued)
(Note 6) - Discontinued Operations:
On August 6, 1996, the Board of Directors of the Company adopted
a plan to sell its apparel segments. The plan of disposal
anticipates a sale of these segments by the end of 1996. The Company
estimated the loss on the discontinuance of the segments to be
approximately $8,000,000, including approximately $3,800,000 of
estimated losses on the disposal of the segments. Such costs include
monies owed pursuant to operating lease agreements, professional fees
and other contractual obligations. Accordingly, the historical
results for the apparel segments have been classified as discontinued
operations for all periods presented in the consolidated statements
of operations. Sales of the apparel segments were $19,017,000 and
$30,805,000 for the nine month periods ended September 30, 1996 and
September 30, 1995, respectively. At September 30, 1996, the assets
of the segments to be sold consist primarily of inventories,
property, plant and equipment and investment in marketable securities
securing the Company's guarantees under the segments' financing
arrangements. Liabilities of the segments to be sold consist of
monies due to the segments' lenders, accounts payable, accrued
expenses and other obligations. The consolidated balance sheet at
December 31, 1995 has not been restated.
<PAGE>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS
Results of Operations
Nine month period ended September 30, 1996 v. September 30, 1995
In August, 1996, the Company adopted a plan to sell its apparel
segments. The plan of disposal anticipates a sale of these segments
by the end of 1996. The company estimated the loss on the disposal
of the apparel segments to the expected disposal date to be
approximately $3,801,000 and charged 1996 operations with such
amount. Such costs include monies owed pursuant to operating lease
arrangements, professional fees and other contractual obligations.
The plan of disposal of the Company's apparel operations leaves the
Company with solely its Electronic Segment which consists of the
Orbit Instrument Division and the new Behlman subsidiary.
Consolidated net sales for the nine month period ended September
30, 1996 increased to $12,568,000 from $10,026,000 from the
comparable period of the prior year due principally to $4,671,000 of
revenues recorded by the Company's new Behlman subsidiary which was
acquired in February, 1996 offset by a decrease in the number units
shipped by the Orbit Instrument division.
The net loss for the nine month period ended September 30, 1996,
decreased to $5,421,000 from $17,734,000 from the comparable period
of the prior year. The loss for the current year was principally due
to operating losses from the Company's apparel segments and to the
estimated loss of $3,801,000 resulting from reserves taken on an
expected loss on the disposal of such segments. The loss in the
prior year was principally due to non cash charges of $13,216,000
reflecting the Company's write-off of goodwill and other intangible
costs related to its U.S. Apparel Segment as well as $2,000,000 of
inventory write-downs taken by the same segment.
Net earnings from continuing operations for the nine month
period ended September 30, 1996 increased to $2,580,000 from
$2,305,000 from the comparable period of the prior year due
principally to earnings recorded during the period by the Company's
new Behlman subsidiary.
Gross profit, as a percentage of sales for the nine months ended
September 30, 1996 increased to 44.1% from 37.5% from the comparable
period of the prior year due to greater efficiencies resulting from
the Behlman acquisition.
<PAGE>
Selling, general and administrative expenses for the nine months
ended September 30, 1996 increased to $4,115,000 from $3,367,000
principally due to selling, general and administrative expenses
incurred by the Company's new Behlman subsidiary and offset by lower
corporate expenses and lower selling, general and administrative
expenses incurred by the Orbit Instrument division. Selling, general
and administrative expenses, as a percentage of sales decreased to
32.7% from 33.6% due to additional sales and greater efficiencies
derived from the Behlman acquisition and lower corporate expenses.
Interest expense for the period decreased to $73,000 from
$193,000 from the comparable period of the prior year due to a
reduction in the average amounts owed during the period.
Investment and other income for the nine months ended September
30, 1996 decreased to $1,224,000 from $2,104,000 from the prior
period due principally to interest earned on higher cash balances in
the prior period. Both the current and prior period included non
recurring income resulting from, in the current period, the
realization of approximately $800,000 representing the final payment
of royalty income from Orbit Semiconductor, Inc., pursuant to a Stock
Purchase Agreement signed in November, 1991 and, in the prior period,
$869,000 of insurance proceeds resulting from the death of the
Company's former chief executive officer net of accrued costs to the
officers estate.
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, 1996 v. September 30, 1995
Consolidated net sales for the three month period ended
September 30, 1996 increased to $4,798,000 from $1,851,000 from the
comparable period of the prior year due principally to sales
generated by the Company's new Behlman subsidiary and to increased
sales recorded by the Orbit Instrument division.
Net earnings from continuing operations for the three months
ended September 30, 1996 increased to $741,000 from a loss of
$401,000 from the comparable period of the prior year due principally
to increased sales and earnings from the Orbit Instrument division,
earnings from the new Behlman subsidiary and offset by lower
investment and other income than the prior year.
