FORM 10-K/A - ITEM 14(a)(1) & (2)
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
REPORTS OF INDEPENDENT AUDITORS
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1996 AND 1995
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE FOLLOWING FINANCIAL STATEMENT SCHEDULE IS INCLUDED IN ITEM 14(d):
II - VALUATION AND QUALIFYING ACCOUNTS
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
F-1
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Orbit International Corp.
We have audited the accompanying consolidated balance sheet of Orbit
International Corp. and subsidiaries as of December 31, 1996 and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for the year then ended. Our audit also included the financial
statement schedule listed in the Index at Item 14(a) for the year ended
December 31, 1996. These consolidated financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and schedule
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Orbit
International Corp. and subsidiaries at December 31, 1996 and the consolidated
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements as a whole, presents fairly in
all material respects the information set forth therein for the year ended
December 31, 1996.
We also audited the adjustments described in Note B that were applied to
restate the 1995 and 1994 consolidated financial statements. In our opinion,
such adjustments are appropriate and have been properly applied.
Ernst & Young LLP
New York, New York
March 12, 1997
F-2
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Orbit International Corp.
Hauppauge, New York
We have audited the accompanying consolidated balance sheet of Orbit
International Corp. and subsidiaries as at December 31, 1995 and the related
consolidated statements of operations, changes in stockholders' equity, cash
flows and Schedule II, for the years ended December 31, 1995 and December 31,
1994 prior to their restatement for the adjustments described in Note B to the
1996 consolidated financial statements. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements described above present fairly,
in all material respects, the consolidated financial position of Orbit
International Corp. and subsidiaries at December 31, 1995 and the consolidated
results of their operations and their consolidated cash flows for the years
ended December 31, 1995 and December 31, 1994 prior to their restatement for
the adjustments described in Note B to the 1996 consolidated financial
statements in conformity with generally accepted accounting principles.
Further, it is our opinion that the schedule referred to above presents fairly,
in all material respects the information set forth therein, in compliance with
the applicable accounting regulation of the Securities and Exchange Commission.
Richard A. Eisner & Company, LLP
New York, New York
March 21, 1996
F-3
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents.............. $ 927,000 $ 2,274,000
Investments in marketable securities... 782,000 7,495,000
Accounts receivable (less allowance for
doubtful accounts of $150,000 (1996)
and $1,576,000 (1995))................ 3,114,000 854,000
Inventories............................ 6,657,000 13,124,000
Restricted investments, related to
discontinued operations............... 2,453,000
Assets held for sale, net.............. 712,000
Other current assets................... 246,000 1,669,000
Total current assets................. 14,891,000 25,416,000
Property, plant and equipment - at cost
less accumulated depreciation and
amortization........................... 2,347,000 3,069,000
Excess of cost over the fair value of
assets acquired (less accumulated
amortization of $85,000 (1996) and
$252,000 (1995)........................ 1,019,000 834,000
Restricted investments in marketable
securities............................. 7,567,000
Investments in marketable securities.... 1,150,000 795,000
Other assets............................ 524,000 347,000
TOTAL ASSETS............................ $19,931,000 $38,028,000
See accompanying notes.
F-4
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
December 31,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations.. $ 1,656,000 $ 2,292,000
Accounts payable.......................... 940,000 3,860,000
Accrued expenses.......................... 2,545,000 4,090,000
Notes payable............................. 65,000
Accounts payable, accrued expenses and
reserves for discontinued operations..... 2,636,000
Due to factor............................. 852,000 15,294,000
Total current liabilities............... 8,694,000 25,536,000
Long-term obligations, less current
portion................................... 4,352,000 1,097,000
Accounts payable, accrued expenses and
reserves for discontinued operations,
less current portion...................... 1,424,000
Other liabilities.......................... 315,000 2,077,000
Total liabilities....................... 14,785,000 28,710,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock - $.10 par value.............. 907,000 877,000
Additional paid-in capital................. 23,518,000 23,285,000
Accumulated deficit........................ (9,515,000) (4,026,000)
Less treasury stock, at cost............... (9,588,000) (9,588,000)
Less deferred compensation................. (174,000)
Less cumulative translation adjustment..... (1,230,000)
Less unrealized loss on marketable
securities................................ (2,000)
Total stockholders' equity............... 5,146,000 9,318,000
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY. $19,931,000 $38,028,000
See accompanying notes.
F-5
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales.......................... $16,971,000 $11,763,000 $12,254,000
Cost of sales...................... 9,361,000 6,529,000 7,078,000
Gross profit....................... 7,610,000 5,234,000 5,176,000
Selling, general and
administrative expenses........... 5,501,000 5,274,000 4,489,000
Interest expense................... 118,000 236,000 323,000
Investment and other (income)...... (1,320,000) (2,614,000) ( 734,000)
Income from continuing operations
before income taxes............... 3,311,000 2,338,000 1,098,000
Tax (benefit)...................... (153,000) .
Income from continuing
operations......................... 3,311,000 2,491,000 1,098,000
Discontinued operations:
(Loss) from operations........... (4,200,000) (24,744,000) (18,093,000)
(Loss) from disposal............. (4,600,000) .
NET (LOSS)......................... $(5,489,000) $(22,253,000) $(16,995,000)
Income (loss) per share:
Income from continuing operations:
Primary......................... $ .53 $ .42 $ .18
Fully diluted................... .50 .42 .18
(Loss) from discontinued operations:
Primary......................... (1.42) (4.20) (2.93)
Fully diluted................... (1.32) (4.20) (2.93)
NET (LOSS):
Primary......................... ( .89) (3.78) (2.75)
Fully diluted................... ( .82) (3.78) (2.75)
</TABLE>
See accompanying notes.
F-6
<TABLE>
<CAPTION>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock
25,000,000 Shares
Authorized
Treasury Stock
Unrealized
Number of
Additional
Retained
Number
Cumulative
loss on
Shares
Paid-in
Earnings
of
Deferred
Translation
Marketable
Issued
Amount
Capital
(Deficit)
Shares
Amount
Compensation
Adjustment
Securities
Total
<S>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
<C.
<C>
Balance - December 31, 1993 . . . . . . . . .
11,723,000
$ 1,172,000
$32,710,000
$ 35,222,000
(5,316,000)
$ (18,106,000)
$ (442,000)
$ (930,000)
$ -
$ 49,626,000
Purchase of treasury stock . . . . . . . . . . . .
(480,000)
(1,480,000)
(1,480,000)
Deferred compensation earned. . . . . . . . . .
294,000
294,000
Compensation attributable to stock options
231,000
231,000
Foreign currency translation adjustment. .
(413,000)
(413,000)
Retirement of treasury shares . . . . . . . . .
(2,952,000)
(295,000)
(9,771,000)
2,952,000
10,066,000
Net (loss). . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
(16,995,000)
.
.
.
.
.
(16,995,000)
Balance - December 31, 1994 . . . . . . . . .
8,771,000
877,000
23,170,000
18,227,000
(2,844,000)
(9,520,000)
(148,000)
(1,343,000)
- -
31,263,000
Purchase of treasury stock . . . . . . . . . . .
(41,000)
(68,000)
(68,000)
Deferred compensation earned. . . . . . . . . .
148,000
148,000
Compensation attributable to stock options
115,000
115,000
Foreign currency translation adjustment. .
113,000
113,000
Net (loss). . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
(22,253,000)
.
.
.
.
.
(22,253,000)
Balance - December 31, 1995 . . . . . . . . .
8,771,000
877,000
23,285,000
(4,026,000)
(2,885,000)
(9,588,000)
- -
(1,230,000)
- -
9,318,000
Issuance of compensatory stock . . . . . . .
300,000
30,000
233,000
(233,000)
30,000
Deferred compensation earned. . . . . . . . . .
59,000
59,000
Write-off of foreign currency translation
adjustment, included in discontinued
operations . . . . . . . . . . . . . . . . . . . . . . . .
1,230,000
1,230,000
Marketable securities valuation adjustment
(2,000)
(2,000)
Net (loss). . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
(5,489,000)
.
.
.
.
.
(5,489,000)
Balance - December 31, 1996
9,071,000
$ 907,000
$23,518,000
$ (9,515,000)
(2,885,000)
$ (9,588,000)
$ (174,000)
$ - .
$ (2,000)
$ 5,146,000
</TABLE>
See accompanying notes.
F - 7
<TABLE>
<CAPTION>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
<S>
1996
<C>
1995
<C>
1994
<C>
Cash flows from operating activities:
Net (loss)........................................................................................................
$ (5,489,000)
$ (22,253,000)
$ (16,995,000)
Adjustments to reconcile net (loss) to net cash provided by (used in)
operating activities:
Inventory reserves.........................................................................................
4,500,000
Deferred compensation.................................................................................
801,000
Provision for doubtful accounts.....................................................................
798,000
(85,000)
Depreciation and amortization.......................................................................
122,000
398,000
521,000
Write-off of intangible assets........................................................................
9,780,000
Amortization and write-off of goodwill............................................................
919,000
58,000
671,000
Write-down of investment in affiliate.............................................................
13,987,000
Deferred tax (benefit)....................................................................................
(2,115,000)
Compensatory issuance of stock and options...............................................
59,000
262,000
525,000
Gain on sales of marketable securities.........................................................
(173,000)
Change in value of marketable securities......................................................
(222,000)
(222,000)
Imputed interest on acquisition note..............................................................
213,000
274,000
Purchases of marketable securities .............................................................
(24,229,000)
(24,594,000)
Proceeds of sales of marketable securities...................................................
25,710,000
22,122,000
Gain on sale of fixed assets..........................................................................
(79,000)
Write-off of fixed assets................................................................................
144,000
Write-off of foreign currency translation.......................................................
1,230,000
(Loss) on disposal of discontinued operations..............................................
4,600,000
Changes in operating assets and liabilities, excluding effect of acquisitions:
Accounts receivable.....................................................................................
(2,992,000)
3,729,000
(192,000)
Inventories...................................................................................................
914,000
3,465,000
(6,036,000)
Prepaid and refundable taxes......................................................................
168,000
Other current assets...................................................................................
985,000
(4,000)
641,000
Other assets...............................................................................................
(268,000)
Accounts payable........................................................................................
655,000
165,000
(784,000)
Accrued expenses......................................................................................
(395,000)
1,881,000
(1,597,000)
Income taxes payable..................................................................................
(245,000)
188,000
Assets held for sale....................................................................................
1,473,000
Other long term liabilities.............................................................................
3,000
.
.
Net cash provided by (used in) operating activities...................................
1,816,000
4,699,000
(13,523,000)
Cash flows from investing activities:
Purchases of marketable securities.................................................................
(17,765,000)
Proceeds of sales of marketable securities......................................................
