UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-3936
Orbit International Corp.
(Exact name of small business issuer 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)
(631) 435-8300
(Issuer's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (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:
Check whether the issuer filed all documents and reports required to
be filed by Sections 12, 13 or 15 (d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date (after giving effect to
the one for three reverse stock split effective October 4, 1999):
March 31, 2000 2,026,000
Transitional Small Business Disclosure Format (check one): Yes___
No_X_
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, 2000 are
not necessarily indicative of the results of operations for the full fiscal
year ending December 31, 2000.
The consolidated balance sheet as of December 31, 1999 was condensed
from the audited consolidated balance sheet appearing in the 1999 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, 1999.
ACCOUNTANT'S REVIEW REPORT
To the Board of Directors
Orbit International Corp.
We have reviewed the accompanying condensed consolidated balance sheet of
Orbit International Corp. and Subsidiaries as of March 31, 2000, and the
related condensed consolidated statements of operations, and cash flows for
the three-month period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the condensed
financial statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
statements for them to be in conformity with generally accepted accounting
principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
April 28, 2000
PART I - FINANCIAL INFORMATION
ITEM - I
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents............... $ 2,025,000 $ 2,975,000
Investments in marketable securities.... 3,000 3,000
Accounts receivable (less allowance for
doubtful accounts)..................... 1,775,000 1,391,000
Inventories ............................ 5,991,000 5,804,000
Assets held for sale, net............... 13,000 41,000
Other current assets.................... 121,000 136,000
Deferred tax assets..................... 75,000 75,000
Total current assets.................. 10,003,000 10,425,000
Property, plant and equipment - at cost,
less accumulated depreciation and
amortization........................... 2,123,000 2,128,000
Excess of cost over the fair value of
assets acquired....................... 1,035,000 1,059,000
Other assets............................ 657,000 661,000
Deferred tax assets..................... 675,000 675,000
TOTAL ASSETS............................ $14,493,000 $14,948,000
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(continued)
March 31, December 31,
2000 1999
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations.. $ 870,000 $ 738,000
Accounts payable.......................... 1,270,000 1,143,000
Accrued expenses.......................... 879,000 884,000
Accounts payable, accrued expenses and
reserves applicable to discontinued
operations............................... 427,000 499,000
Total current liabilities............... 3,446,000 3,264,000
Long-term obligations...................... 3,188,000 3,666,000
Accounts payable, accrued expenses and
reserves applicable to discontinued
operations, less current portion..... .... 370,000 370,000
Total liabilities....................... 7,004,000 7,300,000
STOCKHOLDERS' EQUITY
Common stock - $.10 par value.............. 304,000 304,000
Additional paid-in capital................. 24,165,000 24,165,000
Accumulated deficit........................ (7,130,000) (6,971,000)
17,339,000 17,498,000
Treasury stock, at cost.................... (9,850,000) (9,850,000)
Total stockholders' equity.............. 7,489,000 7,648,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,493,000 $14,948,000
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31,
2000 1999
Net sales........ $ 2,753,000 $ 3,409,000
Cost of sales.... 1,831,000 2,057,000
Gross profit..... 922,000 1,352,000
Selling, general and
administrative
expenses........ 1,242,000 1,354,000
Interest expense...... 83,000 81,000
Investment and
other income, net.... (54,000) (65,000)
Loss before
income tax benefit... (349,000) (18,000)
Income tax benefit.... - -
Net loss before extraordinary
item ........ (349,000) (18,000)
Extraordinary item 190,000 -
NET (LOSS) $(159,000) $(18,000)
Net loss per common
share:
Loss before extraordinary item
Basic........ $(.17) $(.01)
Diluted...... $(.17) $(.01)
Extraordinary item
Basic $.09 -
Diluted $.09 -
Net (loss)
Basic $(.08) $(.01)
Diluted $(.08) $(.01)
See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities:
Net (loss) ................................ $(159,000)
$(18,000)
Adjustments to reconcile net income
to net cash (used in)
operating activities:
Depreciation and amortization............... 40,000
43,000
Amortization of goodwill.................... 24,000
24,000
Forgiveness of debt......................... (190,000)
Compensatory issuance of stock and options..
19,000
Change in value of marketable securities...
(10,000)
Changes in operating assets and liabilities:
Accounts receivable......................... (384,000)
768,000
Inventories..................................(187,000)
443,000
Other current assets........................ 15,000
12,000
Other assets................................ -
78,000
Accounts payable............................ 127,000
(375,000)
Accrued expenses............................ (5,000)
(109,000)
Customer advances...........................