Gross profit, as a percentage of sales for the three months
ended September 30, 1996 increased to 44.8% from 29.3% from the
comparable period of the prior year due to higher sales and greater
efficiencies derived from the transition of the Behlman operation
into the Company's facility.
<PAGE>
Selling, general and administrative expenses for the three
months ended September 30, 1996 increased to $1,462,000 from
$1,172,000 but decreased as a percentage of sales to 30.5% from 63.3%
due to significantly increased sales and greater efficiencies derived
from the Behlman acquisition.
Interest expense for the three months ended September 30, 1996
decreased to $49,000 from $63,000 in the prior period due to a
reduction in amounts owed during the period.
Investment and other income for the three months ended September
30, 1996 decreased to $102,000 from $292,000 from the prior period
due to interest earned on higher cash balances in the prior period.
The Company did not record any tax benefit on the current pre-
tax loss because of the uncertainty of future realization.
Liquidity, Capital Resources and Inflation:
Working capital increased by $4,871,000 to $4,751,000 for the
nine month period ended September 30, 1996 from a working capital
deficit of $120,000 for the year ended December 31, 1995 principally
due to approximately $7,567,000 of long term restricted assets which
were used either to reduce amounts owed under certain lending
facilities or reclassified as short term due to the Company's
adoption of a plan to dispose of its apparel segments. The increase
in working capital was offset by a net loss of approximately
$1,620,000 incurred by the Company during the nine month period
(exclusive of $3,801,000 of reserves taken on an expected loss on the
disposal of the apparel segments) and by approximately $1,104,000
related to the acquisition of Behlman which was allocated to
goodwill. The Company's working capital ratio at September 30, 1996
was 1.3 to 1 compared to 1.0 to 1 at December 31, 1995.
Assets held for sale and liabilities associated with assets held
for sale (related to the discontinued Apparel Segments) decreased
during the quarter due to the fulfillment of order backlog with the
sale of inventory and the liquidation of certain marketable
securities, both of which were used to reduce amounts owed under
respective lending facilities.
Under the Company's factoring arrangements related to the
discontinued apparel segments, the Company has pledged marketable
securities or provided standby letters of credit as security for its
guarantees under these arrangements. As of September 30, 1996, the
Company has pledged approximately $590,000 in marketable securities
and provided $3,000,000 in standby letters of credit (see Certain
Material Trends). Between January and September, 1996 the Company
<PAGE>
used approximately $7,577,000 of marketable securities to reduce the
amount owed under two of the facilities.
In February 1996, the Company, through a wholly-owned
subsidiary, purchased from Astrosystems, Inc. substantially all of
the assets of its wholly-owned subsidiary, Behlman and substantially
all of the assets of its Military Electronics Division. The purchase
price of $3,750,000 was substantially funded by the Company's cash
and a $500,000 bridge loan from BNY Financial Corporation ("BNY").
In June, 1996, the Company completed a $2,000,000 Term Loan and
$2,000,000 Revolving Credit facility with BNY. The proceeds were
used to pay off the bridge loan and to provide working capital for
the Company's Electronic Segment. The Term Loan is payable in 36
monthly installments and bears interest at prime plus 1.50%. The
Revolving Credit facility bears interest at prime plus 1.0%.
In March 1996, the Company entered into an agreement with the
sellers of East/West whereby the purchase price for the assets under
the asset purchase agreement dated July 1993 (the "Asset Purchase
Agreement") was reduced from $15,000,000 to $8,850,000 plus other
consideration. Accordingly, the $8,000,000 promissory note to the
sellers was reduced to $1,850,000. The amended note is payable as
follows: (i) $500,000 paid upon the execution of the agreement, (ii)
two $250,000 installments due July 1, 1996 (which has been paid) and
January 1, 1997, respectively and (iii) $750,000 payable in quarterly
installments over a five year period commencing March 31, 2002.
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.
Certain Material Trends
Despite continued profitability in 1996, the Company's Electronic
Segment continues to face a difficult business environment with
continuing 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 current delivery schedules and as a result of the
acquisition of Behlman, however, revenues for the Electronics Segment
should increase from those levels recorded in the prior year although
there can be no assurance that such increased revenues will actually
be sustained.
<PAGE>
The Company's Electronic Segment continues 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 Electronic 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. The acquisition of Behlman, however,
has given the Company some diversity with its commercial products
subsidiary which is not affected by fluctuations in military
spending.
In August, 1996, the Company adopted a plan to dispose of its
Apparel Segments. As part of its divestiture plan, the Company is
seeking buyers to assume its guarantees under various lending
arrangements and thereby relieving certain marketable securities and
standby letters of credit pledged to secure such guarantees. As an
alternative, the Company is also seeking to enter into exclusive
licencing arrangements for the trademarks in the Apparel Segments.
