-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VjrU4C0OH4Mbz4QWraCQ1MEX3C2B7NvgheJdHh90NP0OZo6ALWfAxuZgjKT7aoRR POfqJni+2zxbrcgjxFz62g== 0000074818-97-000013.txt : 19970815 0000074818-97-000013.hdr.sgml : 19970815 ACCESSION NUMBER: 0000074818-97-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORBIT INTERNATIONAL CORP CENTRAL INDEX KEY: 0000074818 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 111826363 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03936 FILM NUMBER: 97662188 BUSINESS ADDRESS: STREET 1: 80 CABOT CT CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 5164358300 MAIL ADDRESS: STREET 1: 80 CABOT COURT STREET 2: 80 CABOT COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 FORMER COMPANY: FORMER CONFORMED NAME: ORBIT INSTRUMENT CORP DATE OF NAME CHANGE: 19911015 10-Q 1 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 June 30, 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: June 30, 1997. 6,194,000 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 six months ended June 30, 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 June 30, December 31, 1997 1996 (unaudited) ASSETS Current assets: Cash and cash equivalents............... $ 310,000 $ 927,000 Investment in marketable securities..... 1,632,000 782,000 Accounts receivable (less allowance for doubtful accounts)..................... 2,659,000 3,114,000 Inventories ............................ 7,223,000 6,657,000 Restricted investments, related to discontinued operations................ 1,269,000 2,453,000 Assets held for sale, net............... 188,000 712,000 Other current assets.................... 243,000 246,000 Total current assets.................. 13,524,000 14,891,000 Property, plant and equipment - at cost less accumulated depreciation and amortization........................... 2,329,000 2,347,000 Excess of cost over the fair value of assets acquired....................... 983,000 1,019,000 Investment in marketable securities..... 621,000 1,150,000 Other assets............................ 649,000 524,000 TOTAL ASSETS............................ $18,106,000 $19,931,000 See accompanying notes. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (continued) June 30, December 31, 1997 1996 (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term obligations.. $ 1,576,000 $ 1,656,000 Accounts payable.......................... 1,127,000 940,000 Accrued expenses.......................... 1,998,000 2,545,000 Notes payable............................. 92,000 65,000 Accounts payable, accrued expenses and reserves for discontinued operations..... 1,207,000 2,636,000 Due to factor............................. 704,000 852,000 Total current liabilities............... 6,704,000 8,694,000 Long-term obligations, less current portion................................... 3,815,000 4,352,000 Accounts payable, accrued expenses and reserves for discontinued operations, less current portion...................... 1,183,000 1,424,000 Other liabilities.......................... 315,000 315,000 Total liabilities....................... 12,017,000 14,785,000 STOCKHOLDERS' EQUITY Common stock - $.10 par value.............. 908,000 907,000 Additional paid-in capital................. 23,526,000 23,518,000 Accumulated deficit........................ (8,621,000) (9,515,000) Less treasury stock, at cost............... (9,588,000) (9,588,000) Less deferred compensation................. (136,000) (174,000) Less unrealized loss in marketable securities................................ (2,000) Total stockholders' equity................ 6,089,000 5,146,000 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $18,106,000 $19,931,000 See accompanying notes. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Six Months Ended Three Months Ended June 30, June 30, 1997 1996 1997 1996 Net sales........... $ 8,396,000 $ 7,770,000 $ 4,426,000 $ 4,889,000 Cost of sales....... 4,901,000 4,376,000 2,526,000 2,597,000 Gross profit........ 3,495,000 3,394,000 1,900,000 2,292,000 Selling, general and administrative expense............ 2,664,000 2,653,000 1,437,000 1,343,000 Interest expense 77,000 24,000 37,000 3,000 Investment and other(income)...... (140,000) (1,122,000) (59,000) (122,000) Income from continuing operations......... 894,000 1,839,000 485,000 1,068,000 Discontinued operations: (Loss)from operations (4,200,000) (2,659,000) (Loss)from disposal (3,801,000) (3,801,000) NET INCOME (LOSS)... $ 894,000 $(6,162,000) $ 485,000 $(5,392,000) Income (loss) per share: Income from continuing operations:........ $ .13 $ .31 $ .07 $ .18 (Loss) from discontinued operations:........ ( 1.34) ( 1.07) NET INCOME (LOSS):.. $ .13 $ ( 1.03) $ .07 $ ( .89)
See accompanying notes. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended June 30, 1997 1996 Cash flows from operating activities: Net income(loss)............................ $ 894,000 $(6,162,000) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Depreciation and amortization............... 68,000 59,000 Amortization of goodwill.................... 36,000 51,000 Write-off of goodwill....................... 805,000 Write-off of foreign currency translation... 1,230,000 Compensatory issuance of stock.............. 38,000 20,000 Change in value of marketable trading securities................................. 2,000 (18,000) Disposal of discontinued operations......... 2,996,000 Changes in operating assets and liabilities: Accounts receivable......................... 455,000 (2,234,000) Inventories................................. (566,000) 652,000 Other current assets........................ 3,000 1,079,000 Accounts payable............................ 187,000 730,000 Accrued expenses............................ (547,000) (161,000) Assets held for sale........................ 524,000 1,731,000 Accounts payable, accrued expenses and reserves for discontinued operations....... (1,670,000) Other long term obligations................. (312,000) Other assets................................ (125,000) (121,000) Net cash (used in) provided by operating activities...................... (701,000) 345,000 Cash flows from investing activities: Acquisitions of fixed assets................ (50,000) (96,000) Purchase of net assets of acquired company.. (3,750,000) Change in value of marketable securities.... Purchase of marketable securities........... (3,149,000) (12,805,000) Proceeds of sales of marketable securities.. 4,012,000 22,645,000 Net cash provided by investing activities.. 813,000 5,994,000 (continued) ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended June 30, 1997 1996 Cash flows from financing activities: Proceeds from issuance of performance shares 30,000 Due to factor............................... (148,000) (5,902,000) Repayments of debt.......................... (617,000) (2,159,000) Proceeds of debt............................ 27,000 2,000,000 Stock option exercises...................... 9,000 Net cash (used in) financing activities...... (729,000) (6,031,000) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................................. (617,000) 308,000 Cash and cash equivalents - January 1........ 927,000 2,274,000 CASH AND CASH EQUIVALENTS - June 30.......... $ 310,000 $ 2,582,000 Supplemental disclosures of cash flow information: Cash paid for: Interest.............................. $ 328,000 $ 938,000 Taxes................................. $ 26,000 $ 0 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 six month and three month periods ended June 30, 1997 and 1996 are as follows: Six Months Ended Three Months Ended June 30, June 30, 1997 1996 1997 1996 Primary 6,781,000 5,960,000 6,751,000 5,998,000 Fully diluted 6,781,000 5,970,000 6,751,000 6,020,000 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 six months and second quarter ended June 30, 1997 of $.02 per share and $.01 per share, respectively, and to be immaterial for the comparable periods of the prior year. The impact of Statement 128 on the calculation of fully diluted earnings per share for these periods 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: June 30, December 31, 1997 1996 Raw Materials.............. $ 2,401,000 $ 2,332,000 Work-in-process............ 4,822,000 4,325,000 Finished goods............. - - TOTAL $ 7,223,000 $ 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 June 30, 1997, this collateral requirement amounted to approximately $1,269,000. The following is a summary of available-for-sale securities as of: June 30, 1997 Estimated Fair Cost Value U.S. Treasury bills......................... $ 2,901,000 $ 2,901,000 Debt securities issued by other government agencies............... 5,000 5,000 Corporate debt securities................... 616,000 617,000 3,522,000 3,523,000 Restricted value of portfolio used to collateralize credit facility...... 1,269,000 1,269,000 Balance of securities portfolio............. $ 2,253,000 $ 2,254,000 The amortized cost and estimated fair value of debt and marketable equity securities at June 30, 1997 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. Due in one year or less.................... $ 2,901,000 $ 2,901,000 Due after one year through three years..... 35,000 35,000 Due after three years...................... 586,000 587,000 3,522,000 3,523,000 Restricted value of portfolio used to collateralize credit facilities........... 1,269,000 1,269,000 $ 2,253,000 $ 2,254,000 (continued) ITEM - II ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS Results of Operations Six month period ended June 30, 1997 v. June 30, 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 six month period ended June 30, 1997 increased to $8,396,000 from $7,770,000 for the six month period ended June 30, 1996 due principally to additional sales recorded by the Company's Behlman subsidiary which was acquired during the first quarter of 1996, offset by decreased sales from the Company's Orbit Instrument division. Income from continuing operations for the six month period ended June 30, 1997 decreased to $894,000 from $1,839,000 for the six month period ended June 30, 1996 due principally to the recording of $815,000 in the first quarter of 1996, which represented a portion of a one time royalty fee received from a former affiliate. Had this royalty income not been recorded, income from continuing operations for the six month period ended June 30, 1997 would have decreased to $894,000 from $1,024,000 for the six months ended June 30, 1996. This decrease is attributed to lower sales and profitability recorded by the Orbit Instrument division and increased selling general and administrative costs incurred by the Behlman subsidiary. Net income for the six month period ended June 30, 1997 increased to $894,000 from a loss of $6,162,000 for the six month period ended June 30, 1996 due principally to an operating loss in the prior period of $4,200,000 incurred from the Company's discontinued apparel operations and to the estimated loss of $3,801,000 resulting from reserves taken on an expected loss on the disposal of such apparel operations. Gross profit, as a percentage of sales, for the six month period ended June 30, 1997 decreased to 41.6% from 43.7% for the six month period ended June 30, 1996 due principally to lower sales from the Orbit Instrument division and weaker gross margins from the Behlman subsidiary due to product mix. Selling, general and administrative expenses for the six month period ended June 30, 1997 increased slightly to $2,664,000 from $2,653,000 for the six month period ended June 30, 1996 principally due to higher selling, general and administrative costs incurred by the Behlman subsidiary offset by lower corporate costs. Selling, general and administrative expenses, as a percentage of sales for the six month period ended June 30, 1997, decreased to 31.7% from 34.1% for the comparable period in 1996 due to increased sales and lower