UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended to
Commission file number 0-3936
Orbit International Corp.
(Exact name of registrant as specified in its charter)
Delaware ID # 11-1826363
(State or other jurisdiction (I.R.S. Employer Identification
incorporation or organization) Number)
80 Cabot Court, Hauppauge, New York 11788
(Address of principal executive offices (Zip Code)
(516) 435-8300
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 month (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15 (d) of
the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (after giving
effect to the one for three reverse stock split effective October 4, 1999):
November 12, 1999 2,026,000
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 nine months ended September 30, 1999
are not necessarily indicative of the results of operations for the full
fiscal year ending December 31, 1999.
The consolidated balance sheet as of December 31, 1998 was condensed
from the audited consolidated balance sheet appearing in the 1998 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, 1998.
PART I - FINANCIAL INFORMATION
ITEM - I
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1999 1998
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents............... $ 2,107,000 $ 438,000
Investments in marketable securities.... 1,037,000 3,230,000
Accounts receivable, net................ 1,996,000 2,345,000
Inventories ............................ 6,080,000 7,089,000
Restricted investments, related to
discontinued operations................ - 26,000
Assets held for sale, net............... 41,000 80,000
Other current assets.................... 176,000 140,000
Deferred tax assets..................... 276,000 276,000
Total current assets.................. 11,713,000 13,624,000
Property, plant and equipment - at
cost, net............................... 2,162,000 2,267,000
Excess of cost over the fair value of
assets acquired, net.................. 1,083,000 1,155,000
Investments in marketable securities.... 281,000 517,000
Other assets............................ 666,000 658,000
Deferred tax assets..................... 924,000 924,000
TOTAL ASSETS............................ $16,829,000 $19,145,000
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(continued)
September 30, December 31,
1999 1998
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations.. $ 738,000 $ 593,000
Accounts payable.......................... 1,335,000 1,189,000
Accrued expenses.......................... 837,000 2,432,000
Customer advances......................... - 785,000
Accounts payable, accrued expenses and
reserves applicable to discontinued
operations............................... 518,000 669,000
Due to factor............................. - 15,000
Total current liabilities............... 3,428,000 5,683,000
Long-term obligations...................... 3,803,000 3,881,000
Accounts payable, accrued expenses and
reserves applicable to discontinued
operations, less current portion..... .... 393,000 522,000
Total liabilities....................... 7,624,000 10,086,000
STOCKHOLDERS' EQUITY
Common stock - $.10 par value.............. 304,000 912,000
Additional paid-in capital................. 24,165,000 23,555,000
Accumulated deficit........................ (5,402,000) (5,596,000)
Deferred compensation...................... - (19,000)
Accumulated other comprehensive
(loss) income............................. (12,000) 9,000
19,055,000 18,861,000
Treasury stock, at cost.................... (9,850,000) (9,802,000)
Total stockholders' equity................ 9,205,000 9,059,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $16,829,000 $19,145,000
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
Net sales........ $ 9,791,000 $ 12,346,000 $ 2,773,000 $ 3,826,000
Cost of sales.... 5,897,000 7,217,000 1,611,000 2,336,000
Gross profit..... 3,894,000 5,129,000 1,162,000 1,490,000
Selling, general and
administrative
expenses........ 3,690,000 4,004,000 1,144,000 1,280,000
Class action litigation
settlement...... - 500,000 - -
Interest expense...... 250,000 251,000 87,000 67,000
Investment and
other income, net.... (240,000) (300,000) (77,000) (100,000)
Income before
income tax benefit... 194,000 674,000 8,000 243,000
Income tax benefit.... - 1,200,000 - 50,000
NET INCOME ........ $ 194,000 $1,874,000 $ 8,000 $ 293,000
Net income per common
share:
Basic........ $.10 $.91 $.00 $.14
Diluted...... $.09 $.79 $.00 $.13
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
1999 1998
Cash flows from operating activities:
Net income ................................ $ 194,000 $1,874,000
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization............... 122,000 104,000
Amortization of goodwill.................... 72,000 72,000
Compensatory issuance of stock and options.. 19,000 58,000
Change in value of marketable securities... (21,000) 18,000
Benefit for deferred taxes.................. - (1,200,000)
Changes in operating assets and liabilities:
Accounts receivable......................... 349,000 1,150,000