(324,000)
Assets held for sale, net................... 28,000
12,000
Accounts payable, accrued expenses and
reserves applicable to discontinued
operations................................. (72,000)
(103,000)
Payment for settlement of class action
Litigation................................. -
(1,000,000)
Net cash (used in)
operating activities...................... (763,000)
(540,000)
Cash flows from investing activities:
Purchases of property, plant and equipment.. (31,000) -
Purchases of marketable securities.......... -
(196,000)
Proceeds from sales of marketable securities -
1,710,000
Net cash (used in) provided by
investing activities...................... (31,000)
1,514,000
(continued)
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(continued)
Three Months Ended
March 31,
2000 1999
Cash flows from financing activities:
Decrease in due to factor................... (15,000)
Repayments of debt.......................... (156,000) (148,000)
Proceeds from debt... ............. 500,000
Proceeds from stock option exercises........ 2,000
Treasury stock.purchases.................... - (48,000)
Net cash (used in) provided by financing
activities................................. (156,000) 291,000
NET INCREASE IN CASH AND CASH
EQUIVALENTS................................. (950,000) 1,265,000
Cash and cash equivalents - January 1........ 2,975,000 438,000
CASH AND CASH EQUIVALENTS 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 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.
(NOTE 2) - Income Per Share:
For the three month periods ended March 31, 2000 and March 31,
1999, the denominator for both basic and diluted loss per common share
is the weighted-average common shares. Due to a loss recorded for
those periods, there is no effect of common share equivalents as such
effect would be antidilutive.
The numerator for basic and diluted loss per share for the three
month periods ended March 31, 2000 and March 31, 1999 is the net loss
for each period.
(NOTE 3) - Cost of Sales:
For interim periods, the Company estimates its inventory and
related gross profit.
(NOTE 4) - Inventories:
Inventories are comprised of the following:
March 31, December 31,
2000 1999
Raw Materials.............. $ 3,087,000 $ 2,943,000
Work-in-process............ 2,904,000 2,861,000
TOTAL $ 5,991,000 $ 5,804,000
(NOTE 5) - Available-For-Sale Securities:
At March 31, 2000, the Company had corporate debt securities with
a cost and estimated fair value of approximately $3,000. The corporate
debt securities owned by the Company at March 31, 2000 have a
contractual maturity greater than three years.
(continued)
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(continued)
(NOTE 6) - Business Segments:
The Company operates through 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
as they manufacture and distribute distinct products with different
production processes.
The following is business segment information for the three month
periods ended March 31, 2000 and March 31, 1999.
Three Months Ended
March 31,
2000 1999
Net sales:
Electronics....... $ 1,247,000 $ 2,286,000
Power Units.......
Domestic........ 1,198,000 977,000
Foreign......... 308,000 154,000
Intercompany sales. - (8,000)
Total Power Units.... 1,506,000 1,123,000
Total $ 2,753,000 $ 3,409,000
Income (loss) from
operations:
Electronics....... $ (134,000) $ 528,000
Power Units....... (51,000) (272,000)
General corporate
expenses not
allocated.(a)...... (135,000) (258,000)
Interest expense..... (83,000) (81,000)
Investment and other
income............. 54,000 65,000
(Loss) before
income taxes........ $ (349,000) $ (18,000)
(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, 2000 v. March 31, 1999
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 March 31, 2000
decreased to $2,753,000
from $3,409,000 for the three month period ended March 31, 1999 principally
due to lower sales recorded
from its Electronics Segment that was partially offset by higher sales
recorded by its Power Units Segment.
Gross profit, as a percentage of sales, for the three months ended March
31, 2000 decreased to
33.5% from 39.7% for the three month period ended March 31, 1999 due to a
lower gross profit realized
by the Electronics Segment principally due to a reduction in the Segment's
sales. This decrease was
partially offset by a higher gross profit realized by the Company's Power
Units Segment.
Selling, general and administrative expenses for the three month period
ended March 31, 2000
decreased to $1,242,000 from $1,354,000 for the three month period ended March
31, 1999 principally due
to the impact of several cost cutting initiatives taken by the Company during
1999. Selling, general and
administrative expenses, as a percentage of sales, for the three month period
ended March 31, 2000
increased to 45.1% from 39.7% for the three month period ended March 31, 1999
principally due to
decreased sales during the current period.
Interest expense for the three month period ended March 31, 2000 was
$83,000 and did not
materially change from the $81,000 recorded for the three month period ended
March 31, 1999.