29,237,000
Purchase of fixed assets..................................................................................
(170,000)
(455,000)
(611,000)
Purchase of net assets of acquired companies...............................................
(3,779,000)
Proceeds on sale of fixed assets.....................................................................
216,000
479,000
Acquisition costs related to purchase of businesses.......................................
.
.
(27,000)
Net cash provided by (used in) investing activities.....................................
7,523,000
(239,000)
(159,000)
(continued)
</TABLE>
F - 8
<TABLE>
<CAPTION>
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Year Ended December 31,
<S>
1996
<C>
1995
<C>
1994
<C>
Cash flows from financing activities:
Repayments of debt.........................................................................................
(1,956,000)
(7,079,000)
(5,746,000)
Proceeds of debt..............................................................................................
2,482,000
395,000
5,214,000
Increase (decrease) in due to factor.................................................................
(11,242,000)
3,754,000
11,086,000
Purchase of treasury stock..............................................................................
(68,000)
(1,480,000)
Proceeds from issuance of performance shares.............................................
30,000
.
.
Net cash (used in) provided by financing activities....................................
(10,686,000)
(2,998,000)
9,074,000
Effect of exchange rate changes on cash.........................................................
- .
(3,000)
(24,000)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........
(1,347,000)
1,459,000
(4,632,000)
Cash and cash equivalents - beginning of year.................................................
2,274,000
815,000
5,447,000
CASH AND CASH EQUIVALENTS - END OF YEAR.....................................
$927,000
$2,274,000
$815,000
</TABLE>
Supplemental disclosures of cash flow information:
Year Ended December 31,
1996 1995 1994
Cash paid for:
Interest....................... $1,806,000 $ 2,994,000 $ 1,392,000
Income taxes (net of refunds
of $115,000 (1995) and
$444,000, (1994) respectively) $ - $ (85,000) $ (268,000)
See accompanying notes.
F-9
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(NOTE A) - Organization, Business and Summary of Significant Accounting
Policies:
Organization and Business
The consolidated financial statements include the accounts of Orbit
International Corp. and its wholly-owned subsidiaries (collectively, the
"Company"). All significant intercompany transactions have been eliminated in
consolidation.
The Company is engaged in the design, manufacture and sale of customized
electronic components and subsystems, distortion free commercial power units,
power conversion devices and electronic devices for measurement and display.
The Company discontinued its operations (see Note B) in the apparel business in
1996.
Summary of Significant Accounting Policies
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Inventories
Inventories are valued at the lower of cost (first-in, first-out basis) or
market price.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation and
amortization of the respective assets are computed using the straight-line
method over their estimated useful lives ranging from 8 years to 40 years.
Leasehold improvements are amortized using the straight-line method over the
remaining life of the lease or the life of the improvement, whichever is less.
Intangible Assets
Excess of cost over the fair value of net assets acquired is being
amortized on a straight-line basis over fifteen years.
(continued)
F-10
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Organization, Business and Summary of Significant Accounting
Policies: (continued)
Investments
The Company classifies its investments as held-to-maturity, available for
sale, or trading. The Company classified all of its securities as trading
securities until December 30, 1995 when it transferred all of its securities
from trading securities to available-for-sale securities.
Available-for-sale securities are carried at fair value, with the
unrealized gains and losses, net of tax, reported in a separate component of
stockholders' equity. The amortized cost of debt securities in this category
is adjusted for amortization of premiums and accretions of discounts to
maturity. Realized gains and losses and declines in value judged to be other
than temporary on available-for-sale securities are included in investment
income. The cost of securities sold is based on the specific identification
method. Interest and dividends on securities are included in investment
income.
Revenue Recognition
Substantially all of the Company's revenues are recognized from the sale
of tangible products. The Company records sales upon delivery of the units
under its manufacturing contracts. The Company also records revenue from
engineering services which it does not deem to be material. Such revenue is
recorded upon completion of performance under certain engineering contracts.
The Company records royalty income when such income is earned as defined
under a certain licensing agreement.
Orbit earned a one-time royalty payment from a former affiliate pursuant
to a Stock Option Agreement executed in November 1991, which was realized
partially in fiscal year 1996 and partially in fiscal year 1995. Such amounts
have been included in Investment and other income in the accompanying
Consolidated Statements of Operations.
Income (Loss) Per Share
Income (loss) per share is based on the weighted average number of common
and common equivalent shares outstanding during each period, utilizing the
treasury stock method or modified treasury stock method where applicable. The
average number of shares and equivalent shares outstanding for the year ended
December 31, 1996 was 6,688,000 for continuing operations. The average number
of shares and equivalent shares outstanding for the year ended December 31,
1995 and December 31, 1994 were 5,886,000 and 6,169,000, respectively for
continuing operations.
(continued)
F-11
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Organization, Business and Summary of Significant Accounting
Policies: (continued)
Foreign Currency
Assets and liabilities of the Company's discontinued Canadian operations
are translated at the foreign currency exchange rate in effect at the balance
sheet date. Results of operations are translated using weighted average
exchange rates during the period. Stockholders' equity accounts are translated
at historical exchange rates. Prior to the discontinuance of the operations,
the accumulated gains and losses resulting from the translation of foreign
currency financial statements were included in a separate component of
stockholders' equity.
Foreign currency translation adjustments have been written-off as part of
the loss on disposal of discontinued operations during the year ended December
31, 1996.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the financial statements and accompany notes. Actual
results could differ from those estimates.
Long-Lived Assets
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" ("SFAS 121"). The statement requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less then the assets' carrying amount. SFAS
121 also addresses the accounting for long-lived assets that are expected to be
disposed of. This standard specifies when assets should be reviewed for
impairment, how to determine if an asset is impaired, how to measure an
impairment loss, and what disclosures are necessary in the financial
statements. (See Note B - Discontinued Operations for impairment losses
recorded in 1996 and 1995).
Stock Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its stock options.
(continued)
F-12
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Organization, Business and Summary of Significant Accounting
Policies: (continued)
Fair Value of Financial Instruments
The book values of cash and cash equivalents, accounts receivable,
accounts payable, and accrued liabilities approximate their fair values
principally because of the short-term maturities of these instruments. The
fair value of the Company's long-term obligations is estimated based on the
current rates offered to the Company for debt of similar terms and maturities.
Under this method, the Company's fair value of long-term obligations was not
significantly different than the stated value at December 31, 1996 and 1995.
(NOTE B) - Discontinued Operations:
On August 6, 1996, the Board of Directors of the Company adopted a plan to
dispose of its U.S. and Canadian apparel operations. The Company estimated the
loss on the discontinuance to be approximately $8,800,000, including
approximately $4,200,000 of operating losses and approximately $4,600,000 of
estimated losses on the disposal of the operations. Such estimated losses
include a $1,456,000 write-off of cumulative translation adjustments,
$1,333,000 pursuant to certain operating lease agreements and $1,300,000
resulting from the write-down of assets to net realizable value.
The U.S. apparel operations consisted of the design, importation and
manufacture of women's active-wear and outerwear, principally under the
East/West label, through the Company's East/West division and East End Apparel
Group, Ltd. subsidiary. In the fourth quarter of 1996, the Company entered
into a three-year license agreement with a third party pursuant to which the
Company granted the right to manufacture and sell ladies apparel under the
"East/West" trademark in the U.S. and Canada. The Company has otherwise ceased
operations of the East/West division. Accordingly, the Company completed the
disposal of its U.S. Apparel operations in December 1996. During the fourth
quarter of 1996, the Company commenced discussions with the Company's factor to
convert the amounts due to the factor from the Company's discontinued U.S.
apparel operations to a term loan from the Company. The new term loan is
expected to commence on May 1, 1997 at which time the factor expects to
complete its collection of all outstanding accounts receivable. Under the
terms of the new lending arrangement, amortization of the loan would be based
on a 60 month repayment period with payments due on a monthly basis for 35
months and a final payment of approximately $1,493,000 due April 1, 2000. The
loan would have an interest rate of prime rate plus 1%. In accordance with
FASB No. 6 and management's intent to refinance this obligation on a long-term
basis, a substantial portion of the short term amounts due to the factor have
been classified as non-current (See Note G).
(continued)
F-13
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE B) - Discontinued Operations: (continued)
Pursuant to the Company's plans to dispose of its U.S. and Canadian
apparel operations, it recorded an impairment loss of $793,000 related to the
Canadian apparel operations in 1996. In 1995, management, in its continuing
review of operations, wrote off all of the goodwill relating to its East/West
Division upon determining that cash flows from future operations of the
Division would not be sufficient to support any carrying amount of goodwill and
accordingly recorded a write down of $13,216,000.
The Canadian apparel operations have been operated through the Company's
three wholly-owned subsidiaries in Canada; Canada Classique ("Classique"),
Winnipeg Leather (1991) Inc. ("Winnipeg Leather") and Symax Garment Co. (1993)
Ltd. ("Symax"). On March 12, 1997, the Company commenced bankruptcy proceedings
against Classique, which manufactured and sold branded and private label men's,
women's and children's outerwear in Winnipeg, Canada and Winnipeg Leather,
which manufactured and sold women's garments under private labels in Winnipeg,
Canada. Classique and Winnipeg Leather are now in Bankruptcy and Orbit has
appointed a receiver and manager for the purpose of liquidating their assets;
the Company is currently seeking buyers. On March 7, 1997, substantially all
of the assets of Symax, which manufactured and sold private label men's
outerwear in Vancouver, British Columbia, Canada, were sold to a third-party.
In July 1988 the Company, through USA Classic ("Classic"), a wholly-owned
subsidiary, acquired all of the outstanding stock of U.S. Apparel, Inc. In
November 1992, Classic completed an initial public offering (the "Offering") of
3,105,000 shares of its common stock, thereby reducing the Company's ownership
to approximately 43%. Classic designed, manufactured and marketed men's,
women's and children's active-wear, sportswear and outerwear until it, and its
subsidiaries, filed petitions under Chapter 11 of the United States Bankruptcy
Code in May 1994. In August 1994, as part of its plan of liquidation pursuant
to filing under Chapter XI of the Bankruptcy Code, USA Classic sold off its
remaining assets (including accounts receivable and inventory), the proceeds of
which were used to pay off its secured lender and accordingly, at such date
ceased operations. There have been no operations subsequent to 1994. The
Company recorded a non cash charge related to such bankruptcy of $13,987,000,
which includes its 43% equity interest in Classic, subordinated debt owing by
Classic to the Company of approximately $2,400,000 and approximately $2,500,000
of related costs (see Note M (2)).