Inventories.................................1,009,000 (1,000,000)
Other current assets........................ (36,000) 42,000
Other assets................................ (25,000) (270,000)
Accounts payable............................ 146,000 405,000
Accrued expenses............................ (595,000) (18,000)
Customer advances........................... (785,000) 1,102,000
Assets held for sale, net................... 39,000 185,000
Accounts payable, accrued expenses and
reserves applicable to discontinued
operations................................. (280,000) (422,000)
Payment for settlement of class action
securities litigation.....................(1,000,000) _____-___
Net cash (used in) provided by
operating activities...................... (792,000) 2,100,000
Cash flows from investing activities:
Purchases of property, plant and equipment.. - (49,000)
Purchases of marketable securities.......... (1,966,000) (4,688,000)
Proceeds from sales of marketable securities 4,421,000 3,872,000
Net cash provided by (used in)
investing activities...................... 2,455,000 (865,000)
(continued)
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(continued)
Nine Months Ended
September 30,
1999 1998
Cash flows from financing activities:
Decrease in due to factor................... (15,000) (245,000)
Repayments of long-term debt................ (433,000) (4,297,000)
Proceeds from long-term debt................ 500,000 3,500,000
Proceeds from exercise of stock options..... 2,000 20,000
Purchase of treasury stock.................. (48,000) 50,000
Net cash provided by (used in) financing
activities................................. 6,000 (1,072,000)
NET INCREASE IN CASH AND CASH
EQUIVALENTS................................. 1,669,000 163,000
Cash and cash equivalents - January 1........ 438,000 1,096,000
CASH AND CASH EQUIVALENTS - September 30.......$2,107,000 $ 1,259,000
Supplemental disclosures of cash flow
information:
(1) Cash paid for:
Interest.............................. $250,000 $ 251,000
Taxes................................. $ - $ 32,000
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(NOTE 1) - Reverse Stock Split:
On September 1, 1999, the Board of Directors authorized, and on October
1, 1999, the Company's shareholders approved, an amendment to the Company's
Certificate of Incorporation to effectuate a one-for-three reverse stock
split thereby decreasing the number of issued and outstanding shares of the
Company's common stock. Accordingly, all per share data and number of
common shares have been retroactively restated to reflect the reverse stock
split.
(NOTE 2) - Income Per Share:
The following table sets forth the computation of basic and diluted
income per common share:
Nine Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
Denominator:
Denominator for basic
income per share -
weighted-average common
shares 2,026,000 2,057,000 2,026,000
2,058,000
Effect of dilutive securities:
Employee and directors
stock options 17,000 229,000 - 178,000
Warrants 15,000 60,000 - 53,000
Unearned stock award - 12,000 - 11,000
Denominator for diluted
income per share -
weighted-average common
shares and assumed
conversion 2,058,000 2,358,000 2,026,000 2,300,000
The numerator for basic and diluted income per share for the nine and
three months ended September 30, 1999 and September 30, 1998 is the net
income for each period.
(NOTE 3) - Cost of Sales:
For interim periods, the Company estimates its inventory and related
gross profit.
(continued)
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(continued)
(NOTE 4) - Inventories:
Inventories are comprised of the following:
September 30, December 31,
1999 1998
Raw Materials.............. $ 2,312,000 $ 2,609,000
Work-in-process............ 3,768,000 4,480,000
TOTAL $ 6,080,000 $ 7,089,000
(NOTE 5) - Available-For-Sale Securities:
The following is a summary of available-for-sale securities as of:
September 30, 1999
Estimated
Fair
Cost Value
U.S. Treasury bills......................... $ 942,000 $ 942,000
Corporate debt securities .................. 388,000 376,000
Securities portfolio........................ $ 1,330,000 $ 1,318,000
The amortized cost and estimated fair value of marketable debt
securities at September 30, 1999 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.
September 30,1999
Estimated
Fair
Cost Value
Due in one year or less.................... $ 1,042,000 $ 1,037,000
Due after three years...................... 288,000 281,000
$ 1,330,000 $ 1,318,000
(continued)
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(continued)
(NOTE 6) - Business Segments:
The Company operates in two business segments. Its Electronics
Segment, through the Orbit Instrument Division, is engaged in the design,
manufacture and sale of customized electronic components and subsystems.
Its Power Units Segment, through the Behlman Electronics, Inc. subsidiary,
is engaged in the design, manufacture and sale of distortion free commercial
power units, power conversion devices and electronic devices for measurement
and display.