However, there is no assurance that the sales or licencing
arrangements will be completed by the end of 1996 or the Company will
be successful in relieving its guarantees under its lending
arrangements
<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: October 30, 1996 /s/ Dennis Sunshine
Dennis Sunshine, President, Chief
Executive Officer and Director
Dated: October 30, 1996 /s/ Mitchell Binder
Mitchell Binder, Vice President-
Finance, Chief Financial Officer
and Directo
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Venture Garments, Ltd. v. East End Apparel Group, Ltd. and Orbit
International Corp.:
In December 1995, Venture Garments, Ltd., a supplier of East End
commenced an action in Supreme Court, New York County for goods had
and received and related equitable relief against both East End and
the Company. In February 1996, the Company answered the complaint,
asserted counterclaims against Venture and impleaded East End's
former president, Gary Jacobs.
Gary Jacobs v. East End Apparel Group, Ltd. and Orbit
International Corp.:
In December 1995, Gary Jacobs, former president of East End,
commenced an action against the Company in connection with his
termination. Jacobs' complaint alleged that he was wrongfully
terminated in violation of his employment agreement with the Company.
The complaint sought damages in the amount of $2,000,000. In
February 1996, the Company answered the complaint and asserted a
counterclaim against Jacobs and his personal counsel for breach of
the contract, breach of fiduciary duty, tortious interference of the
contract and other related relief seeking damages in the aggregate
amount of $30,400,000.
In August 1996, the Company reached a joint settlement with the
plaintiffs in both actions whereby the Company and East End agreed
to pay $475,000 to Venture Garments Ltd. ("Venture") payable as
follows: i) $250,000 upon execution of the settlement ii) $200,000 in
fifteen equal installments commencing September 1, 1996 and iii)
$25,000 in three equal installments commencing December 1, 1997. The
Company and East End also agreed to return certain inventory to
Venture previously held on consignment.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibit 11. Computation of earnings per share.
(b) Reports on Form 8-K. An Item 5 Form 8-K dated August 8,
1996 was filed by the Company to announce that it has
entered into a letter of intent for the sale of its
East/West Division and announced its plan to sell its
Canadian Apparel Segment.
<PAGE>
EXHIBIT 11
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
NINE MONTHS ANDED SEPTEMBER 30, 1996
(unaudited)
Pimary Fully Diluted
Computation of adjusted net earnings:
Net earnings from continued operations.. $ 2,580,000 $ 2,580,000
(Loss) from discontinued operations..... (8,001,000) (8,001,000)
Net (loss).............................. (5,421,000) (5,421,000)
Reduction of interest expense (net of
tax effect) or interest earned (net of
tax effect) attributable to utilization
of assumed proceeds from exercise of
options in excess of amount required to
repurchase 20% of the outstanding
common stock at applicable market value .
Adjusted net (loss)...................... (5,421,000) (5,421,000)
Shares used for computation:
Weighted average number of shares
outstanding............................ 5,936,000 5,936,000
Common shares issuable upon assumed
exercise of options in excess of
assumed repurchase of outstanding
common shares.......................... 69,000 316,000
Shares used for computation.............. 6,005,000 6,252,000
Earnings per common share:
Earnings from continuing operations..... $ .43 $ .41
(Loss) from discontinued operations..... (1.33) (1.28)
Net (loss).............................. $ ( .90) $ ( .87)
<PAGE>
EXHIBIT 11
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ANDED SEPTEMBER 30, 1996
(unaudited)
Pimary Fully Diluted
Computation of adjusted net earnings:
Net earnings............................ $ 741,000 $ 741,000
Reduction of interest expense (net of
tax effect) or interest earned (net of
tax effect) attributable to utilization
of assumed proceeds from exercise of
options in excess of amount required to
repurchase 20% of the outstanding
common stock at applicable market value 1,000
Adjusted net (loss)...................... 741,000 742,000
Shares used for computation:
Weighted average number of shares
outstanding............................ 5,936,000 5,936,000
Common shares issuable upon assumed
exercise of options in excess of
assumed repurchase of outstanding
common shares.......................... 136,000 407,000
Shares used for computation.............. 6,072,000 6,343,000
Earnings per common share................ $ .12 $ .12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,102,000
<SECURITIES> 662,000
<RECEIVABLES> 3,287,000
<ALLOWANCES> 269,000
<INVENTORY> 6,433,000
<CURRENT-ASSETS> 20,533,000
<PP&E> 4,403,000
<DEPRECIATION> 2,053,000
<TOTAL-ASSETS> 25,532,000
<CURRENT-LIABILITIES> 15,782,000
<BONDS> 1,346,000
0
0
<COMMON> 907,000
<OTHER-SE> 4,267,000
<TOTAL-LIABILITY-AND-EQUITY> 25,532,000
<SALES> 12,568,000
<TOTAL-REVENUES> 12,568,000
<CGS> 7,024,000
<TOTAL-COSTS> 7,024,000
<OTHER-EXPENSES> 4,115,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,000
<INCOME-PRETAX> 2,580,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,580,000
<DISCONTINUED> (8,001,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,421,000)
<EPS-PRIMARY> (.90)
<EPS-DILUTED> (.87)
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