(continued)
F-14
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE B) - Discontinued Operations: (continued)
Amounts previously reported for the apparel segments in 1995 and 1994 have
been restated to give effect to recording of the discontinued operations in the
accompanying consolidated statements of operations. The operating results of
the discontinued operations are summarized as follows:
For the Year Ended December 31, 1996 1995 1994
Sales $26,235,000 $46,471,000 $45,576,000
(Loss) before tax benefit (8,800,000) (24,755,000) (20,020,000)
Tax benefit 11,000 1,927,000
Net (loss) (8,800,000) (24,744,000) (18,093,000)
Net (loss) per share of common stock:
Primary $(1.42) $(4.20) $(2.93)
Fully diluted $(1.32) $(4.20) $(2.93)
At December 31, 1996, the assets of the discontinued operations consist
primarily of inventories and accounts receivable. Liabilities of the
discontinued operations consist of accounts payable, accrued expenses and other
reserves. The consolidated balance sheet at December 31, 1995 has not been
restated.
(NOTE C) - 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. (collectively, "Behlman"). The assets are
primarily used in the business of manufacturing and selling various power
supply and power source products. The purchase price is subject to adjustment
based upon final valuations. The parties have not agreed on such final
valuation and are pursuing the dispute resolution procedures as outlined in the
contract. 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 (See Note G).
The operations of Behlman have been included in the consolidated financial
statements from February 6, 1996. Had the acquisition been made on January 1,
1995 (unaudited) proforma sales, income and earnings per share from continuing
operations would have been $20,635,000, $1,734,000 and $.29 per share
respectively, for the year ended December 31, 1995.
(continued)
F-15
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE C) - Acquisition: (continued)
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
(NOTE D) - Inventories:
Inventories consist of the following:
December 31,
1996 1995
Raw materials. . . . . . $ 2,332,000 $ 1,594,000
Work in process. . . . . 4,325,000 4,756,000
Finished goods (apparel) - 6,774,000
$ 6,657,000 $13,124,000
(NOTE E) - Property, Plant and Equipment:
Property, plant and equipment are as follows:
December 31,
1996 1995
Land and building. . . . . . . . . . . $ 2,688,000 $ 2,688,000
Building and leasehold improvements. . 279,000 599,000
Machinery and equipment. . . . . . . . 1,053,000 1,418,000
Furniture and fixtures . . . . . . . . 413,000 937,000
4,433,000 5,642,000
Accumulated depreciation
and amortization . . . . . . . . . . 2,086,000 2,573,000
$ 2,347,000 $ 3,069,000
continued)
F-16
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Available-For-Sale Securities:
On December 30, 1995 the Company transferred its marketable securities to
the available for sale category of investments. On the date of the transfer,
all debt securities were being carried at their amortized cost which
approximated fair market value. 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 December 31, 1996, this collateral
requirement amounted to approximately $2,453,000 and on December 31, 1995 it
was approximately $11,647,000 of which $540,000 represents the balance in cash
accounts, $3,540,000 represents available-for-sale securities classified as
current assets and the remainder was shown as restricted investments.
The following is a summary of available-for-sale securities:
December 31, 1996
Estimated
Fair
Cost Value
U.S. Treasury bills............ $3,235,000 $3,235,000
Debt securities issued by
government agencies.......... 5,000 5,000
Corporate debt securities...... 1,147,000 1,145,000
4,387,000 4,385,000
Restricted value of portfolio
used to collateralize credit
facility (included in assets
held for sale).............. 2,453,000 2,453,000
Balance of securities
portfolio................... $1,934,000 $1,932,000
(continued)
F-17
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Available-For-Sale Securities: (continued)
December 31, 1995
Estimated
Fair
Cost Value
U.S. Treasury Bills $10,400,000 $10,400,000
Debt securities issued by
government agencies......... 2,919,000 2,919,000
Corporate debt securities..... 2,526,000 2,526,000
Total debt securities......... 15,845,000 15,845,000
Equity securities............. 12,000 12,000
15,857,000 15,857,000
Restricted value of portfolio
used to collateral credit
facility.................... 7,567,000 7,567,000
Balance of securities
portfolio (including
$3,450,000 of marketable
securities used to satisfy
outstanding debt classified
as a current obligation).... $8,290,000 $8,290,000
The amortized cost and estimated fair value of debt and marketable equity
securities at December 31, 1996 and December 31, 1995, by contractual maturity,
are shown below. Expected maturities will differ from contractual maturities
because the issuers of the securities may have the right to repay obligations
without prepayment penalties.
December 31, 1996
Estimated Fair
Cost Value
Due in one year or less............... $3,235,000 $3,235,000
Due after three years ................ 1,152,000 1,150,000
4,387,000 4,385,000
Restricted value of portfolio used to
collateralize credit facilities..... 2,453,000 2,453,000
$1,934,000 $1,932,000
(continued)
F-18
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Available-For-Sale Securities: (continued)
December 31, 1995
Estimated Fair
Cost Value
Due in one year or less............... $15,050,000 $15,050,000
Due after three years................. 795,000 795,000
15,845,000 15,845,000
Equity securities..................... 12,000 12,000
15,857,000 15,857,000
Restricted value of portfolio used to
collateralize credit facilities..... 7,567,000 7,567,000
$ 8,290,000 $ 8,290,000
(NOTE G) - Debt:
Long-term obligations consist of the following:
December 31,
1996 1995
Term loan collateralized by $1,120,000 of treasury
bills, inventories, accounts receivable and
general tangibles of the electronics division,
bearing interest at LIBOR (5.875% at December 31,
1995) plus .75%, paid in full on January 1, 1996.
$1,000,000
Term loan collateralized by certain real estate of
the Company bearing interest at prime
(8.25% at December 31, 1996) plus 1.5%,
payable in monthly installments of $56,000
commencing July 1996 through June 1999........... $1,667,000
Promissory note payable to the sellers of the East/
West division (face amount $1,850,000) -
noninterest bearing, imputed interest at 6%
payable in one installment of $500,000 on March
28, 1996, two installments of $250,000 on July 1,
1996 and January 1, 1997 and twenty quarterly
installments of $42,500 commencing March 31, 2002 785,000 1,535,000
(continued)
F-19
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Debt: (continued)
December 31,
1996 1995
Term loan collateralized by certain real estate of
the electronics division, bearing interest
at LIBOR (5.875% at December 31, 1995)
plus .75% (floating), payable in $250,000
quarterly installments through April 1, 1996..... 250,000
Note due to the estate of the former principal
officer payable in monthly installments through
February 1998 (Note N)........................... 356,000 604,000
Short term debt expected to be refinanced,
collateralized by accounts receivable and
inventories of the Company, bearing
interest at prime (8.25% at December 31,
1996) plus 1%. The replacement debt is expected
to be payable in monthly payments of $53,000
commencing May 1997 with a final payment of
approximately $1,493,000 in April, 2000
(see Note B)..................................... 3,200,000 .
6,008,000 3,389,000
Less current portion.............................. 1,656,000 2,292,000
$4,352,000 $1,097,000
Payments due on the Company's long-term debt at December 31, 1996 are
as follows:
Year Ending
December 31,
1997................. $1,656,000
1998................. 1,351,000
1999................. 973,000
2000 (January through
April)......... 1,493,000
Thereafter........... 535,000
$6,008,000
(continued)
F-20
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Debt: (continued)
Short-term notes payable aggregated $65,000 at December 31, 1996. This is
in connection with the Company's revolving line of credit which bears interest
at prime (8.25% at December 31, 1996) plus 1%.
Under the various debt agreements, the Company must comply with certain
covenants which require it to maintain minimum levels of working capital,
minimum levels of debt to equity and tangible net worth at all times. The
Company is also precluded from declaring and paying dividends without the
consent of such lender.
(NOTE H) - Stock Based Compensation Plans:
The alternative fair value accounting provided for under Statement of
Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" ("Statement 123"), requires use of opinion valuation models that
were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
The Company has a stock option plan which provides for the granting of
non-qualified or incentive options to officers, directors and key employees.
The plan authorizes granting of up to 1,500,000 shares of the Company's common
stock at the market value on the date of such grants. All options are
exercisable at times as determined by the Board of Directors not to exceed ten
years from the date of grant.
Pro forma information regarding net loss and net loss per share is
required by Statement 123, which also requires that the information be
determined as if the Company has accounted for its stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value of these options was estimated at the date of grant using the
Black-Sholes option pricing model with the following weighted average
assumptions: risk-free interest rate of 6%; no dividend yields; volatility
factor of the expected market price of the Company's common stock of 85.5%; and
a weighted-average expected life of the options of 3.0 years at December 31,
1996 and 1995.
The Black-Sholes option valuation model was developed for use in
estimating fair value of traded options which have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price volatility.
Because
(continued)
F-21
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE H) - Stock Based Compensation Plans:(continued)
the Company's employers stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vested period. The Company's
pro forma information follows:
1996 1995
Net earnings from
continuing operations: As Reported $ 3,311,000 $ 2,491,000
Pro Forma 2,830,000 2,325,000
Primary EPS: As Reported .53 .42
Pro Forma .46 .38
Fully Diluted EPS: As Reported .50 .42
Pro Forma .42 .35
1996 1995
Net (loss): As Reported $(5,489,000) $(22,253,000)
Pro Forma (5,970,000) (22,419,000)
Primary EPS: As Reported (.89) (3.78)
Pro Forma (.96) (3.81)
Fully Diluted EPS: As Reported (.82) (3.78)
Pro Forma (.89) (3.81)
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1997.
As required by Statement 123, the fair values method of accounting has not
been applied to options granted prior to January 1, 1995. As a result, the pro
forma compensation cost may not be representative of that to be expected in
future years.
(continued)
F-22
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE H) - Stock Based Compensation Plans:(continued)
Information as to options for share of common stock is as follows:
<TABLE>
<CAPTION>
1996 .
1995 .
1994 .
Weighted Average
Weighted Average
Weighted Average
Options
Exercise Price
Options
Exercise Price
Options
Exercise Price
<S>
<C>
<C>
<C>
<C>
<C>
<C>
Outstanding at the
beginning of year.............
964,000
$1.25
965,000
$3.13
900,000
$4.93
Granted...........................
332,500
0.92
1,017,000
1.25
965,000
3.13
Canceled.........................
(15,000)
0.92
(1,018,000)
2.70
(900,000)
4.93
Outstanding at the
end of year.......................
1,281,500
0.92
964,000
1.25
965,000
3.13
Exercisable at end of year.
964,000
-
-
Weighted average fair
value of options granted..
0.54
0.54
</TABLE>
The weighted average remaining contractual life of the options outstanding
is 3 years.
At December 31, 1996, 218,500 shares of common stock were reserved for
future issuance of stock options.