The Company's reportable segments are business units that offer
different products. The reportable segments are each managed separately
because they manufacture and distribute distinct products with different
production processes.
The following is business segment information for the nine and three
months ended September 30, 1999 and 1998.
Nine Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
Net sales:
Electronics....... $ 5,763,000 $ 8,034,000 $ 1,561,000 $ 2,522,000
Power Units.......
Domestic........ 3,453,000 3,703,000 1,046,000 1,115,000
Foreign......... 585,000 688,000 166,000 205,000
Intercompany sales. (10,000) (79,000) - (16,000)
Total Power Units.... 4,028,000 4,312,000 1,212,000 1,304,000
Total $ 9,791,000 $12,346,000 $ 2,773,000 $ 3,826,000
Income (loss) from
operations:
Electronics....... $ 1,092,000 $ 2,042,000 263,000 $ 589,000
Power Units....... (349,000) (274,000) (113,000) (165,000)
General corporate
expenses not
allocated.(a)...... (539,000) (1,143,000) (132,000) (214,000)
Interest expense..... (250,000) (251,000) (87,000) (67,000)
Investment and other
income............. 240,000 300,000 77,000 100,000
Income before
income taxes........$ 194,000 $ 674,000 $ 8,000 $ 243,000
(a) Includes a $500,000 charge for the class action securities litigation
settlement for the nine months ended September 30, 1998.
(continued)
ITEM - II
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three month period ended September 30, 1999 v. September 30, 1998
The Company currently operates in two industry segments. Its Orbit
Instrument Division is engaged in the design and manufacture of electronic
components and subsystems (the "Electronics Segment"). Its Behlman
subsidiary is engaged in the design and manufacture of commercial power
units (the "Power Units Segment").
Consolidated net sales for the three month period ended September 30,
1999 decreased to $2,773,000 from $3,826,000 for the three month period
ended September 30, 1998 due to decreased sales from both its Electronics
Segment and its Power Units Segment.
Gross profit, as a percentage of sales, for the three month period
ended September 30, 1999 increased to 41.9% from 38.9% for the three month
period ended September 30, 1998 due to higher gross profits realized by both
of the Company's Segments due to product mix. This increase in gross margin
was realized despite a reduction in sales for the period.
Selling, general and administrative expenses for the three month period
ended September 30, 1999 decreased to $1,144,000 from $1,280,000 for the
three month period ended September 30, 1998 principally due to several cost
cutting initiatives taken by the Company during the first quarter of 1999 in
anticipation of expected lower revenues for 1999. Selling, general and
administrative expenses, as a percentage of sales, for the three month
period ended September 30, 1999 increased to 41.3% from 33.5% for the three
month period ended September 30, 1998 due to decreased sales during the
current period.
Interest expense for the three month period ended September 30, 1999
increased to $87,000 from $67,000 for the three month period ended September
30, 1998 due to higher amounts borrowed as well as a higher interest rate on
those amounts borrowed during the current period.
Investment and other income for the three month period ended September
30, 1999 decreased to $77,000 from $100,000 for the three month period ended
September 30, 1998 due to a decrease in the amounts invested during the
current period.
In connection with the resolution of the USA Classic class action
securities litigation in the prior year and its related uncertainties and
the Company's consistent earnings from its continuing operations, pursuant
to Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", the Company reduced its valuation allowance against its
deferred tax assets by $50,000 during the three months ended September 30,
1998.
Net income for the three month period ended September 30, 1999
decreased to $8,000 from $293,000 for the three month period ended September
30, 1998 principally due to a reduction in revenues.
Nine month period ended September 30, 1999 v. September 30, 1998
Consolidated net sales for the nine month period ended September 30,
1999 decreased to $9,791,000 from $12,346,000 for the nine month period
ended September 30, 1998 principally due to decreased sales from both the
Electronics Segment and the Power Units Segment.
Gross profit, as a percentage of sales, for the nine month period ended
September 30, 1999 decreased to 39.8% from 41.5% for the nine month period
ended September 30, 1998 due to lower gross profits realized by both the
Electronics Segment and the Power Units Segment due to certain costs that
did not decrease despite the reduction in sales for the period.
Selling, general and administrative expenses for the nine month period
ended September 30, 1999 decreased to $3,690,000 from $4,004,000 for the
nine month period ended September 30, 1998 principally due to several cost
cutting initiatives taken by the Company during the first quarter of 1999.
