UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended to
Commission file number 0-3936
Orbit International Corp.
(Exact name of registrant as specified in its charter)
Delaware ID # 11-1826363
(State or other jurisdiction (I.R.S. Employer Identification
incorporation or organization) Number)
80 Cabot Court, Hauppauge, New York 11788
(Address of principal executive offices (Zip Code)
(516) 435-8300
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 month (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15 (d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date:
March 31, 1997. 6,186,000
ORBIT INTERNATIONAL CORP.
The financial information herein is unaudited. However, in the
opinion of management, such information reflects all adjustments
(consisting only of normal recurring accruals) necessary to a fair
presentation of the results of operations for the periods being
reported. Additionally, it should be noted that the accompanying
condensed financial statements do not purport to contain complete
disclosures in conformity with generally accepted accounting
principles.
The results of operations for the three months ended March 31,
1997 are not necessarily indicative of the results of operations for
the full fiscal year ending December 31, 1997.
The consolidated balance sheet as of December 31, 1996 was
condensed from the audited consolidated balance sheet appearing in the
1996 annual report on Form 10-K.
These condensed consolidated statements should be read in
conjunction with the Company's financial statements for the fiscal year
ended December 31, 1996.
PART I - FINANCIAL INFORMATION
ITEM - I
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
(unaudited)
ASSETS
Current assets
Cash and cash equivalents............... $ 450,000 $ 927,000
Investment in marketable securities..... 1,561,000 782,000
Accounts receivable (less allowance for
doubtful accounts)..................... 2,940,000 3,114,000
Inventories ............................ 7,160,000 6,657,000
Restricted investments, related to
discontinued operations................ 1,801,000 2,453,000
Assets held for sale, net............... 407,000 712,000
Other current assets.................... 528,000 246,000
Total current assets.................. 14,847,000 14,891,000
Property, plant and equipment - at cost
less accumulated depreciation and
amortization........................... 2,339,000 2,347,000
Excess of cost over the fair value of
assets acquired....................... 1,001,000 1,019,000
Investment in marketable securities..... 1,256,000 1,150,000
Other assets............................ 502,000 524,000
TOTAL ASSETS............................ $19,945,000 $19,931,000
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(continued)
March 31, December 31,
1997 1996
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations.. $ 1,599,000 $ 1,656,000
Accounts payable.......................... 1,412,000 940,000
Accrued expenses.......................... 2,478,000 2,545,000
Notes payable............................. 78,000 65,000
Accounts payable, accrued expenses and
reserves for discontinued operations..... 1,878,000 2,636,000
Due to factor............................. 1,427,000 852,000
Total current liabilities............... 8,872,000 8,694,000
Long-term obligations, less current
portion................................... 3,981,000 4,352,000
Accounts payable, accrued expenses and
reserves for discontinued operations,
less current portion...................... 1,212,000 1,424,000
Other liabilities.......................... 315,000 315,000
Total liabilities....................... 14,380,000 14,785,000
STOCKHOLDERS' EQUITY
Common stock - $.10 par value.............. 907,000 907,000
Additional paid-in capital................. 23,518,000 23,518,000
Accumulated deficit........................ (9,106,000) (9,515,000)
Less treasury stock, at cost............... (9,588,000) (9,588,000)
Less deferred compensation................. (155,000) (174,000)
Less unrealized loss in marketable
securities................................ (11,000) (2,000)
Total stockholders' equity................ 5,565,000 5,146,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $19,945,000 $19,931,000
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31,
1997 1996
Net sales........................... $ 3,970,000 $ 2,881,000
Cost of sales....................... 2,375,000 1,779,000
Gross profit........................ 1,595,000 1,102,000
Selling, general and administrative
expense............................ 1,227,000 1,310,000
Interest expense.................... 40,000 21,000
Investment and other (income)....... (81,000) (1,000,000)
Income from continuing operations... 409,000 771,000
Discontinued operations:
(Loss) from operations.......... (1,541,000)
NET INCOME (LOSS)................... $ 409,000 $ (770,000)
Income (loss) per share:
Income from continuing operations: $ .06 $ .13
(Loss) from discontinued operations: ( .26)
NET INCOME (LOSS): $ .06 ($ .13)
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net income(loss)........................... $ 409,000 $ (770,000)
Adjustments to reconcile net income (loss)
to net cash (used in)
operating activities:
Depreciation and amortization.............. 34,000 93,000
Amortization of goodwill................... 18,000 24,000