In consideration of an executive officer's entry into an employment
agreement during the year, the Company sold to the officer 300,000 shares of
its common stock at par value $.10 per share. The stock is subject to
repurchase by the Company, at the same price, in the event of resignation or
discharge for cause, of the officer. The difference between the fair value of
the shares and its issue price will be charged to operations over a three year
period.
(NOTE I) - Employee Benefit Plans:
A profit-sharing and incentive-savings plan provides benefits to certain
employees who meet specified minimum service and age requirements. The plan
provides for contributions by the Company equal to one-half of employee
contributions (but not more than 2% of eligible compensation), and the Company
may make additional contributions out of current or accumulated net earnings at
the sole discretion of the Company's Board of Directors.
(continued)
F-23
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Employee Benefit Plans:
The Company contributed $117,000, $185,000 (including $24,000 applicable
to discontinued operations) and $312,000 (including $139,000 applicable to
discontinued operations) to the plans for the years ended December 31, 1996,
December 31, 1995 and December 31, 1994, respectively.
(NOTE J) - Income Taxes:
The Company uses the liability method in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
For the year ended December 31, 1996, the Company recorded no income tax
provision. The Company has an alternative minimum tax credit of $ 564,000 with
no limitation on the carryforward period, a net operating loss carryforward of
$18,400,000 which expire in 2010 and a capital loss carryforward of $ 1,968,000
which expires in 1999. In addition, a subsidiary whose operations were
disposed of in 1991 has various income tax benefits which are available to
offset future taxable income of the parent only. These benefits consist of a
net operating loss carryforward of approximately $ 5,900,000 and certain tax
credits which amount to approximately $ 594,000 which are available through
1999.
The provision (benefit) for income taxes for the years December 31, 1995
and 1994 are as follows:
December 31,
1995 1994
Current:
Foreign and state.... $(164,000) $ 188,000
Deferred:
Federal.............. - (1,823,000)
Foreign and state.... - (292,000)
.
$(164,000) $(1,927,000)
(continued)
F-24
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE J) - INCOME TAXES: (continued)
A reconciliation of the Federal statutory tax rate with the effective tax
rate is as follows:
December 31,
1996 1995 1994
Federal statutory tax rate... (34.0%) (34.0%) (34.0%)
Increase (reduction) in taxes
resulting from:
Foreign and state income
tax, net of federal
income tax benefit...... 3.3 (.3)
Nondeductible items..... 1.3 1.3
Non taxable life insurance
proceeds................. (6.7)
Nonutilization of net
operating and capital
loss carryforwards and
carrybacks............... 34.0 35.0 22.1
Other .5 .7
0% (.7%) (10.2%)
(continued)
F-25
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE J) - INCOME TAXES: (continued)
The deferred tax assets (liability) are as follows:
December 31,
1996 1995
Deferred tax asset:
Alternative minimum
tax credit carryforward.. $ 564,000 $ 561,000
Net operating loss and
capital loss
carryforwards (including
pre-acquisition net
operating loss
carryforwards)........... 8,931,000 7,100,000
Various temporary
differences.............. 912,000 6,559,000
Total deferred tax assets 10,407,000 14,220,000
Valuation allowances on....... (10,249,000) (14,220,000)
Net deferred tax assets....... 158,000 -
Deferred tax liability:
Various temporary
differences.............. (158,000) .
Net deferred tax assets....... $ - $ - .
As the Company has had cumulative losses and there is no assurance of
future taxable income, a valuation allowance has been established to offset
deferred tax assets.
(NOTE K) - Major Customer and Concentrations of Credit Risk:
Sales to significant customers accounted for approximately 72% (28%, 15%,
17% and 12%), 79% (54%, 12% and 13%) and 77% (66% and 11%) of the Company's net
sales from continuing operations for the years ended December 31, 1996, 1995
and 1994, respectively.
Certain major customers of the Company sell the Company's products to the
United States Government. Accordingly, a substantial portion of the net sales
is subject to audit by agencies of the United States government. In the
opinion of management, adjustments to such net sales, if any, will not have a
material effect on the Company's financial position.
(continued)
F-26
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE K) - Major Customer and Concentrations of Credit Risk: (continued)
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and trade
receivables. The Company places its cash and cash equivalents with one
financial institution. At times, cash may be in excess of FDIC insurance
limits.
(NOTE L) - Leasing Arrangements:
Operating leases are for a sales office and certain equipment and vehicles
for continuing operations and office, showroom, warehouse and manufacturing
facilities for discontinued operations, and are subject to annual increases
based on changes in the Consumer Price Index and increases in real estate taxes
and certain operating expenses.
Future minimum lease payments as of December 31, 1996 under operating
lease agreements that have initial or remaining noncancellable lease terms in
excess of one year are as follows:
Year Ending Continuing Discontinued
December 31, Operations Operations Total
1997 . . . . . . . . $ 78,000 $ 901,000 $ 979,000
1998 . . . . . . . . 34,000 876,000 910,000
1999 . . . . . . . . 646,000 646,000
2000 . . . . . . . . 239,000 239,000
Total minimum
lease payments $ 112,000 $ 2,662,000 $ 2,774,000
Operating lease rent expense for the years ended December 31, 1996, 1995
and 1994 was $1,083,000, $1,170,000 and $1,100,000, respectively. Continuing
operations account for approximately $41,000 of operating lease expense for the
year ended December 31, 1996. Leasing arrangements for discontinued operations
do not include amounts owed to the Company under certain sublease agreements.
(continued)
F-27
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE M) - Commitments and Contingencies:
[1] The Company has employment agreements with its three executive
officers which may be terminated by the Company on not less than three years
prior notice and with two other principal officers, for aggregate annual
compensation of $1,099,000. In the event of a change in control of the Company,
the executive officers have the right to elect a lump sum payment representing
future compensation due them over the remaining years of their contracts. In
addition, the five officers are entitled to bonuses based on a percentage of
earnings before taxes, as defined. Total bonus compensation paid to the
executive officers was approximately $281,000 in 1996. No bonuses were earned
or paid in 1995 or 1994.
[2] 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 of its directors in the United States District Court
for the Southern District of New York. 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 1933 in connection with
the offering as well as violations of Section 10b of the Securities 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. The class action has been stayed
against USA Classic as a result of its filing for protection for relief under
Chapter 11 of the bankruptcy code.
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. On June 16, 1995, the motion for dismissal was
denied in its entirety. On March 8, 1995, the plaintiff's representatives
filed a motion for class certification. Since that date, the parties have been
conducting depositions and reviewing documents relevant to issues of class
certification. It is estimated that discovery in this matter will continue
throughout 1997.
(continued)
F-28
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE M) - Commitments and Contingencies: (continued)
The Company is unable to estimate a range of loss at the present time and
consequently, cannot determine the impact of the action on the financial
condition of the Company. The Company plans to continue to vigorously defend
against this action.
[3] The Company, in the ordinary course of business, is the subject of
or a party to various lawsuits, the outcome of which, in the opinion of
management, will not have a material adverse effect on the consolidated
financial statements.
(NOTE N) - Death of Principal Officer:
On February 24, 1995, the Company's principal officer died. Pursuant to
his employment contract, the Company owed approximately $800,000 to the
principal officer's estate, payable in monthly installments over a three year
period. During 1995, the Company received insurance proceeds aggregating
$1,500,000 on keyman policies on the life of the principal officer (see Note
G).
F-29
<TABLE>
<CAPTION>
ORBIT INTERNATIONAL CORP.
VALUATION AND QUALIFYING ACCOUNTS
Column A
Column B
Column C
Column D
Column E
Additions
(1)
(2)
Balance at
Charged to
Charged to
Balance at
Beginning
cost and
Other accounts -
Deductions -
end of
of Period
expenses
describe
describe
period
<S>
<C>
<C>
<C>
<C>
<C>
Year ended December 31, 1996:
Reserve for estimated doubtful
accounts and allowance...............
$1,576,000
$359,000
$(338,000)**
$(1,447,000)***
$150,000
Valuation allowance on deferred
tax asset........................................
$14,220,000
$(3,971,000)**
$10,249,000
Year ended December 31, 1995:
Reserve for estimated doubtful
accounts and allowance...............
$769,000
$887,000
$ 80,000*
$1,576,000
Valuation allowance on deferred
tax asset........................................
$6,380,000
$7,840,000
$14,220,000
Year ended December 31, 1994:
Reserve for estimated doubtful
accounts and allowance...............
$882,000
$226,000
$ 339,000*
$769,000
Valuation allowance on deferred
tax asset........................................
$2,425,000
$3,995,000
$6,380,000
TOTAL
$3,307,000
$4,181,000
$339,000
$7,149,000
*Amount represents write-offs.
**Relief of allowances
***Transfer of allowances of
apparel companies to discontinued
operations.
</TABLE>
See Accompanying notes.
F-30
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K/A-2
XX Annual Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 for the fiscal year
ended December 31, 1996. [No Fee Required]
or
Transition report pursuant to Section 13 of 15(d) of
the Securities Exchange Act of 1934 for transition period
from to . [No Fee Required]
Commission File No. 0-3936
ORBIT INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
Delaware 11-1826363
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
80 Cabot Court, Hauppauge, New York 11788
(Address of principal executive offices)
Registrant's telephone number, including area code:
(516) 435-8300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $.10 par value per share
Indicate by check mark whether the Registrant has (1) filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) been subject to such filing
requirements for the past 90 days.
Yes X No ______
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
Aggregate market value of Registrant's voting stock held by non-
affiliates (based on shares held and the closing price quoted on
the Nasdaq National Market on March 19, 1997): $15,465,000
Number of shares of common stock outstanding as of the close of
the period covered by this report: 6,186,093.
Documents incorporated by reference: the Registrant's definitive
proxy statement to be filed pursuant to regulation 14A
promulgated under the Securities Exchange Act of 1934 in
connection with the Registrant's 1996 Annual Meeting of
Stockholders, the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, the Registrant's Current
Report on Form 8-K filed February 7, 1996 and the Registrant's
Current Report on Form 8-K/A filed July 8, 1996.
PART I
Item 1. BUSINESS
General
Orbit International Corp. (the "Company" or "Orbit"
) conducts its operations through its Orbit Instrument
Division and its subsidiary, Behlman Electronics, Inc. In August
1996, the Company announced that it was discontinuing operations
of its apparel business. Through its Orbit Instrument Division,
which includes its wholly-owned subsidiary, Orbit Instrument of
California, Inc., the Company is engaged in the design,
manufacture and sale of customized electronic components and
subsystems. Behlman Electronics, Inc. is engaged in the design
and manufacture of distortion free commercial power units, power
conversion devices and electronic devices for measurement and
display.