Selling, general and administrative expenses, as a percentage of sales, for
the nine months ended September 30, 1999 increased to 37.7% from 32.4% for
the comparable period in 1998 principally due to decreased sales during the
current period.
In July, 1998, the Company reached a settlement with respect to the USA
Classic class action securities litigation. The Company's portion of the
settlement was $1,000,000 of which $500,000 had been previously accrued.
Accordingly, the Company recorded an additional charge of $500,000 during
the nine months ended September 30, 1998.
Interest expense for the nine month period ended September 30, 1999 was
$250,000 and did not materially change from $251,000 recorded for the nine
month period ended September 30, 1998.
Investment and other income for the nine month period ended September
30, 1999 decreased to $240,000 from $300,000 for the nine month period ended
September 30, 1998 principally due to a decrease in funds available for
investment in the current period.
In connection with the resolution of the USA Classic class action
securities litigation in the prior year and its related uncertainties and
the Company's consistent earnings from its continuing operations, pursuant
to Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", the Company reduced its valuation allowance against its
deferred tax assets by $1,200,000 during the nine months ended September 30,
1998.
Net income for the nine month period ended September 30, 1999 decreased
to $194,000 from $1,874,000 for the nine month period ended September 30,
1998. Net income for the nine month period ended September 30, 1999
decreased to $194,000 from $1,174,000 for the same period last year,
excluding the effect of the income tax benefit and the settlement of the
class action securities litigation. The decrease was principally due to the
reduction in revenues.
Liquidity, Capital Resources and Inflation:
Working capital increased to $8,285,000 at September 30, 1999 compared
to $7,941,000 at December 31, 1998. The ratio of current assets to current
liabilities increased to 3.4 to 1 at September 30, 1999 from 2.4 to 1 at
December 31, 1998.
Net cash flows used in operations for the nine months ended September
30, 1999 was approximately $792,000, primarily attributable to the payment
related to the settlement of the class action litigation and a decrease in
accrued expenses and customer advances partially offset by a decrease in
accounts receivable and inventories. Cash flows provided by investing
activities for the nine months ended September 30, 1999 was approximately
$2,455,000, due to the net sales of marketable securities. Cash flows
provided by financing activities was approximately $6,000, primarily
attributable to proceeds of debt which was partially offset by repayments of
debt and the purchase of treasury stock.
All operations of the discontinued apparel companies have been
terminated. All losses and obligations of these apparel operations have
been provided for, and accordingly, the Company does not anticipate using
any significant portion of its resources towards these discontinued apparel
operations.
In August 1998, the Company closed on a new $4,000,000 credit facility
with a new lender, secured by real property and other assets of the Company.
The Company used $3,500,000 of the proceeds to replace its existing asset
based lending arrangement and the remaining $500,000 was borrowed in
January, 1999 to partially fund a class action securities litigation
settlement of $1,000,000. The amount owed under this existing credit
facility at September 30, 1999 was approximately $ 3,453,000 at an interest
rate of 1.25 percent above the prime rate of interest.
On September 1, 1999, the Board of Directors authorized a 1 for 3
reverse stock split thereby decreasing the number of issued and outstanding
shares of the Company's stock. All per share data and numbers of common
shares have been retroactively restated to reflect this reverse stock split.
In September 1998, the Company's Board of Directors authorized a stock
repurchase program for the repurchase of up to 83,333 shares of its common
stock in the open market or in privately negotiated transactions. Through
August 3, 1999, the Company repurchased approximately 52,000 shares at an
average price of $5.01 per share. The Company has not made any repurchases
since the first quarter of 1999 in order for it to remain in compliance with
financial covenants related to its existing credit facility.
The Company's existing capital resources, including its bank credit
facilities and its projected cash flow from operations, are expected to be
adequate to cover its cash requirements for the foreseeable future.
Inflation has not materially impacted the operations of the Company.
Certain Material Trends
Despite continued profitability in 1998, and through the first three
quarters of 1999, the Company continues to face a very 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. The Company continues to pursue many business opportunities,
including programs in which it has long participated but, due to industry-
wide funding and pricing pressures, the Company has encountered delays in
the awards of these contracts. The delay in receiving these awards will
shift a portion of shipments anticipated for 1999 into the year 2000.