Provision for doubtful accounts............ 236,000
Compensatory issuance of stock ............ 19,000
Changes in operating assets and liabilities:
Accounts receivable....................... 174,000 (1,789,000)
Inventories............................... (503,000) 862,000
Other current assets...................... (282,000) 1,075,000
Accounts payable.......................... 472,000 49,000
Accrued expenses.......................... (67,000) (15,000)
Assets held for sale...................... 305,000
Accounts payable, accrued expenses and
reserves for discontinued operations..... (669,000)
Other assets.............................. 22,000 12,000
Net cash (used in) operating
activities............................. (98,000) (223,000)
Cash flows from investing activities:
Acquisitions of fixed assets............... ( 26,000) (131,000)
Purchase of net assets of acquired company. (3,750,000)
Change in value of marketable securities... (9,000) 2,000
Purchase of marketable securities.......... (2,307,000) (11,095,000)
Proceeds of sales of marketable securities. 2,074,000 17,172,000
Net cash provided by (used in) investing
activities.............................. (268,000) 2,198,000
(continued)
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(unaudited)
Three Months Ended
March 31,
1997 1996
Cash flows from financing activities:
Due to factor............................. 308,000 (1,823,000)
Repayments of debt........................ (429,000) (1,795,000)
Proceeds of debt.......................... 13,000
Net cash provided by (used in)
financing activities..................... 111,000 (3,618,000)
Effect of exchange rate changes on cash.....
NET (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ (477,000) (1,643,000)
Cash and cash equivalents - January 1....... 927,000 2,274,000
CASH AND CASH EQUIVALENTS - March 31........ 450,000 631,000
Supplemental disclosures of cash flow
information:
Cash paid for:
Interest........................... $ 221,000 506,000
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(NOTE 1) - Income (Loss) Per Share:
Income (loss) per share is based on the weighted average number of
common and common equivalent shares (where appropriate) outstanding
during each period. The average number of shares and equivalent shares
outstanding for the three month period ended March 31, 1997 and 1996
are 6,820,000 and 5,886,000 respectively.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted
on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will
be excluded. The impact is expected to result in an increase in
primary earnings per share for the first quarter ended March 31, 1997
of $.01 per share and to be immaterial for the first quarter ended
March 31, 1996. The impact of Statement 128 on the calculation of fully
diluted earnings per share for these quarters is not expected to be
material.
(NOTE 2) - Cost of Sales:
For interim periods, the Company estimates its inventory and
related gross profit.
(NOTE 3) - Inventories:
Inventories are comprised of the following:
March 31, December 31,
1997 1996
Raw Materials.............. $ 2,439,000 $ 2,332,000
Work-in-process............ 4,721,000 4,325,000
Finished goods............. - -
TOTAL $ 7,160,000 $ 6,657,000
(continued)
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(continued)
(NOTE 4) - Available-For-Sale Securities:
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 March 31, 1997, this collateral
requirement amounted to approximately $1,801,000.
The following is a summary of available-for-sale securities as of:
March 31, 1997
Estimated Fair
Cost Value
U.S. Treasury bills......................... $ 3,362,000 $ 3,362,000
Debt securities issued
by other government agencies............... 5,000 5,000
Corporate debt securities................... 1,262,000 1,251,000
4,629,000 4,618,000
Restricted value of portfolio
used to collateralize credit
facility (included in assets
held for sale)............................. 1,801,000 1,801,000
Balance of securities portfolio............. $ 2,828,000 $ 2,817,000
The amortized cost and estimated fair value of debt and marketable
equity securities at March 31, 1997 by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities
because the issurers of the securities may have the right to repay
obligations without prepayment penalties.
Due in one year or less.................... $ 3,362,000 $ 3,362,000
Due after one year through three years..... 40,000 40,000
Due after three years...................... 1,127,000 1,216,000
4,629,000 4,618,000
Restricted value of portfolio used to
collateralize credit facilities........... 1,801,000 1,801,000
$ 2,828,000 $ 2,817,000
(continued)
ITEM - II
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS
Results of Operations
Three month period ended March 31, 1997 v. March 31, 1996
In August, 1996, the Company adopted a plan to sell its apparel
segments. The plan of disposal of such segments left the Company with
solely its Electronics Segment which consists of its Orbit Instrument
Division and Behlman subsidiary.
Consolidated net sales for the three month period ended March 31,
1997 increased to $3,970,000 from $2,881,000 for the three month period
ended March 31, 1996 due principally to additional sales recorded by
the Company's Behlman subsidiary which was acquired during the first
quarter of 1996.