In February 1996, the Company, through its wholly-owned
subsidiary, Cabot Court, Inc., completed the acquisition of
certain of the assets of Astrosystems, Inc. and its wholly-owned
subsidiary Behlman Electronics, Inc., each of which were
unaffiliated third parties. Under the terms of the purchase
agreement, Orbit assumed certain liabilities relating to the
assets being acquired, including, without limitation, obligations
under the acquired contracts. Concurrently with the
purchase, Cabot Court, Inc. changed its name to Behlman
Electronics, Inc. ("Behlman") .
On August 6, 1996, the Board of Directors of the Company
adopted a plan to sell and/or liquidate its remainig U.S. and
Canadian apparel operations. The U.S. operations consisted of
the design, importation and manufacture of women's active-wear
and outer-wear, principally under the East/West label, through
the Company's East/West Division and its subsidiary, East End
Apparel Group Ltd.("East End") . In the fourth quarter
of 1996, the Company entered into a three-year license agreement
(the "Athco License Agreement") with Athco, Inc. ("Athco"),
an unaffiliated third party, pursuant to which Orbit granted
to Athco the right to manufacture and sell ladies
apparel under the "East/West" trademark in the U.S. and
Canada. The Athco License Agreement is renewable for two
additional three-year terms at the option of Athco. Under the
terms of the Athco License Agreement, Orbit is entitled to a
royalty equal to 3% of the first $5,000,000 of net sales of the
articles licensed under such agreement during each year of the
term and 2% of net sales in excess of $5,000,000 during each such
year. Athco is also required to pay annual guaranteed minimum
royalties (which are nonrefundable advances applied against
actual royalties earned by Orbit) ranging from $100,000 during
the first year of the term to $227,156 during the final year of
the second renewal term. The operations of the East/West
division are limited to servicing such license.
The Canadian apparel operations have been operated through
the Company's three wholly-owned subsidiaries in Canada: Canada
Classique Inc. ("Classique") , Winnipeg Leather (1991)
Inc. ("Winnipeg Leather") and Symax Garment Co. (1993)
Ltd. ("Symax") . On March 12, 1997, Orbit commenced
bankruptcy proceedings against Classique, which manufactured
branded private label men's, women's and children's outer-wear in
Winnipeg, Manitoba, Canada, and Winnipeg Leather, which
manufactured and sold women's garments under private labels in
Winnipeg, Manitoba, Canada. Classique and Winnipeg Leather are
now in bankruptcy and Orbit has appointed a receiver and manager
for the purpose of liquidating their assets. The Company is
currently seeking buyers for such assets. On March 7, 1997,
substantially all of the assets of Symax, which manufactured
label men's outer wear in Vancouver, British Columbia, Canada
were sold to 535562 B.C. Ltd., an unaffiliated third party
whose name was subsequently changed to Symax Garment Co. (1997)
Ltd. The purchase price was C$110,273.11 which was payable as
follows: C$40,000 at the closing of the transaction, C$1,000 per
month from August 1, 1997 to January 1, 1998, C$34,000 on
February 15, 1998, C$1,000 per month from August 1, 1998 to
January 1, 1999 and C$24,273.11 on February 15, 1999.
In July 1988 Orbit, through a wholly-owned subsidiary, USA
Classic, Inc. ("USA Classic") , acquired all of the
outstanding stock of U.S. Apparel, Inc. In November 1992, USA
Classic completed an initial public offering of 3,105,000 shares
of its common stock, thereby reducing Orbit's ownership to
approximately 43%. USA Classic designed, manufactured and
marketed men's, women's and children's active-wear, sportswear
and outer-wear until it, and its subsidiaries, filed petitions
under Chapter 11 of the United States Bankruptcy Code in May
1994. USA Classic ceased operations in August 1994. At such
time, all of its remaining assets were sold to unaffiliated third
parties and the proceeds from such sales were used to pay down
outstanding obligations to USA Classic's secured lender.
Financial Information about Industry Segments
The Company currently operates in one industry segment which
involves the design and manufacture of various electronic
components. In prior years it also operated in two additional
segments in which it designed and manufactured items of apparel
in the United States and Canada. The Company discontinued its
operations in these segments in August 1996.
Glossary of Technical Terms
"AC power sources" means equipment that produces power that is
the same as what would be received from a public utility.
"bit mapping" means a method of storing digital data for
information displays.
"CRT terminals" means Cathode Ray Tube terminals.
"color liquid crystal display unit" means a flat panel based
display used in information systems.
"Commercial Off the Shelf" means non-customized products produced
in anticipation of customer orders.
"computer controlled action entry panels (CCAEP'S)" means
computer input devices.
"data entry display devices" means computer-based devices that
increase the efficiency between the human operator and the
computer system.
"distortion free commercial power units" means power that is free
of disturbances such as "brown-outs".
"electro luminescent power supplies" means power supplies which
power electro luminescent displays.
"embedded instrumentation products" means products integrated by
the end user into a larger system.
"fire control" means military terminology described in ship
weaponry activities.
"frequency converters" means equipment which converts local power
to equivalent foreign power.
"full-mil keyboards" means keyboards designed for use in a
military environment.
"graphics technologies" means technologies that utilize digital
information for graphic representation.
"high speed digital modem interfaces (ISDN)" means telephonic
interfaces.
"IC manufacturing" means integrated circuit manufacturing.
"operator control trays" means integrated panels used in
conjunction with data display consoles.
"plasma based telephonic intercommunication panels" means
programmable panels used to promote communication throughout
various military communication centers.
"(AC) plasma display panel/unit" means technology utilizing neon
gas illuminated between electrically charged fields.
"power conversion devices" means equipment that produces power
that is the same as what would be received from a public utility.
"ruggedized hardware" means hardware designed to meet severe
environmental conditions.
"ruggedized market" means the market for ruggedized hardware.
"standard shipboard display console requirements" means the
standard tactical display used specifically by the U. S. Navy.
"subsystems" means units produced to be integrated into larger
computer systems.
"telco-based designs" means standard telephone interfaced
designs.
"telecommunication superconducting amplifiers" means amplifiers
used in cable television.
"trackballs" means cursor control devices used in conjunction
with data display systems.
"UPS market" means the market for uninterruptable power supplies.
"uninterruptable power supplies (UPS)" means devices which allow
a computer to operate while utility power is lost.
SURVEILLANCE AIRCRAFT PROGRAMS:
E-2C
J/STARS (Joint Surveillance Target Attack Radar Systems)
AWACS (Lookdown Surveillance Aircraft)
SHIPBOARD PROGRAMS:
AEGIS (Guided Missile Cruisers and Destroyers)
DDG'S (Guided Missile Destroyers)
BFTT (Battle Force Tactical Training)
LSD'S (Amphibious Warfare Ships)
LHA (Amphibious Warfare Ships)
Description of Business
General
The Orbit Instrument Division designs, manufactures and
sells customized panels, components, and "subsystems" (see
Glossary of Technical Terms) for contract program
requirements to prime contractors, governmental procurement
agencies and research and development ("R&D")
laboratories. The Company primarily designs and manufactures in
support of specific military programs. More recently, the
Company has focused on providing commercial, non-military
"ruggedized hardware" (see Glossary of Technical Terms) for
prime contractor programs at cost competitive prices. Products
include a variety of custom designed "plasma based telephonic
intercommunication panels" (see Glossary of Technical Terms)
for secure voice airborne and shipboard program requirements,
"full-mil keyboards" (see Glossary of Technical Terms),
"trackballs" (see Glossary of Technical Terms) and "data entry
display devices" (see Glossary of Technical Terms) . The
Instrument Division's products, which in all cases are designed
for customer requirements on a firm fixed price contract basis,
have been successfully incorporated on surveillance aircraft
programs, including E-2C, J/STARS (Joint Surveillance Target
Attack Radar Systems), AWACS (Lookdown Surveillance Aircraft)
and P-3 requirements and shipboard programs, including AEGIS
(Guided Missile Cruisers and Destroyers), DDG'S (Guided
Missile Destroyers), BFTT (Battle Force Tactical Training), LSD'S
(Amphibious Warfare Ships) and LHA (Amphibious Warfare Ships)
applications, as well as a variety of land based guidance
control programs.
On February 6, 1996, Cabot Court, Inc. ("Cabot Court")
, a wholly-owned subsidiary of Orbit, acquired for $3,706,700
(the "Purchase Price") certain of the assets of
Astrosystems, Inc. ("Astrosystems") and Astrosystems'
wholly-owned subsidiary, BEI Electronics, Inc. ("BEI"), each
of which were unaffiliated third parties. Under the terms of the
purchase agreement, Orbit also assumed certain liabilities
relating to the assets being acquired including, without
limitation, obligations under the acquired contracts. The
acquired assets, which included inventory, fixtures and
equipment, had been used by Astrosystems and BEI in the business
of manufacturing and selling power supplies, AC power sources,
"frequency converters" (see Glossary of Technical Terms),
"uninterruptable power supplies ("UPS")" (see Glossary of
Technical Terms) and associated analytical equipment and
other electronic equipment. The Purchase Price is subject to
adjustment based upon a final inventory valuation with no
maximum or minimum adjustment. Orbit and Astrosystems have
not yet agreed upon the final inventory valuation. Cabot Court
changed its name to Behlman Electronics, Inc. ("Behlman") on
February 7, 1996.
The military division of Behlman designs and manufactures
"power conversion devices" (see Glossary of Technical Terms)
and electronic products for measurement and display. The
commercial products division produces high quality,
"distortion free commercial power units" (see Glossary of
Technical Terms) and low noise UPS.
Products
Plasma Intercommunication Panels
The Company has recently completed its design and
development efforts for an "AC plasma display panel" (see
Glossary of Technical Terms) that includes "bit mapping" (see
Glossary of Technical Terms) and "graphics technologies" (see
Glossary of Technical Terms). Prime contractors in support
of combat communication requirements, in addition to command
systems and display functions, have used these plasma display
units. This panel provides the necessary interface to enable
station operators to communicate with a ship's central switching
unit and to sustain multiple communications lines. The
Company has completed a design effort to incorporate telephonic
and secure voice functions into several of the newly designed
plasma configurations. The Company has completed land-based and
shipboard integration and functional testing of the secure voice
and "telco-based designs" (see Glossary of Technical Terms)
, and has recently been awarded a Basic Ordering
Agreement as a mechanism for the potential procurement of these
panels. The Basic Ordering Agreement established firm fixed
prices for four identifiable Company part numbers for purchase by
the Naval Surface Warfare Center in Crane, Indiana. Such
agreement enables the Naval Surface Warfare Center to procure
such parts at fixed prices for various quantities for a 60-month
period.
Graphic Display Terminal
The Company's family of graphic terminals enables the
operator to monitor and control radar systems for shipboard and
airborne applications. These terminals are used throughout a
ship or surveillance plane as adjuncts to larger console
displays. The modular design of the terminals facilitates
applications for surface ship, submarine, aircraft and land based
requirements.