corporate costs. Interest expense for the six month period ended June 30, 1997 increased to $77,000 from $24,000 for the six month period ended June 30, 1996 due to an increase in outstanding borrowings during the current period. Investment and other income for the six month period ended June 30, 1997 decreased to $140,000 from $1,122,000 for the six month period ended June 30, 1996 due principally to $815,000 of royalty income recorded in the prior period which represented a portion of a one time royalty fee received from a former affiliate and due to a reduction in available balances for investment in the current period. The Company did not record any tax benefit on the current year's pre-tax loss because of the uncertainty of future realization. Three Month period ended June 30, 1997 v. June 30, 1996 Consolidated net sales for the three month period ended June 30, 1997 decreased to $4,426,000 from $4,889,000 for the three month period ended June 30, 1996 due principally to less sales recorded by the Orbit Instrument division which was offset, in part, by increased sales generated by the Company's new Behlman subsidiary. Income from continuing operations for the three months ended June 30, 1997 decreased to $485,000 from $1,068,000 for the three months ended June 30, 1996 due principally to lower sales, a slightly lower gross profit on sales and higher selling, general and administrative costs. Net income for the three month period ended June 30, 1997 increased to $485,000 from a loss of $5,392,000 for the three month period ended June 30, 1996 due principally to an operating loss in the prior period of $2,659,000 incurred from the Company's discontinued apparel operations and to the estimated loss of $3,801,000 resulting from reserves taken on an expected loss on the disposal of such apparel operations. Gross profit, as a percentage of sales for the three months ended June 30, 1997 decreased to 42.9% from 46.9% from the three months ended June 30, 1996 due to lower sales from the Orbit Instrument division in the current period and a slight increase in overhead costs. Selling, general and administrative expenses for the three months ended June 30, 1997 increased to $1,437,000 from $1,343,000 for the three months ended June 30, 1996 and increased as a percentage of sales to 32.5% from 27.5% due principally to an increase in selling, general and administrative costs incurred by the Company's Orbit Instrument division and Behlman subsidiary, offset by lower corporate costs. Interest expense for the three months ended June 30, 1997 increased to $37,000 from $3,000 in the three months ended June 30, 1996 due to an increase in outstanding borrowings during the current period. Investment and other income for the three months ended June 30, 1997 decreased to $59,000 from $122,000 in the three months ended June 30, 1996 due to interest earned on higher cash and marketable securities balances in the prior period. The Company did not record any tax benefit on the current pre-tax loss because of the uncertainty of future realization. Liquidity, Capital Resources and Inflation: Working capital increased by $623,000 to $6,820,000 for the six month period ended June 30, 1997 principally due to $894,000 of income recorded during the period. The Company's working capital ratio at June 30, 1997 was 2.0 to 1 compared to 1.7 to 1 at December 31, 1996. All losses and obligations of the discontinued apparel operations have been provided for in the June 30, 1997 financial statements and, accordingly, the Company does not anticipate using any significant portion of its resources towards these discontinued apparel operations. 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 in August 1997. 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 in month thirty six. The loan will have an interest rate of prime rate plus 1%. Under the Company's factoring arrangement for its 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 June 30, 1997, the Company had provided $1,150,000 in a standby letter of credit which was reduced to $850,000 in July, 1997 due to the paydown of amounts owing to the factor. 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 from continuing operations in 1996 and through the first two quarters 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 line of commercial products gives the Company some diversity. 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: August 14, 1997 /s/ Dennis Sunshine Dennis Sunshine, President, Chief Executive officer and Director Dated: August 14, 1997 /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 An Annual Meeting of Stockholders of the Company was held on June 24, 1997. The holders of 6,186,093 shares of Common Stock of the Company were entitled to vote at the meeting, the holders of 5,456,704 shares of Common Stock, or approximately 88% of shares entitled to vote at the meeting, were represented by proxy. 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 5,431,650 votes for and 25,054 against, Bruce Reissman by 5,437,404 votes for and 19,300 against, Mitchell Binder by 5,437,404 votes for and 19,300 against, Nathan A. Greenberg by 5,437,291 votes for and 19,413 against, John Molloy by 5,439,904 votes for and 16,800 against and Stanley Morris by 5,437,404 votes for and 19,300 against. 2. The stockholders voted 5,425,971 for and 4,920 against the resolution relating to the notification of Ernst & Young LLP as the independent auditors and accountants for the Company for the year ended December 31, 1997(25,813 votes abstained). Item 6. Exhibits and reports on Form 8-K (a) Exhibits. None EX-27 2
5 6-MOS DEC-31-1997 JUN-30-1997 310,000 1,632,000 2,809,000 150,000 7,223,000 13,524,000 4,481,000 2,152,000 18,106,000 6,704,000 3,815,000 0 0 908,000 5,181,000 18,106,000 8,396,000 8,396,000 4,901,000 4,901,000 2,664,000 0 77,000 894,000 0 894,000 0 0 0 894,000 .13 .13
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