Income from continuing operations for the three month period ended
March 31, 1997 decreased to $409,000 from $771,000 for the three month
period ended March 31, 1996 due principally to $815,000 of royalty
income received from a former affiliate which was recorded in the 1996
period. Had this royalty income not been recorded, income from
continuing operations for the three month period ended March 31, 1997
would have increased to $409,000 from a loss of $44,000 in the 1996
period. This increase was due to increased sales from the Behlman
subsidiary and to one time start up costs incurred in the prior period
associated with the acquisition of Behlman, as well as Behlman's
transition into the Company's manufacturing facility.
Net income for the three month period ended March 31, 1997
increased to $409,000 from a loss of $770,000 for the three month
period ended March 31, 1996 which loss had been due principally to
$1,541,000 of operating losses from the Company's discontinued apparel
operations.
Gross profit as a percentage of sales, for the three month period
ended March 31, 1997 increased to 40.2% from 38.3% for the three month
period ended March 31, 1996 due to operating efficiencies gained from
the Behlman acquisition which were not yet realized in the 1996 period.
Selling general and administrative expenses for the three month
period ended March 31, 1997 decreased to $1,227,000 from $1,310,000 for
the three month period ended March 31, 1996 principally due to lower
corporate costs. Selling, general and administrative expenses, as a
percentage of sales for the three month period ended March 31, 1997
decreased to 30.9% from 45.5% for the 1996 period due to increased
sales and lower corporate costs.
Interest expense for the three month period ended March 31, 1997
increased to $40,000 from $21,000 for the three month period ended
March 31, 1996 due to an increase in the amounts owed during the
current period.
Investment and other income for the three month period ended March
31, 1997 decreased to 81,000 from $1,000,000 for the three month period
ended March 31, 1996 due principally to $815,000 of royalty income
recorded in the prior period which was received from a former affiliate
and to a reduction in available balances for investment in the current
period.
The Company did not record any tax benefit on the current years
pre-tax loss because of the uncertainty of future realization.
Liquidity, Capital Resources and Inflation:
Working capital decreased by $222,000 to $5,975,000 for the three
month period ended March 31, 1997 principally due to amounts used to
pay debt and other obligations primarily from the discontinued apparel
operations which was offset by $409,000 of income recorded during the
period. The Company's working capital ratio at March 31, 1997 was 1.7
to 1 compared to 1.7 to 1 at December 31, 1996.
All losses and obligations of the apparel businesses have been
provided for in the March 31, 1997 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 after May 15,
1997 at which time the factor expects to complete its collection
efforts on 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 May 1, 2000. The loan will have an
interest rate of prime rate plus 1%.
Under the Company's factoring arrangement related to the
discontinued Canadian apparel operations, the Company has provided a
standby letter of credit as security for its guaranty under this
lending facility, collaterallized by marketable securities. As of
March 31, 1997, the Company had provided $1,650,000 in a standby letter
of credit. In May, 1997, the Company used approximately $500,000 of
marketable securities to reduce the amount owed under this lending
arrangement and the standby letter of credit was reduced accordingly.
The Company's existing capital resources, including its bank
credit facilities, and its cash flow from operations are expected to be
adequate to cover the Company's cash requirements for the foreseeable
future.
Inflation has not materially impacted the operations of the
Company.
Certain Material Trends
Despite continued profitability in 1996 and the first quarter of
1997, 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 "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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has dully caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ORBIT INTERNATIONAL CORP.
Registrant
Dated: May 15, 1997 /s/ Dennis Sunshine
Dennis Sunshine, President, Chief
Executive officer and Director
Dated: May 15, 1997 /s/ Mitchell Binder
Mitchell Binder, Vice President-
Finance, Chief Financial Officer
and Director
PART II
OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits. None
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 450,000
<SECURITIES> 1,561,000
<RECEIVABLES> 3,090,000
<ALLOWANCES> 150,000
<INVENTORY> 7,160,000
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<PP&E> 4,458,000
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<BONDS> 3,981,000
0
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<COMMON> 907,000
<OTHER-SE> 4,658,000
<TOTAL-LIABILITY-AND-EQUITY> 19,945,000
<SALES> 3,970,000
<TOTAL-REVENUES> 3,970,000
<CGS> 2,375,000
<TOTAL-COSTS> 2,375,000
<OTHER-EXPENSES> 1,227,000
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