Color Liquid Crystal Display Panels
The Company has recently completed its initial production
"color liquid crystal display unit" (see Glossary of
Technical Terms) for testing and integration. This unit has
been designed as a high speed, windows-based display that
provides the operator with crisp, color resolution to be used in
a full military combat environment.
Operator Control Trays
The Company has designed and manufactures a variety of
"operator control trays" (see Glossary of Technical Terms)
that help organize and process data created by interactive
communications systems, making such data more manageable for
operator consumption. These trays are presently used to support
patrol and surveillance airborne aircraft programs, "standard
shipboard display console requirements" (see Glossary of
Technical Terms) and shore land based defense systems
applications.
Data Entry, Keyboards, and Display Systems
The Company has designed and manufactures "computer
controlled action entry panels (CCAEP'S)" (see Glossary of
Technical Terms) , which provide a console operator with
multiple displays of computer generated data. The Company's data
entry and display panels have been designed and manufactured to
support "fire control" (see Glossary of Technical Terms)
, sonar control and command communication console
requirements.
Power Sources
The Company's "AC power sources" (see Glossary of
Technical Terms) are used in the production of various types
of equipment such as ballasts for fluorescent lighting "CRT
terminals" (see Glossary of Technical Terms) , hair dryers
and hospital beds and are used in test labs to meet European
Community required testing, aircraft testing and simulators.
Other uses include powering equipment for oil and gas
exploration.
The Company s frequency converters are used to convert local
power frequency (e.g., 60HZ in the U.S.) to local frequencies
elsewhere (e.g., 50 HZ in Europe).
The Company's products are used for backup power when local
power is lost. The Company only competes in the "ruggedized
market" (see Glossary of Technical Terms) as opposed to the
commercial "UPS market" (see Glossary of Technical Terms)
.
The Company's military division has certified value-
engineering personnel who are capable of reconfiguring obsolete
or hard-to-maintain government equipment. In most circumstances,
the Company will be contracted to build the equipment but in the
event the component is contracted to be built elsewhere based
upon the Company's engineering design, the Company will receive a
percentage of the government savings over the life of the
program.
The Company also performs reverse engineering of analog
systems for the government or government contractors to enable
them to have a new contractor with high quality capabilities at a
competitive price.
The Company also operates as a qualified repair depot for
many Air Force and Navy programs.
Proposed Products
Product Development
The Company is currently expanding its design and
development resources to update hardware previously used for full
military program requirements. The Instrument Division believes
its wide variety of components, controls, subsystems and plasma
secure voice and intercommunication panels that have supported
the military for aircraft, shipboard, subsurface and land based
program requirements have alternative uses. It is the intent of
the Company to update the electrical and mechanical functionality
of these units and subsystems and provide ruggedized and
commercial equivalent hardware at cost competitive prices.
Construction of color flatpanel displays exhibiting
specialized software routines may also provide the Company with
future areas of growth. The Company continues to focus on
integration of small but extremely functional high resolution
displays for use in "embedded instrumentation products" (see
Glossary of Technical Terms) . Further, the emergence of
"high speed digital modem interfaces" (see Glossary of Technical
Terms) such as ISDN are allowing for increased bandwidth of
digital communications that can handle large files for both voice
and data. The merging of these two concepts has produced
successful results that should contribute to the Company's
already extensive product line. Demonstration for new products
in this category are scheduled in the third quarter of this year
and are expected to transcend the Company's historical customer
base.
The Company has added a sales representative to its
sales force who is solely dedicated to procuring business from
the railroad industry. Railroad signaling is powered from a
unique voltage and frequency which the Company has the capability
to manufacture. The Company is utilizing other existing
sales representatives as well as its in-house sales force to
target this market.
The Company is currently working with a manufacturer of
"electro luminescent power supplies" (see Glossary of Technical
Terms) for the architectural market.
Finally, the Company is developing power supplies and
control systems for the cooling systems used for high speed
computers, "IC manufacturing" (see Glossary of Technical
Terms) , cellular telephones and "telecommunication
superconducting amplifiers "(see Glossary of Technical Terms)
.
The Company is utilizing modular power supplies to produce
power supplies to produce power supply systems for the government
and government contractors at prices lower than its competition.
The Company is also looking at various way to reconfigure
its commercial hardware to meet military specifications so that
its hardware may be considered "Commercial Off the Shelf"
(see Glossary of Technical Terms) for military requirements.
The products described above are presently being developed
by the Company. However, there can be no assurance that such
development efforts will result in any marketable products.
Sales and Marketing
Products of the Orbit Instrument Division are marketed by
the Division s sales personnel and management. Products of the
military division are marketed by Behlman's program managers and
other management personnel. Behlman's commercial products are
sold by regional sales managers, manufacturer's representatives
and non-exclusive distributors.
Competition
The Instrument Division's competitive position within the
electronics industry is, in management's view, predicated upon
the Company's manufacturing techniques, its ability to design and
manufacture products which will meet the specific needs of its
customers and its long-standing successful relationship with its
major customers. There are numerous companies (many of which are
substantially larger than the Company) capable of producing
substantially all of the Company's products. However, to the
Company's knowledge, none of such competitors currently produce
all of the products that the Instrument Division produces. (See -
"Substantial Customers").
Competition in the markets for Behlman's commercial and
military products depends on such factors as price, product
reliability and performance, engineering and production. In
particular, due primarily to budgetary restraints and program
cutbacks, competition in Behlman's government markets has been
increasingly severe and price has become the major overriding
factor in contract and subcontract awards. To the best of the
Company's knowledge, some of Behlman's regular competitors
include larger companies with substantially greater capital
resources and far larger engineering, administrative, sales and
production staffs than Behlman. (See - "Substantial Customers").
Substantial Customers
General Motors Hughes Electronics Corporation ("GMHEC")
, Northrup Grumman, various agencies of the United States
government and Western Atlas accounted for approximately 28%,
15%, 17% and 12% respectively, of net sales of the Company for
the year ended December 31, 1996. The loss of any of these
customers would have a materially adverse effect on the sales and
earnings of the Company. The Company does not have any
significant long-term contracts with any of the above-mentioned
customers.
Since a significant amount of all of the products which the
Company manufactures are used in military applications, any
substantial reduction in overall military spending by the United
States Government could have a materially adverse effect on the
Company's sales and earnings.
Backlog
As of December 31, 1996 and December 31, 1995 the Company's
consolidated backlog was $17,000,000 and $13,000,000
respectively.
Of the backlog for the year ended December 31, 1996,
approximately $4,000,000 represents backlog under contracts which
will not be shipped during 1997.
A significant amount of the Company's contracts are
subject to termination at the convenience of the United States
Government. The backlog is not influenced by seasonality.
Special Features of Government Contracts
Orders under government prime contracts or subcontracts are
customarily subject to termination at the convenience of the
government, in which event the contractor is normally entitled to
reimbursement for allowable costs and to a reasonable allowance
for profits, unless the termination of a contract was due to a
default on the part of the contractor. No material terminations
of Company contracts at the convenience of the government
occurred during the year ended December 31, 1996.
A significant portion of the Company's revenues are subject
to audit under the Vinson-Trammel Act of 1934 and other federal
statutes since they are derived from sales under government
contracts. The Company believes that adjustments to such
revenues, if any, will not have a material effect on the
Company's financial position.
Research and Development
The Company incurred approximately $710,000 of research and
development expenses during the year ended December 31, 1996, as
compared with $420,000 of such expenses during the comparable
period of the prior year.
Patents
The Company does not own any patents which it believes are
of material significance to its operations.
Employees
As of March 14, 1997, the Company employed 126 persons. Of
these, the Instrument Division employed 62 people consisting of
11 in engineering and drafting, 3 in sales and marketing, 11 in
direct and corporate administration and the balance in
production. Behlman employed 64 people, consisting of 11 in
engineering and drafting, 5 in sales, 4 in direct and corporate
administration and the balance in production.
Item 2. PROPERTIES
The Company's plant and executive offices, located at 80
Cabot Court, Hauppauge, New York, consist of 60,000 square feet
(of which approximately 50,000 square feet are utilized for
manufacturing operations) in a two-story, sprinklered, brick
building which was completed in October 1982 and expanded in
1985.
Behlman leases 1700 square feet in Ventura, California which
is used for sales. The lease expires in December 1997.
As part of its discontinued apparel operations, the Company
has leases for showroom and office space in New York, New York,
warehouse space in New Jersey and showroom, office and
manufacturing space in Winnipeg, Manitoba, Canada.
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings against the
Company, other than routine litigation incidental to the
Company's business, except as described below.
In re USA Classic Securities Litigation: On September 23,
1993, a class action (the "Class Action" ) was commenced
by an alleged shareholder of USA Classic, against USA Classic and
certain of its directors in the United States District Court for
the Southern District of New York. 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
public offering of common stock of USA Classic (the "Offering"),
through September 22, 1993, and alleges violations of the
Securities Act of 1933 , as amended (the "Securities Act")
in connection with the Offering as well as violations of
Section 10(b) of the Securities Exchange Act of 1934.
Specifically, the complaint alleges that false and misleading
statements were made in the registration statement (including the
prospectus and the financial statements therein) filed in
connection with the Offering and in certain financial statements
of USA Classic filed subsequent to the Offering in violation of
Sections 11 and 12 (2) of the Securities Act. The complaint
further alleges "control person" liability under Section 15 of
the Securities Act. The plaintiffs are seeking compensatory
damages as well as fees and expenses.
On February 1, 1994, a First Amended and Consolidated
Complaint was filed in the Class Action. The First Amended and
Consolidated Complaint added the Company as a defendant and
alleged that the Company is a "controlling person" of
USA Classic and an "aider and abetter" of the alleged
violations of the securities laws. The Company answered the
First Amended and Consolidated Complaint on March 21, 1994. The
Class Action has been stayed as against USA Classic as a result
of USA Classic's filing of a petition for reorganization under
Chapter 11 of the United States Bankruptcy Code.
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 (the
"Underwriters"), as additional defendants. On November 15, 1994,
the Company and the Underwriters moved to dismiss certain of the
allegations in the Second Amended and Consolidated Complaint. On
or about June 16, 1995, the Honorable John S. Martin, Jr. denied
the dismissal motion in its entirety.
The original complaint, the First Amended and
Consolidated Complaint and the Second Amended and Consolidated
Complaint each fail to quantify any category of damages sought by
the plaintiffs.
On March 8, 1995, the plaintiffs' representatives filed a
motion for class certification. Since that date, the parties
have been conducting depositions and reviewing documents relevant
to the class certification issue. The defendants' response to
the class certification motion has been adjourned without a
future date pending completion of discovery into that issue. On
or about February 6, 1996, the Underwriters moved the court to
stay all substantive discovery until the court rules upon the
class certification motion. The Company joined in said motion.