Consequently, the Company projects that the revenue of the Company's
Electronics Segment in 1999 will not match the levels recorded in 1998.
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 its customers, including the U.S. Government, for such effort. In
addition, even if the U. S. 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, particularly
the Department of the Navy, as a source of revenues and income. The U.S.
Navy fleet has been significantly reduced in the past several years thereby
impacting the procurement of equipment. Any further reductions in the level
of military spending by the U.S Government and/or further reductions to the
U.S. fleet 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 line of commercial products gives the Company
some diversity and the Orbit Instrument Division is beginning to introduce
certain of its products into commercial and foreign markets.
The Company retained OEM Capital Corp ("OEM"), an investment banking
firm specializing in the electronics, communications and computer
industries, to assist the Company in identifying viable acquisition
opportunities. Although the Company is committed to enhancing its sales and
profitability through strategic acquisitions as well as through internal
growth, there is no guarantee that OEM will present acquisition candidates
that will ultimately result in a transaction for the Company.
Year 2000
In accordance with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company notes that certain statements
contained in the following discussion concerning the change over to the year
2000 are forward-looking in nature and are subject to many risks and
uncertainties. These forward-looking statements include such matters as the
Company's projected state of readiness, the Company's projected cost of
remediation, the expected date of completion of remediation and the expected
contingency plans associated with any worst case scenarios. Such statements
also constitute Year 2000 Readiness Disclosure within the meaning of the
Year 2000 Information and Readiness Disclosure Act.
The Year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Such software may recognize
a date using 00 as the year 1900 rather than the year 2000. This could
result in system failures or miscalculations leading to disruptions in the
Company's activities and operations.
The Company has developed a plan to modify its information technology
systems to recognize the Year 2000, including the purchase of a new
manufacturing software package, and has converted its critical data
processing systems. The Company has incurred approximately $125,000 for
this project. These costs include the price of new software and internal
costs but excludes the costs to upgrade and replace systems in the normal
course of business as well as potential costs for outside consultants to
assist the Company in the implementation of a new software package. The
Company does not expect this project to have a material effect on its
operations in 1999. The Company has also had discussions with its
significant suppliers, large customers and financial institutions to ensure
that these parties have appropriate plans to remediate Year 2000 issues
where their systems interface with Company systems or otherwise impact its
operations. However, the Company is currently uncertain as to the impact on
its operations, liquidity and financial conditions should these
organizations fail to properly remediate their computer systems.
While the Company has used diligent efforts and care to implement the
plan set forth above and to take any other necessary steps with regard to
its information technology systems to prepare for the Year 2000, there is no
assurance that such steps will effectively accomplish such goal.
Furthermore, any failure on the part of the Company's primary suppliers,
service providers and customers to adapt their respective information
technology systems to recognize the Year 2000 could adversely impact the
Company. Furthermore, the United States Government has been a significant
customer of the Company for many years. There have recently been several
press reports concerning whether certain departments of the United States
Government will be Year 2000 compliant on a timely basis. To the extent
problems are identified, the Company will implement corrective procedures
where necessary to avoid any adverse effect on the Company's cash flow and
financial condition.
The failure to correct a material Year 2000 problem could result in an
interruption or failure of certain important business operations. The
failure of the Company's sales and billing systems could result in the
Company's inability to timely post and record sales revenue and expenses.
In addition, the aging of the Company's accounts payable would be
inaccurate.
The Company has prepared contingency plans for certain critical
applications and is working on plans for others. These contingency plans
involve, among other actions, manual workarounds, increase of inventories,
and protective cash management procedures.
The financial impact of any or all of the above worst-case scenarios
has not been and cannot be estimated by the Company due to the numerous
uncertainties and variables associated with such scenarios. Management
believes, however, that its Year 2000 program will significantly reduce the
Company's risks associated with the change over to the year 2000.
Forward Looking Statements
Statements in this Item 2 "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.
Quantitative And Qualitative Disclosures About Market Risks
The Company is exposed to market risk related to changes in interest
rates. Most of the Company's debt is at a variable rate of interest and is
not hedged by any derivative instruments.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ORBIT INTERNATIONAL CORP.