Investment and other income for the three month period ended March 31,
2000 decreased to
$54,000 from $65,000 for the three month period ended March 31, 1999
principally due to a decrease in
funds available for investment during the current period.
The net loss before extraordinary item for the three month period ended
March 31, 2000 increased
to $349,000 from the $18,000 loss recorded for the three month period ended
March 31, 1999. This
increased loss was principally due to the decrease in sales from the Company's
Electronics Segment.
In March 2000, the Company reached an agreement with the sellers of a
discontinued apparel
division whereby the Company agreed to commence making payments on a
promissory note payable to such
sellers in 2000 rather than in 2002 as scheduled. The agreement resulted in
an extraordinary gain of
$190,000.
The net loss for the three month period ended March 31, 2000 was $159,000
compared to a loss of
$18,000 for the three month period ended March 31, 1999.
Liquidity, Capital Resources and Inflation
Working capital decreased to $6,557,000 at March 31, 2000 compared to
$7,161,000 at December 31,
1999. The ratio of current assets to current liabilities decreased to 2.9 to
1 at March 31, 2000 from 3.2 to
1 at December 31, 1999.
Net cash flows used in operations for the three month period ended March 31,
2000 was $763,000,
primarily attributable to the net loss for the period, the non-cash flow
effect of income related to the
forgiveness of debt and an increase in accounts receivable and inventory that
was partially offset by an
increase in accounts payable. Cash flows used in investing activities for the
three month period ended
March 31, 2000 was $31,000, primarily attributable to purchases of property,
plant and equipment. Cash
flows used in financing activities for the three month period ended March 31,
2000 was $156,000, primarily
attributable to repayments of long-term debt.
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
credit facility at March 31, 2000 was approximately $3,190,000 at an interest
rate of 1.75 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. This reverse
stock split was approved by
the shareholders on October 1, 1999 and the effective date was October 4,
1999. All per share data and
numbers of common shares have been retroactively restated to reflect this
reverse stock split. The purpose
of the reverse stock split was to put the Company into compliance with the
requirements of a small cap
listing in order to effectuate the transfer of the Company's listing from the
Nasdaq National Market to the
Small Cap Market. See the Company's Report on Form 8-K, filed October 6, 1999.
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. 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.
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
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. However, due to industry-wide funding and pricing
pressures, the Company has
encountered delays in the awards of these contracts which delays the Company
expects will continue
through at least the first two quarters of 2000. As a result of these delays,
the Company does not see any
improvement to revenue levels in the year 2000.
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 United States Government, for such effort. In
addition, even if the United States
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 United States 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 as well as to other
Departments of Defense.
Year 2000
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. There was concern that this could result in system failures or
miscalculations leading to disruptions in
the Company's activities and operations.
In response to the Year 2000 issue, the Company developed a plan to modify its
information technology
systems to recognize the year 2000, including the purchase of a new
manufacturing software package, and
proceeded to convert its critical data processing systems. The Company spent
approximately $125,000,
funded by cash from operations, on its Year 2000 compliance. The expenses
primarily included the price of
new software as well as implementation of the new software package. The
Company also spent resources
to communicate with its significant suppliers, large customers and financial
institutions to ensure that those
parties had appropriate plans to remediate Year 2000 issues where their
systems interface with Company
systems or otherwise impact its operations, and to prepare contingency plans
including manual
workarounds, increase of inventories and protective cash management proceeds.
As of March 31, 2000, the Company experienced no disruptions in
operations as a result of the Year
2000 issue and does not anticipate additional material expenses related to the
Year 2000 issue.
Additionally, the Company has not been notified or become aware of any
significant Year 2000 related
incidents which would materially impact operations. However, the Company will
continue to monitor the
Year 2000 issue in the event such incidents become evident.
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.
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSIONS OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on 8-K
8-K filed on February 11, 2000.
8-K/A filed on February 17, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ORBIT INTERNATIONAL CORP.
Registrant
Dated: May 12, 2000 /s/ Dennis Sunshine
Dennis Sunshine, President, Chief
Executive officer and Director
Dated: May 12, 2000 /s/ Mitchell Binder
Mitchell Binder, Vice President-
Finance, Chief Financial Officer
and Director
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,025,000
<SECURITIES> 3,000
<RECEIVABLES> 1,775,000
<ALLOWANCES> (165,000)
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<BONDS> 3,188,000
0
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<COMMON> 304,000
<OTHER-SE> 7,185,000
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<SALES> 2,753,000
<TOTAL-REVENUES> 2,753,000
<CGS> 1,831,000
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<INCOME-TAX> 0
<INCOME-CONTINUING> (349,000)
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