On March 7, 1996, the court denied the motion to stay substantive
discovery. Depositions and documentary discovery are continuing.
It is estimated that discovery in this matter will continue
throughout 1997. The Company is unable to estimate a range
of loss with regard to this action at the present time and,
accordingly, cannot predict with any certainty the impact of this
action on the Company's financial condition. The Company
currently has available approximately $7 million of directors'
and officers' liability insurance coverage in connection with
this matter. The Company plans to continue to vigorously
defend this action.
Sandra Lakritz v. Orbit International Corp.: On July 7,
1995, Sandra Lakritz, a former employee of the Company's
East/West division commenced an action in Supreme Court, New York
County, claiming employment discrimination based upon age and
disability. On December 4, 1995, the Company answered the
complaint and denied the allegations set forth therein.
Simultaneously with its answer, the Company served upon
plaintiff's counsel numerous discovery requests. To date,
plaintiff has only partially responded to the discovery requests.
Additionally, the plaintiff has requested certain discovery from
the Company. Although the Company has offered to make that
information available to the plaintiff, the plaintiff has failed
to follow up on these requests. The plaintiff is seeking $5
million in compensatory damages and $5 million in punitive
damages. The Company believes that there is no merit to the
claims made by the plaintiff. The Company further believes that,
at the present time, any loss contingency appears to be remote
since this action is in its preliminary stage, with only minimal
discovery having been completed. Consequently, the Company is
unable to estimate a range of loss at the present time and,
accordingly, the Company cannot predict with any certainty the
impact of this action on the Company's financial condition.
The Company intends to vigorously defend this action.
Bankruptcy and Liquidation of Canadian Subsidiaries: On
March 12, 1997, Orbit commenced bankruptcy proceedings against
Classique, which manufactured branded private label men's,
women's and children's outer-wear in Winnipeg, Manitoba, Canada
and Winnipeg Leather, which manufactured and sold women's
garments under private labels in Winnipeg, Manitoba, Canada.
Classique and Winnipeg Leather are now in bankruptcy and Orbit
has appointed a receiver and manager for the purpose of
liquidating their assets.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
An Annual Meeting of Stockholders of the Company was held on
June 28,1996. The holders of 6,186,093 shares of Common Stock of
the Company were entitled to vote at the meeting, the holders of
5,885,255 shares of Common Stock, or approximately 95% of shares
entitled to vote at the meeting, were represented by proxy and
the holders of 25,000 shares of Common Stock were present in
person. The following action took place:
1. The stockholders voted for the election of each of the
following persons nominated to serve as a director of the Company
until the next annual meeting and until his successor is elected
and qualified: Dennis Sunshine by 5,696,921 votes for and 213,334
against, Bruce Reissman by 5,696,421 votes for and 213,834
against, Mitchell Binder by 5,696,421 votes for and 213,834
against, Nathan A. Greenberg by 5,696,421 votes for and 213,834
against, John Molloy by 5,696,921 votes for and 213,834 against
and Stanley Morris by 5,696,408 votes for and 213,847 against.
PART II
Item 5. MARKET FOR REGISTRANT'S CAPITAL STOCK AND RELATED
SECURITY HOLDER MATTERS
As of March 20, 1997 the Company had 729 shareholders of
record. The Company's stock is traded on the Nasdaq National
Market (Nasdaq symbol ORBT).
The quarterly closing prices for the period January 1, 1995
through December 31, 1996, as reported by Nasdaq, were as
follows:
<TABLE>
<CAPTION>
CLOSE
High
Low
1995:
<S>
<C>
<C>
First Quarter
2 1/2
1 5/8
Second Quarter
2 1/8
1 3/8
Third Quarter
1 5/8
1 3/16
Fourth Quarter
1 9/16
3/4
1996:
First Quarter
1
47/64
Second Quarter
1 5/16
7/8
Third Quarter
1 3/4
3/4
Fourth Quarter
2 3/4
1 9/16
The Company has not declared any dividends during the aforesaid
period.
</TABLE>
Item 6. SELECTED FINANCIAL DATA*
<TABLE>
<CAPTION>
Twelve Month period ended December 31
Six Month
Period Ended
December 31**
Twelve Month Period
Ended June 30
<S>
1996
<C>
1995
<C>
1994
<C>
1993
(unaudited)
<C>
1993
<C>
1992
<C>
Net sales
$16,971,000
$11,763,000
$12,254,000
$6,659,000
$14,191,000
$14,496,000
Net earnings
(loss) from
continuing
operations
3,311,000
2,491,000
1,098,000
1,642,000
( 707,000)
( 131,000)
Net earnings
(loss) from
discontinued
operations
( 8,800,000)
(22,744,000)
(18,093,000)
4,277,000
11,942,000
3,033,000
Earnings per
share from
continuing
operations
primary
fully diluted
.53
.50
.42
.42
.18
.18
.25
.25
(.11)
(.11)
(.02)
(.02)
Earnings
(loss) per
share from
discontinued
operations
primary
fully diluted
( 1.42)
( 1.32)
( 4.20)
( 4.20)
( 2.93)
( 2.93)
.64
.64
1.79
1.79
.48
.48
Total assets
at year- end
19,931,000
38,028,000
63,511,000
73,105,000
71,835,000
71,730,000
Long-term
obligations***
3,817,000
1,097,000
8,909,000
10,419,000
2,451,000
6,757,000
Total
stockholders'
equity
5,146,000
9,318,000
31,263,000
49,626,000
54,483,000
43,110,000
_________________
* Restated to reflect discontinued operations
** In 1993, the Company opted to change its fiscal year end from June 30 to December 31.
See "Item 7. Management's discussion and Analysis of Financial Condition and Results of
Operations."
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Year Ended December 31, 1996 v. Year Ended December 31, 1995
In August, 1996, the Company adopted a plan to sell its
apparel businesses. The Company estimates the loss on the
disposal to be approximately $4,600,000 and charged 1996
operations with such amount. Such loss includes a write-off of
foreign currency translation adjustments, monies owed pursuant
to operating lease agreements, the write-down of assets to net
realizable value offset by the reduction in liabilities due to
the bankruptcy of two of the companies and the balance for
professional fees and other contractual obligations. The
discontinuance of the Company's apparel operations leaves the
Company solely with its Electronic Segment which consists of its
Orbit Instrument Division and its Behlman subsidiary.
Consolidated net sales for the year ended December 31, 1996
increased to $16,971,000 from $11,763,000 for the prior year due
principally to $6,879,000 of revenues recorded by the Company's
new Behlman subsidiary which was acquired in February 1996,
offset by a decrease in the number of units shipped by the Orbit
Instrument Division.
The net loss for the year ended December 31, 1996 decreased
to $5,489,000 from $22,253,000 for the prior year. The loss for
the current year is principally due to operating losses from the
Company's discontinued apparel operations of $4,200,000 and the
estimated loss of $4,600,000 on the disposal of such operations.
The loss in the prior year was principally due to non-cash
charges of $9,780,000 reflecting the Company's write-off of
goodwill and other intangible costs related to its U.S. apparel
businesses as well as $12,192,000 of operating losses from all
of the Company's apparel businesses.
Net earnings from continuing operations for the year ended
December 31, 1996 increased to $3,311,000 from $2,491,000 for
the period due principally to earnings recorded during the
period by the Company's new Behlman subsidiary, increased
earnings from the Orbit Instrument Division offset by a decrease
in investment and other income.
Gross profit, as a percentage of sales, for the year ended
December 31, 1996 increased to 44.8% from 44.5% for the prior
year.
Selling, general and administrative expenses for the year
ended December 31, 1996 increased to $5,501,000 from $5,274,000
for the prior year 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
32.4% for the year ended December 31, 1996 from 44.8% for the
prior year due to additional sales and greater efficiencies
derived from the Behlman acquisition and lower corporate
expenses.
Interest expense for the year ended December 31, 1996
decreased to $118,000 from $236,000 for the prior comparable
period due to a reduction in the average amounts owed during the
current year.
Investment and other income for the year ended December 31,
1996 decreased to $1,320,000 from $2,614,000 for the prior year
due principally to interest earned on higher cash balances in
the prior year. The current year included non-recurring
income resulting from the realization of approximately $800,000
representing the payment of royalty income from Orbit
Semiconductor, Inc. The prior year included non-recurring income
of $1,000,000 resulting from the partial realization of royalty
income from Orbit Semiconductor, Inc., a former affiliate, as
well as $869,000 of insurance proceeds realized upon the
death of the Company's former chief executive officer, net of
accrued costs to the officer's estate . Orbit earned a one-
time royalty payment from Orbit Semiconductor, Inc. pursuant to
a Stock Purchase Agreement executed in November 1991, which was
realized partially in fiscal year 1996 and partially in fiscal
year 1995.
Pursuant to its three-year license agreement with
Athco, the Company received $25,000 in royalty income for the
fiscal year ended December 31, 1996. See "Business-General".
The Company did not record any tax benefit on the current
year's pre-tax loss because of the uncertainty of future
realization.
Year Ended December 31, 1995 v. Year Ended December 31, 1994
Consolidated net sales for the year ended December 31, 1995
decreased to $11,763,000 from $12,254,000 in the prior year due
to a decrease in 1995 in the number of units shipped.
The net loss for the year ended December 31, 1995 increased
to $22,253,000 from $16,995,000 for the prior year. The loss for
the year ended December 31, 1995 was due to $12,192,000 of
operating losses from the Company's discontinued apparel
operations and to non-cash charges in the period of $9,780,000
reflecting the Company's write-off of goodwill and other
intangible costs related to its U.S. apparel businesses. The
loss in 1994 reflects the Company's write-off of its 43% equity
interest in USA Classique, Inc., a subordinated receivable and
other related costs.
Net income from continuing operations for the year ended
December 31, 1995 increased to $2,491,000 from $1,098,000 for
the prior year due principally to non-recurring investment and
other income. Gross profit, as a percentage of sales, for the
year ended December 31, 1995 increased to 44.5% from 42.2% for
the prior year.
Selling, general and administrative expenses for the year
ended December 31, 1995 increased to $5,274,000 from $4,489,000
for the prior year due principally to a provision taken in the
year ended December 31, 1995 of approximately $875,000 in
anticipation of costs to be incurred to repair and/or refurbish
certain units that had already been shipped to one of the
Instrument Division's customers. Selling, general and
administrative expenses, as a percentage of sales, increased to
44.8% in 1995 from 36.6% in 1994 due to the aforementioned
reasons.