Registrant
Dated: November 12, 1999 /s/ Dennis Sunshine
Dennis Sunshine, President, Chief
Executive officer and Director
Dated: November 12, 1999 /s/ Mitchell Binder
Mitchell Binder, Vice President-
Finance, Chief Financial Officer
and Director
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
A Special Meeting of Stockholders of the Company was held on October
1,1999. The holders of 6,077,593 shares of Common Stock of the Company were
entitled to vote at the meeting, the holders of 5,712,801 shares of Common
Stock, or approximately 94% of shares entitled to vote at the meeting, were
represented by proxy. The following action took place:
The stockholders voted 5,480,741 for and 213,427 against the resolution
relating to the amendment to the Company's Certificate of Incorporation
to effect a one-for three reverse stock split of the Company's
outstanding common stock (18,633 votes abstained).
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
Exhibit No.
3.1 Certificate of Amendment of Certificate
of Incorporation
(b) On October 6, 1999, the Company filed a Form 8-K stating that
on October 1, 1999, it's shareholders approved an amendment
to the Company's Certificate of Incorporation to effect a
one-for-three reverse stock split of the Company's
outstanding stock.
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ORBIT INTERNATIONAL CORP.
Orbit International Corp., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That by unanimous vote of the Board of Directors of the
Corporation, resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of the Corporation,
declaring such amendment to be advisable and calling a special meeting
of the stockholders of the Corporation for consideration thereof. The
resolutions setting forth the proposed amendment are as follows:
RESOLVED, that the Board of Directors deems it advisable and in
the best interest of the Corporation to reduce the number of
outstanding shares of common stock, par value $.10 per share, of
the Corporation by effecting a reverse stock split of the
Corporation's outstanding shares of common stock by
reclassifying each three (3) shares of common stock held into
one (1) share of common stock, par value $.10 per share; and
further
RESOLVED, that the Board of Directors of the Corporation hereby
declares advisable that the Certificate of Incorporation of the
Corporation be amended by adding thereto the following
provisions:
Immediately upon effectiveness of this amendment to the
Certificate of Incorporation of the Corporation pursuant
to the General Corporation Law of the State of Delaware
(the "Effective Time"), each three shares of the
Corporation's Common Stock, par value $.10 per share ("Old
Common Stock") issued and outstanding immediately prior
thereto and each three shares held immediately prior
thereto in the Corporation's treasury, shall
automatically, without further action on the part of the
Corporation or any holder of such Old Common Stock, be
reclassified into and become one new share of the
Corporation's Common Stock, par value $.10 per share ("New
Common Stock"), following the Effective Time. The
reclassification of the Old Common Stock into New Common
Stock will be deemed to occur at the Effective Time,
regardless of when the certificates previously
representing such shares of Old Common Stock are
physically surrendered to the Corporation in exchange for
certificates representing shares of New Common Stock.
After the Effective Time, certificates previously
representing shares of Old Common Stock will, until such
shares are surrendered to the Corporation in exchange for
certificates representing shares of New Common Stock,
represent the number and class of shares of New Common
Stock into which such shares of Old Common Stock shall
have been reclassified pursuant to this amendment;
provided, however, that no dividends or other
distributions shall be received by a person holding shares
of New Common Stock until certificates previously
representing shares of Old Common Stock have been so
surrendered for exchange.
In any case in which the reclassification of shares of Old
Common Stock into shares of New Common Stock would
otherwise result in any stockholder holding a fractional
share, the Corporation shall, in lieu of issuing any such
fractional share, pay the stockholder for such fractional
share on the basis of the average closing market price on
the Nasdaq National Market of the Old Common Stock for the
ten (10) trading days immediately preceding the day of the
Effective Time with payment for each one-third of a share
of New Common Stock being equal to the average closing
price of one share of Old Common Stock."
SECOND: That thereafter, pursuant to a resolution of its Board of
Directors, a special meeting of the stockholders of said corporation
was duly called and held, upon notice in accordance with Section 222
of the General Corporation Law of the State of Delaware, at which
meeting the necessary number of shares as required by statute were
voted in favor of the adoption of the foregoing resolutions.
THIRD: That the foregoing amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
FOURTH: This Certificate of Amendment shall become effective at 5:00
p.m. Delaware time on the date on which it is filed in the office of
the Secretary of State of Delaware.
IN WITNESS WHEREOF, Orbit International Corp. has caused this
certificate to be signed by the President and Chief Executive Officer of
Orbit International Corp. this 1st day of October, 1999.
Orbit International Corp.
By:_____________________
Name: Dennis Sunshine
Title: President and Chief Executive
Officer
19
2
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