Interest expense for the year ended December 31, 1995
decreased to $236,000 from $323,000 for the prior year due to a
reduction in the average amounts owed during the period.
Investment and other income increased during the year ended
December 31, 1995 to $2,614,000 from $734,000 for the prior year
due to (i) insurance proceeds received by the Company upon the
death of the Company's former chief executive officer net of
accrued costs due to the officer's estate and (ii) the partial
realization of $1,000,000 of royalty income received from Orbit
Semiconductor, Inc. pursuant to a Stock Purchase Agreement
signed in November 1991.
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 $6,317,000 to $6,197,000
during the year ended December 31, 1996 from a working capital
deficit of $120,000 as of December 31, 1995 principally due to
approximately $7,567,000 of non-current restricted assets which
were used to either reduce amounts owed under certain lending
facilities and the reclassification of certain amounts due under
the Company's factoring arrangements to a three year term loan.
The Company's working capital ratio at December 31, 1996 was 1.7
to 1 compared to 1.0 to 1 at December 31, 1995.
All losses and obligations of the apparel businesses have
been provided for in the December 31, 1996 financial statements
and, accordingly, the Company does not anticipate using any
significant portion of its resources towards these apparel
businesses.
During the fourth quarter of 1996, the Company commenced
discussions with the Company's factor to convert the amounts due
to the factor from the Company's discontinued U.S. Apparel
operations to a term loan. The new term loan is expected to
commence on May 1, 1997 at which time the factor expects to
complete its collection of all outstanding accounts receivable.
Under the proposed terms of the new lending arrangement, the
loan amortization is based on a 60 month period with payments
due on a monthly basis for 35 months and a final balloon payment
due April 1, 2000. The loan will have an interest rate of prime
rate plus 1%.
Under the Company's factoring arrangements related to the
discontinued apparel operations, the Company has provided
standby letters of credit as security for its guarantees under
these arrangements, collaterallized by marketable securities. As
of December 31, 1996, the Company has provided $2,200,000 in
standby letters of credit. Between January and December 1996,
the Company used approximately $8,918,000 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
Electronics, Inc., and substantially all of the assets of
Astrosystems Military Electronics Division. The purchase price
of $3,706,000 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 electronics operations. 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%.
The Company is currently a named defendant in a class
action lawsuit (the "Class Action") commenced by an alleged
shareholder of USA Classic. See "Legal Proceedings." Neither
the original complaint, the First Amended and Consolidated
Complaint nor the Second Amended and Consolidated Complaint
includes a quantification of any category of damages sought by
the plaintiffs. The Company is unable to estimate a range of
loss with regard to this action at the present time and,
accordingly, cannot predict with any certainty the impact of
this action on the Company's financial condition.
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 Company has no material
commitments for capital during fiscal year 1997.
Inflation has not materially impacted the operations of the
Company.
Certain Material Trends
Despite continued profitability in 1996, the Company
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
Company should be sustained at the levels recorded in 1996,
although there can be no assurance that such increased revenues
will actually be achieved.
The Company continues to seek new contracts which require
incurring up-front design, engineering, prototype and
preproduction costs. While the Company 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 Company 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 Company's
future revenues and earnings. In addition, due to major
consolidations in the defense industry, it has become more
difficult to avoid dependence on certain customers for revenue
and income. Behlman's product line gives the Company some
diversity with its line of commercial products.
Forward Looking Statements
Statements in this Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and elsewhere in this document as well as statements made in
press releases and oral statements that may be made by the
Company or by officers, directors or employees of the Company
acting on the Company's behalf that are not statements of
historical or current fact constitute "forward-looking
statements"
within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors
that could cause the actual results of the Company to be
materially different from the historical results or from any
future results expressed or implied by such forward-looking
statements. In addition to statements which explicitly describe
such risks and uncertainties, readers are urged to consider
statements labeled with the terms
"believes", "belief",
"expects", "intends", "anticipates" or "plans" to be
uncertain and forward-looking. The forward-looking statements
contained herein are also subject generally to other risks and
uncertainties that are described from time to time in the
Company's reports and registration statements filed with the
Securities and Exchange Commission.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See index to financial statements, which is a part of
the financial statements, and the financial statements and
schedules included elsewhere in this Annual Report on Form 10-K.
The following sets forth certain selected, unaudited quarterly
financial data:
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(Consolidated)
<TABLE>
<CAPTION>
Year Ended
December 31, 1996
<S>
First
Quarter
<C>
Second
Quarter
<C>
Third
Quarter
<C>
Fourth
Quarter
<C>
Net Sales
$2,881,000
$4,889,000
$4,798,000
$4,403,000
Gross Profit
1,102,000
2,292,000
2,150,000
2,066,000
Income from
continuing
operations
771,000
1,068,000
741,000
731,000
(Loss) from
discontinued
operations
(1,541,000)
(6,460,000)
0
(799,000)
Net earnings (loss)
(770,000)
(5,392,000)
741,000
(68,000)
Income per share
from continuing
operations
0.14
0.18
0.12
0.11
(Loss) per share
from discontinued
operations
(0.28)
(1.07)
(0.12)
Net income (loss)
per share (fully
diluted)
</TABLE>
(0.14)
(0.89)
0.12
(0.01)
<TABLE>
<CATION>
Year Ended
December 31, 1995
<S>
<C>
<C>
<C>
<C>
Net Sales
$4,106,000
$4,069,000
$1,851,000
$1,737,000
Gross Profit
1,817,000
1,402,000
542,000
$1,473,000
Income (loss)
from continuing
operations
1,786,000
920,000
(401,000)
$186,000
(Loss) from
discontinued
operations
(2,099,000)
(3,053,000)
(14,887,000)
($4,705,000)
Net (loss)
(313,000)
(2,133,000)
(15,288,000)
($4,519,000)
Income (loss)
per share from
continuing
operations
0.30
0.16
(0.07)
0.03
(Loss) per
share from
discontinued
operations
(0.36)
(0.52)
(2.53)
(0.80)
Net (loss) per
share
(0.05)
(0.36)
(2.60)
(0.77)
</TABLE>
Item 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On July 8, 1996, the Board of Directors of the Company
approved the engagement of Ernst & Young, LLP as its independent
auditors for the fiscal year ended December 31, 1996 to replace
the firm of Richard A. Eisner & Company, LLP who had been
dismissed by the Company. See the Company's Current Report on
Form 8-K/A dated July 8, 1996.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to the Company's definitive
proxy statement to be filed pursuant to regulation 14A
promulgated under the Securities Exchange Act of 1934 in
connection with the Company's 1997 Annual Meeting of
Stockholders.
Item 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's definitive
proxy statement to be filed pursuant to regulation 14A
promulgated under the Securities Exchange Act of 1934 in
connection with the Company's 1997 Annual Meeting of
Stockholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated by reference to the Company's definitive
proxy statement to be filed pursuant to regulation 14A
promulgated under the Securities Exchange Act of 1934 in
connection with the Company's 1997 Annual Meeting of
Stockholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Company's definitive
proxy statement to be filed pursuant to regulation 14A
promulgated under the Securities Exchange Act of 1934 in
connection with the Company's 1997 Annual Meeting of
Stockholders.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are filed as part of
this Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
1.& 2. Financial Statements and Schedule:
The index to the financial statements and schedule
is incorporated by reference to the index to financial
statements attached as an exhibit to this Annual Report on Form
10-K.
3. Exhibits:
Exhibit No. Description of Exhibit
3 (a) Certification of Incorporation, as amended.
Incorporated by reference to Exhibit 3(a) to
Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1991.
3 (b) By-Laws, as amended. Incorporated by reference to
Exhibit 3(b) to Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1988.
4 (a) Orbit International Corp. 1995 Employee Stock
Option Plan. Incorporated by reference to Exhibit
4(a) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
4 (b) Orbit International Corp. 1995 Stock Option Plan
for Non-Employee Directors. Incorporated by
reference to Exhibit 4(b) to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1995.
10 (a) Employment Agreement, dated July 1, 1996 between
Registrant and Mitchell Binder.
10 (b) Employment Agreement dated July 1, 1996 between
Registrant and Bruce Reissman.
10 (c) Employment Agreement dated July 1, 1996 between
Registrant and Dennis Sunshine.
10 (d) Form of Indemnification Agreement between the Company
and each of its Directors. Incorporated by reference
to Exhibit 10(e) to Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1988.
10 (e) Asset Purchase Agreement, dated July 12, 1993, among
The Panda Group, Inc., Kenneth Freedman, Frederick
Meyers and Registrant. Incorporated by reference to
Exhibit 1 to Registrant's Current Report on Form 8-K
dated July 12, 1993.
10 (f) Asset Purchase Agreement, dated as of January 11, 1996,
by and among Astrosystems, Inc., and BEI Electronics,
Inc., Orbit International Corp. and Cabot Court,
Inc. Incorporated by reference to the Registrant's
Current Report on Form 8-K dated February 7, 1996
10 (g) Form of Agreement among Kenneth Freedman, Frederick
Meyers, The Panda Group, Inc. and Orbit International
Corp. dated March 28, 1996; Form of Amendment
Promissory Note dated March 28, 1996; and Form of
Warrant to purchase 125,000 shares of Orbit
International Corp. Common Stock. Incorporated by
reference to Exhibit 10(g) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1995.
16 Letter re change in certifying accountant.
Incorporated by reference to the Registrant's Current
Report on Form 8-K/A dated July 8, 1996.
21 Subsidiaries of Registrant.
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the
last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunder duly authorized.
ORBIT INTERNATIONAL CORP.
Dated: March 31, 1997 By: /s/ Dennis Sunshine
Dennis Sunshine, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
Signature
Title
Date
/s/ Dennis Sunshine
Dennis Sunshine
President, Chief
Executive Officer and
Director
March 31, 1997
/s/ Mitchell Binder
Mitchell Binder
Vice President-Finance,
Chief Financial Officer
and Director
March 31, 1997
/s/ Bruce Reissman
Bruce Reissman
Executive Vice President,
Chief Operating Officer
and Director
March 31, 1997
/s/ Harlan Sylvan
Harlan Sylvan
Treasurer,
Secretary and Controller
March 31, 1997
/s/ Nathan A. Greenberg
Nathan A. Greenberg
Director
March 31, 1997
/s/ John Molloy
John Molloy
Director
March 31, 1997
/s/ Stanley Morris
Stanley Morris
Director
March 31, 1997
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
REPORT OF INDEPENDENT AUDITORS
CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, 1996 AND 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE FOLLOWING FINANCIAL STATEMENT SCHEDULE IS INCLUDED IN
ITEM 14(d):
II - VALUATION AND QUALIFYING ACCOUNTS
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and therefore have been omitted.
Q:\SSDOCS\SQUAD01\BAW\COGENER2\186681 1.WPD
